Organizations opposed to the death tax are keeping the pressure on Republican Tennessee Gov. Bill Haslam to back the General Assembly’s effort to repeal the tax.
In a letter to the governor sent last week, the American Family Business Institute (AFBI) laid out the economic benefits of repealing the tax, which is levied on estates after the owner dies.
Haslam has expressed concerns that Tennessee’s budget problems have left it unprepared to take on inheritance tax cuts, the Tennessean newspaper reported. His concerns do not appear to be shared by the Republican-majority General Assembly, which has made clear it intends to move ahead.
Applying to estates worth more than $1 million, in 2010, Tennessee used the tax to collect approximately $107 million, the Tennessean continued.
“It is true that while serious reforms like eliminating the death tax present short-term challenges,” the AFBI letter began, “they are necessary steps towards leaving a legacy of economic prosperity in Tennessee and promoting job creation from the most productive sector of the economy — family businesses.”
The letter also cited a study by economic guru Art Laffer’s Laffer Associates, that concluded that, “Tennessee’s estate and gift tax is the single greatest reason why wealthy people don’t want to live in Tennessee.”
“Tennessee’s estate and gift tax, the [Laffer study states], has already reduced state GDP by up to $18.2 billion over the past ten years,” the letter continued. “In addition, the robust economic growth resulting from elimination of the state’s inheritance tax, would have added at least $7 billion to state coffers over the last ten years. The tax currently accounts for less than 1 percent of total state revenues.”
When the taxpayer dies, the death tax confiscates a percentage of their holdings, even though those earnings were already taxed when first earned. The tax has become a favorite villain for supply-side economists, who maintain that by taxing people large amounts of money for saving, rather than spending, the government is double-taxing, creating disincentives for responsibility and destroying family businesses that cannot protect their assets from death like their big-business competition does. Liberals touts the tax as an important source of government revenue and a blockade against the development of an American ruling class.
“The first domino to fall this year was the state of Ohio, which completely repealed its state estate tax in order to attract and retain more family businesses,” Palmer Schoening, director of federal affairs at AFBI, told The Daily Caller. “We plan to make history by axing several other states’ death taxes in 2012, starting with Tennessee.”
The letter was also signed by a who’s-who of the center-right tax movement: The presidents of Americans for Tax Reform, Americans for Prosperity, National Taxpayers Union and the Beacon Center of Tennessee.
AFBI is a trade association that represents family business owners and farmers.