“On the death of our founder,” says WJ Grundy, former president of Jomac, Inc., a Pennsylvania maker of protective gloves, “we spent more than $3 million to redeem stock so we could pay estate taxes and control the business”. This was $3 million not available for operations and the troubled division was sold, reducing our employment by about 30 employees and our sales by about $5 million.” (Boston Globe, June 15, 2000) The Center for the Study of Taxation found that three in four families facing full or partial liquidation of their business to pay estate tax would have to cut their payroll in the process, studies conducted by the Institute for Policy Innovation (IPI) and Congress’s own Joint Economic Committee have found that the estate tax costs communities more in terms of lost jobs and lower economic growth than it raises for the US Treasury (William W, Beach, The Heritage Foundation) The same thing can happen right here in the Valley.
The estate tax (or “inheritance tax” as it is known, though perhaps erroneously) is a tax on inherited wealth and can amount to more than 50% of a person’s estate. For a person who died during 2005, an estate worth less than $1,500,000 would not pay a federal estate tax and would probably not have to file a federal estate tax return. The applicable exclusion amount increases to $2,000,000 for those who died in the years 2006, 2007, and 2008. The amount increases to $3,500,000 for 2009. Pursuant to the Tax Relief and Economic Growth Reconciliation Act of 2001, the federal estate tax disappears for 2010, but tax returns in 2011 at the 2001 level when the temporary derogation expires. As an additional tax levied on income that has already been drained by decades of other taxes, it is one of the most disgusting plunders of the federal tax code. Simply put, it is double taxation on the lifetime salary of a working person. The federal government profits from the death of a wealthy person by looting her assets with a tax on a lifetime of work. Fortunately, opponents of the estate tax are fighting to make the repeal permanent, but they face strong opposition from the usual suspects in the Senate. The House has already voted to repeal it permanently. A compromised Senate could be a likely, if unsatisfactory, outcome. Our own United States Senator John Sununu (R-NH) has pledged to repeal the unfair practice of taxing someone at death by co-sponsoring the “Estate Tax Reform and Job Protection Act of 2005,” legislation that effectively repeals permanent and immediate wealth tax. with the emphasis on immediately.
Now, what could be a justification for a second death tax? Perhaps the principle that the wealthy few, if they weren’t willing to leave their money to charity, shouldn’t be able to pass it all on directly to their heirs. Or perhaps a related belief in human equality, especially with regard to social, political, and economic rights and privileges (which is a definition of egalitarianism)? But it is claimed that egalitarianism is incompatible with freedom. Reality dictates in a free country that not everyone ends up with the same rewards, because not everyone is equally capable, equally rational, or equally hardworking. With regard to earned wealth, justice dictates that you deserve what you earn and should be able to use it as you see fit. Regarding inheritance, since the producer’s wealth belongs to him or her, he or she should have the right to inherit it to whomever they please.
These days, people find it downright strange if someone steps up to defend a rich person. After all, the rich can take care of themselves. But this is myopic. Inheritance tax rewards a “broken” ethic, whereby the rich spend their wealth on excessive consumption. The tax discourages beneficial saving and does not promote redistribution, equal opportunity, or fundamental justice (ironically all traditional liberal ideals). However, some of the worst damage is suffered by those with modest fortunes. These are small town entrepreneurs like the aforementioned WJ Grundy. There are a great many self-made Grundy people in our country and in our Mount Washington Valley who work hard all their lives to build a successful family business, say a construction business, farm, grocery store, meals or a small chain. of dry-cleaning shops, only to be faced with the possibility that his life’s work will be shredded and sold after his death to pay estate taxes. If a farm owner’s land and property increases in value over the years due to the parallel real estate boom, his assets may increase to the point where they qualify for inheritance tax, unless he is lucky enough to die. in 2010. This creates an incentive to die. in the year 2010 which of course is just plain crazy. These assets could have been actively invested in the economy, but once the government seizes them, the money is simply funneled down the drain of federal budgets and/or into the greedy and eager clutches of Washington bureaucrats. The fact is that more and more people cannot afford to transfer their farms or businesses. They sell out, laying off long-time employees. They do it not because they want to, but because they have no other choice. And the implications can ripple through an entire community… or valley. Family businesses that already have substantial debt (due to equity investment as just one example), when hit with this federal barrage, may have no choice but to offload their business, often into the hands of a corporate company without links with the local community.
Witty (and ultra-liberal) Congressman Barney Frank, (D-MA), fumes: “I don’t see why Bill Gates’ children who are going to inherit Bill Gates’ money, having done nothing to earn it, shouldn’t have have to pay some tax on it” (GrasstopsUSA.com). But a good paraphrasable response to that noxious comment is that some may not see why Barney Frank and the federal bureaucratic monster he feeds on should want Bill Gates’ money, HAVING DONE NOTHING TO EARN IT. The fact is that Frank and his ilk are not entitled to a red penny.
If the inheritance tax is so terrible that it should be repealed in 2011, then it should be repealed immediately. It has been destroying businesses and ruining lives for four generations. Let’s not continue this with our children. The Senate needs to repeal this tax now.
“For every benefit you receive, a tax is charged.” Ralph Waldo Emerson