May 19
On the Estate (or Death) Tax
For years, Republicans in Congress have been fighting for the permanent repeal of the federal estate tax, which is commonly referred to as the “death tax.”
We thought that goal was on its way to becoming a reality when former President Bush signed a law gradually increasing the size of estates that can be exempted from the death tax. That exemption topped out at $3.5 million in 2009, and there is no federal tax on estates in 2010.
But due to an odd quirk of the law, the old estate tax, with only a $2 million exemption for couples and rates as high as 55 percent, will again become the law of the land on Jan. 1, 2011, unless Congress takes action before that.
For the good of hard-working families throughout the nation, particularly family farmers, this tax should be permanently shelved before the old rates go back into effect.
The government has a funny way of measuring wealth. The owner of a farm or small business can easily have several million dollars tied up in equipment. That doesn’t make that person “rich.” Under the estate tax system, the value of all of that equipment gets counted as part of the estate at the time of death. That means the heirs to the estate are often forced to sell the business, or a good part of the necessary equipment, just to pay off the taxes.
American citizens - particularly those in business for themselves - already pay a great deal of taxes during their lifetime. They do not need their property and income taxed a second time when they die, just to help the federal government meet its overstretched obligations. But as it stands, if you pass away after Jan. 1, the government will be able to tax up to 55 percent of the value of a couple’s total estate, after the first $2 million.
For an estate worth $4 million, the government would presumably collect more than $1 million.
That’s not exactly what our farmers, or other citizens, need at the moment. Such a tax bill could force small farms or small companies out of business, hurting the owners, their employees and the overall economy.
Some interests are lobbying for a top rate of 35 percent, to head off the threat of the 55 percent tax, but I don’t think that goes far enough. This tax punishes people for working hard all their lives and building something of value to leave to their loved ones. It should be repealed altogether.
With any luck, that goal will be accomplished by Jan. 1, before the next Congress is seated. But if it’s not, and I become your next congressman, I will work tirelessly with colleagues, hopefully from both parties, to make it happen. People work hard to build solid nest eggs they can leave to their families, not the federal government. That’s clearly the way it should be.
