Kill the Death Tax

Rep. Darrell Issa Congressman, California 49th District
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A brief window of sensible tax policy has opened for 2010, though if Congress doesn’t take action to permanently eliminate the Death Tax—now at zero percent—the rate will return to a whopping fifty-five percent next year. Any proposal by Republicans or Democrats other than a zero percent taxation is unacceptable.

Economically, the Death Tax is counterproductive. The Death Tax serves only one purpose: to supply the revenue that liberals desperately need to keep pace with their out-of-control spending habits. As a result of political greed, the Death Tax sucks job-creating capital from the private sector, forcing the children of many small business owners and farmers to pay a cumbersome tax bill in order to keep their businesses and farms in the family hands.

So long as these small businesses—which are responsible for 64 percent of all new jobs over the last 15 years—have to pay a 55 percent tax just to keep the family business running, their ability to create jobs is drastically stifled. Moreover, the Death Tax effectively serves to punish those who save and invest and encourages a pattern of reckless spending, thus depleting the economy of private capital and requiring more borrowing from the Chinese.

Politically, the Death Tax is opportunistic. As a political strategy, the Death Tax is a brilliant scheme because it imposes a penalty on the dead, who have no votes—except perhaps in Chicago. But in reality, the Death Tax doesn’t only affect the dead; it’s a tax on everybody. Eliminating the Death Tax altogether would free up more than $1.6 trillion for job creation in the private sector, an amount that former CBO Director Douglas Holtz-Eakin estimates would generate 1.5 million new jobs. These are jobs we desperately need for an economic recovery.

Morally, the Death Tax is reprehensible. To tax any person for divesting an asset at one rate the day before they die (15 percent Capital Gains), and more than triple that rate the day after they die (55 percent Death Tax in 2011), is making the federal government into a grave-robber. There is no reason why the company that a hard-working American created from scratch should be struck with a tax equal to more than half the company’s value at the moment of the owner’s death.

Socially, the Death Tax is disintegrative. Class warfare—fomenting the resentments of the poor against the rich, the employee against the manager, and the laborer against the shareholder—won’t get our economy back on track. The advocates of the Death Tax pit one group of Americans against the other in a strategy based on political division rather than principle. In the end, every American suffers.

Is it better for the American economy for Congress to reinstate the Death Tax—thus generating a meager $500 million in revenue, an amount equal to .014 percent of the 2010 federal budget? Or is it better to kill the Death Tax, thus giving American small businesses the ability and incentive to create 1.5 million new jobs?

Is it better for America to pit one group of Americans against another and punish people for no other reason than they started a successful business, created jobs, and prepared to leave that legacy to their family’s next generation?

Is it better for America to keep recycling unsuccessful policies of wealth redistribution to feed the ever-more-ravenous federal bureaucracy at the expense of small businesses, farmers, and every American who stands to lose from liberal economic policy? Of course not.

Most Americans will tell you they hope to provide a better life for their kids than they had for themselves. The Death Tax destroys this goal to feed Washington’s gluttonous bureaucracy and punish people who have worked hard to build assets, save and invest.

To get our economy back on track, Washington needs to permanently end the Death Tax along with every other policy that punishes Americans for starting successful businesses that create jobs. Let the American people earn wealth, grow businesses, and pass along a legacy of success to the benefit of their children, their employees, and millions of people who enjoy the economic benefit of successful small businesses.

Rep. Darrell Issa represents the people of California’s 49th Congressional District in the United States House of Representatives, a seat he has held since 2001. He is the Ranking Member on the House Committee on Oversight and Government Reform.