With tax policy changes looming in the future, the estate tax, or death tax, has been a topic of discussion. The general argument for not repealing the estate tax alone is that it only benefits the rich, furthering a division between the rich and poor. I can sympathize with this feeling, but I think this argument looks at how the repeal of the law benefits extreme outliers rather than how current law hurts small business and communities.
The estate tax collects only .6 percent of all tax revenue collected. This is due, in part, to deductions available through current law, and loopholes that can be taken advantage of. For the small percentage of estates that have to pay this tax, costs to plan around this tax can be large.
While there may be administrative costs attached with the current tax law, the damage comes when the tax is due. Nearly 50 percent of U.S. private gross domestic product is generated by small businesses. For those small business, the estate tax could be their death tax. The current tax rate for the estate tax is 40 percent. Many small business, those who do not take advantage of loopholes etc, are not able to keep up with this cost. In the end, their company is sold, sometimes to foreign entities (look into logging and mining companies), in effort to pay taxes on what they have worked for (and already paid taxes on).
The money collected is lost to communities. Many of these small business account for jobs in rural towns. Also, many small businesses often give back to the communities. Repeal of this tax would relieve a burden imposed on small businesses, as well as improve economic conditions.
A report by the Tax Foundation states repealing the Death Tax would "increase the size of the economy by .8 percent, boost investment by 2.2 percent, and lead to 139,000 new jobs."
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In the end, the super wealthy avoid paying the death tax through loopholes and tax schemes, leaving only the small businesses and local communities to be punished. It seems that the desire to redistribute wealth has blinded some to the effects the law has on the small business that drive our economy.
Dale lives in Moorhead.
