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Compromise is Costly

January 13, 2011

As many of you know, we at NTU are ardent supporters of full repeal of the onerous death tax. The levy destroys hard-earned savings and pushes small and family-owned businesses into bankruptcy. Economists have acknowledged that the tax's adverse effects on the economy exceed generated revenues, and studies show that permanent repeal would create 1.5 million jobs and slash the unemployment rate by a full percentage point over the next two years. One of our biggest concerns with the tax cut compromise that passed Congress in late 2010 was the resurrection of the death tax from 0 to a 35% rate and $5 million exemption. Mind you, this "deal" expires in 2012, at which time the tax will return to pre-2001 levels (55% rate and $1 million exemption).

There is talk that some will fight for a permanent arrangement of current rates (again, 35% rate and $5 million exemption) to avoid a more devastating blow to American taxpayers, but we don’t believe that’s the answer. The only way to truly protect taxpayers and spur economic growth is through full, permanent repeal.

A new study by our friends at the American Family Business Foundation highlights the number of small businesses, farms and households susceptible under the new law and how the impact of the death tax is growing faster than inflation, subjecting far more individuals to the levy than originally intended.

Here are a few key findings from the report:

  • Up to 67% of estates vulnerable to the tax include farm and small business assets;
  • Up to 22,000 farms, 14,000 real estate partnerships, and 29,000 privately-held corporations will be susceptible;
  • 170,000 total households will bear the burden; and
  • By 2048, half of U.S. households will have sufficient assets to be at risk of having to pay the tax.

I encourage all of you to check out the new study for a more detailed explanation. The American Family Business Foundation has provided another great resource for the death tax debate, and we look forward to continuing to work with them as we push for full, permanent repeal in the 112th Congress.