Raising the Bar on Estate Taxes

Death and taxes are inevitable, but that doesn’t mean entrepreneurs have to like either of them. A new study by the Texas-based Institute for Policy Innovation concludes that estate taxes soak successful family-owned businesses while generating relatively little revenue for the Treasury.

The conservative, free-market think tank is calling for an end to estate taxes, a rallying cry that’s being picked up by small-business lobbying groups like the National Federation of Independent Business and some legislators on Capitol Hill.

“The people who are really getting hammered aren’t the ones who are really wealthy,” said economist Gary Robbins, a co-author of the study. “They owned a small business, a family farm or they were just good savers. “

Once used as a tool to break up the fortunes of wealthy robber barons, estate taxes now fall on estates valued at just over $650,000--a pretty low bar in places like Southern California, where a good-sized home and a 401(k) can put many families over the limit.

Robbins’ research shows that more than half of the $11.8 billion in estate taxes the government collected in 1995 were paid by estates valued at less than $5 million.

While some would argue that anyone wealthy enough to pay estate taxes doesn’t have much to gripe about, Robbins argues that many of these taxpayers are rich only on paper. Forcing them to sell off parts of the family farm or bust up a business to pay estate taxes destroys wealth and jobs instead of redistributing them, he says.

Some lawmakers agree. Rep. Jennifer Dunn (R-Wash.), a member of the powerful House Ways and Means Committee, recently introduced legislation that would phase out all estate and gift taxes over a 10-year period.

To learn more about the proposed legislation, check out the Library of Congress’ legislative information site at https://thomas.loc.gov for bill HR 8.

Robbins’ report, “The Case for Burying the Estate Tax,” is available at https://www.ipi.org.