By Curtis Dubay
Senators Sanders (I-VT), Harking (D-IA) and Whitehouse (D-RI) are circulating a bill that would drastically increase the death tax at the worst possible time: such a policy move would be a body blow to a weakly recovering economy and would clearly signal to everyone that this Congress has no intention of breathing new life into the American dream.
The death tax is currently expired for 2010. The repeal of the death tax was a decade-long policy first brought into law with the 2001 tax relief package. That legislation phased down the death tax through 2009 before repealing it in 2010. But because the tax relief was passed under budget reconciliation rules, the policy to repeal the death tax could not apply outside a 10 year budget window. As a result current law has always shown the death tax coming back to life in 2011.
If Congress does nothing and the death tax does rise from the dead next year it will come back with a punitive rate of 55 percent and exemption of $1 million ($2 million for couples), enough by itself seriously to slow the recovery. This draconian tax rate and less-than-generous exemption level is not enough for Senators Sanders, Harkin and Whitehouse, however.
Their proposal would set the top rate at 65 percent for the largest estates. For smaller estates the rates would range from 45 percent to 55 percent. The first $3.5 million ($7 million for couples) would be exempt for the death tax.
If the Senators’ plan became law, Americans that work hard, live a virtuous life, create jobs for other Americans and build wealth for their families would see a large majority of what they have built confiscated by a profligate government to be redistributed as seen fit by Washington. A death tax at such levels would certainly become the nightmare of the American dream.
Not only would a death tax at those levels strike at the very heart of the American dream, it would also badly hurt the economy. A higher death tax would put more weight on the struggling economy and delay recovery further by reducing investment and therefore job creation. When economic recovery does finally occur, a higher death tax would mean that economic growth and job creation would remain permanently below where they otherwise would have been. For all their rhetoric about wanting to help the unemployed and aid economic recovery, with plans such as this Congress continues to compound the uncertainty that is keeping businesses from hiring.
The Sanders, Harkin and Whitehouse plan is the worst death tax proposal in a long time. Dishearteningly, it could very well be in line with views of many in Congress. In fact, it has been obvious for a long time now that Congressional leadership does not want to do anything in regard to the death tax this year. That way, in just 6 short months, the death tax goes from 0 percent to 55 percent. While such a jump isn’t as much as proposed by Senators Sanders, Harking and Whitehouse, it is only slightly less bad. And it can be achieved by Congress doing nothing, which is much easier than passing something controversial like the Sanders, Harkin, Whitehouse plan.
It is time for Congress to stop playing games with the death tax and repeal it once and for all time. The economy remains weak and job creation non-existent. Now is not the time to raise taxes, especially one like the death tax that has such a profound impact on job creation. Instead of threatening to destroy more jobs by increasing the death tax, Congress should repeal it permanently. Doing so would create 1.5 million jobs – a much needed and timely boost for the economy. Even more importantly, it would signal clearly that this country remains a land of economic opportunity for all who dream about a better life.