2010 is the first year since 1916 that citizens will not be taxed for inherited assets, but unfortunately the future doesn't look as promising. Unless Congress acts, the death tax will automatically go from a 0% rate to a 55% rate (pre-2001 level) beginning in 2011.
The death tax is commonly referred to as the estate tax. So what's in a name? In the 1990s, the "estate tax" was renamed the "death tax." It refers to the transfer of a person's assets after their death - an imposition on the taxable estate of a deceased person.
If the death tax is reinstated it will have detrimental affects on the economy, particularly unemployment. An estimated 500,000 jobs will be lost if the death tax returns. As explained in a study by the Heritage Foundation, this form of taxation discourages savings and investment, undermines job creation, and suppresses wages and productivity. This tax also hurts small businesses and family farms. According to the US Department of Agriculture, one in every 10 family farms would be significantly hurt if this tax continues. Furthermore, 1.5 million jobs would be created if the death tax were repealed.
There are some who claim the death tax is crucial in the fight to provide an equal distribution of wealth (because the tax is imposed only on the upper class). They argue it’s vital for securing revenue for Congress, even though economists themselves have acknowledged that the tax’s adverse impact on the economy would exceed generated revenues.
Fortunately, we still have a number of lawmakers still willing to fight against this onerous levy. Last week, Senator Jim DeMint forced a vote on an amendment to kill the death tax once and for all. DeMint referred to the tax as an "an unfair, immoral double tax on property and assets that folks have already paid taxes on throughout their lives." We released a Vote Alert in support of the DeMint Amendment, but the amendment failed by a vote of 39-59.
Will Congress resurrect the tax, or will they work in the interest of American taxpayers and implement permanent repeal? As the debate in Washington wages, only time will be able to answer that question. Rest assured, however, that NTU will continue to have a hand in the fight. We'll do our best to make sure the death tax doesn't come back to life.