Political parties may not agree on much, but one surprising exception in Washington is death tax repeal. Currently the top federal rate on the taxable estates is 40 percent, and it is one of the most widely hated and immoral taxes. When Congress comes back to Washington in September, House Majority Leader Kevin McCarthy (R-Calif.) should schedule a floor vote on Rep. Kevin Brady's (R-Texas) legislation to repeal the death tax, H.R. 2429.
This legislation sees overwhelming support both on and off Capitol Hill. The bill has 221 cosponsors, a bipartisan group that exceeds the number of votes required to pass on the floor. It also has endorsements from Americans for Prosperity and over 35 additional groups led by Family Business Coalition.
Claims from death tax supporters consistently fail to match up with economic realities. They claim, for instance, that the government will miss out on revenue, even though the death tax yields a miniscule amount. Less than one half of one percent of total federal revenue came from the death tax in 2012, according to research from the nonpartisan Tax Foundation. Research in fact suggests that repealing the death tax would result in higher revenue, not less, since it costs jobs and slows overall economic growth. Former Treasury Department economist Stephen J. Entin found in a study for the American Family Business Institute that eliminating the death tax would bring in $89 billion in new federal revenue.
Repealing the death tax would bring a number of economic benefits, at a time when the American economy needs it most. People would be more likely to save and invest, knowing that the federal government would not seize nearly half of their estate when they die. They would be more likely to start businesses, buy new equipment, and hire more workers. In fact, former Congressional Budget Office director Douglas Holtz-Eakin found that getting rid of the death tax would create nearly 1 million small business jobs and bring down the unemployment rate by nearly 1 percentage point.
Proponents also attempt to argue that the death tax is needed to address income inequality, ostensibly to prevent well-to-do families from passing on their wealth to their children. However, the burden of the death tax falls much further down the income spectrum than supporters will publicly admit. By no means is the impact isolated on top earners. The death tax prevents families who own companies or farms from passing on the fruits of their labor to their children. Too often families to sell off assets, let workers go, or close their business entirely because they do not have enough liquid assets to pay the government 40 percent of their estate upon death.
Legislators in Washington should look to the states for inspiration on the issue. Lately there’s been progress in eliminating and reducing death taxes at the state level. Kansas, Ohio, Oklahoma, and North Carolina recently did so. Death tax reform is even picking up in blue states. Most recently, Minnesota increased its state’s death tax exemption from $1 million to $2 million over five years. New York reduced its state death tax rate to 10 percent and increased its exemption to $5.25 million, in line with the federal exemption. Maryland also brought rates down to 10 percent and increased the exemption to more than $5 million.
The House should vote on Brady's legislation to repeal the death tax, H.R. 2429, while legislative days remain in 113th session. Americans deserve to know where there representatives stand on this important issue.
Hanson is National Issue Campaign manager for Americans for Prosperity, a conservative political advocacy organization.