How the Death Tax can affect you:
If you are a small business owner, your family may be affected by the current Death Tax laws.  You pay taxes throughout your lifetime and upon death, your family or estate managers must pay a tax on your assets.

60% of small business owners said they would be able to create new jobs in the next year if the Death Tax were eliminated.  According to the National Federation of Independent Businesses, one-third of all small businesses will have to sell or liquidate a portion of their business simply to pay death taxes. Of the businesses who have to liquidate, half will lay off 30 or more employees to pay the IRS. Whether you own or are employed on a farm or by a small business, you will be affected.
 

The Death Tax and The Demise of The Family Farm
The Death Tax is a major factor contributing to the demise of family farm: 9 out of 10 successors whose family-owned businesses failed within three years of the principal owner's death said trouble paying estate taxes contributed to the company's demise, according to a Prince & Associates survey.

When a family farmer (or business owner) dies, the value of the farm is added to his or her estate and taxed at rates as high as 55%. The valuation of such businesses at the death of the owner is difficult-- since there was no transaction, the determination made by the IRS is arbitrary, resulting in a tremendous amount of litigation and legal squabbling.

The result: many family businesses must be sold, downsized or liquidated in order to pay the tax collector and the lawyers.
 

The Death Tax Punishes Savings and Capital Formation
Federal Reserve Chairman Alan Greenspan, has characterized America’s low savings rate as "the key domestic economic policy problem of this country." The Death Tax is an especially strong source of our tax code's bias against savings and capital formation.

By penalizing success and the creation of wealth, the Death Tax depresses national income and savings. It creates a bias against savings and investment, in favor of consumption. It impedes the upward mobility of labor by stifling productivity, wage growth and employment opportunities. At the same time, the death tax stimulates enormous amounts of lawyers' and accountants' time and expense, as people must use a variety of legal devices in order to minimize this punitive tax.

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Previous Congressional Action
The Death Tax used to be three separate taxes. They were "unified" in 1981. The Internal Revenue Code levies taxes on transfers of property at death (the estate tax), during life (the gift tax), and to grandchildren or other descendants (the generation-skipping transfer tax).

The death tax rate is the steepest in the tax code, starting at 37% and rising to 55%.

Congress Voted to Repeal the Death Tax
On August 5, 1999, for the first time ever, the U.S. Congress voted to completely repeal the federal death tax.  Although President Clinton's own White House Conference on Small Business made death tax repeal a top legislative priority, on September 23, 1999, Clinton formally vetoed legislation that would repeal the death tax.

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The Solution
A solution to the double taxation caused by the death tax has passed the House of Representatives by a vote of 279 - 136 this year.  H.R. 8, "Death Tax Elimination Act", phases out out the federal estate, gift and generation skipping transfer tax over the next 10 years, and completely eliminates the tax in 2010.  If the President signs the bill into law, families could see $28.3 billion in tax relief over the next five years.
 

Why Should The Death Tax Be Repealed?
One of the most powerful reasons people work is to make life better for their children and loved ones. That's why families go to great lengths to circumvent this most unfair of all taxes. By confiscating between 37% and 55% of a family’s after-tax savings, the death tax punishes thrift, discourages entrepreneurship and penalizes families.

Although intended as tool for redistributing income designed to break up large concentrations of family wealth, the death tax perpetuates wealth concentration. Not only can the rich afford lawyers and accountants to construct tax-exempt trusts and other complicated legal devices to shield their wealth, but cash-strapped family farmers and small business people without the high-priced legal help must often sell out to larger corporate interests at firesale prices to pay the taxman.
 

Does the Death Tax Raise Revenue?
Revenue from taxes on estates, gifts and generation-skipping transfers accounts for roughly 1% of all annual federal receipts. This revenue is offset by administration costs and by tax revenue lost from payroll, income and other taxes when businesses are destroyed and jobs lost.

The Death Tax is one of the costliest taxes for the IRS to administer. According to the Center for the Study of Taxation, compliance and enforcement costs eat up about 65 cents for every $1 collected.The transfer tax provisions take up nearly 100 pages of the Internal Revenue Code and nearly 300 pages of Regulations issued by the IRS. Death Tax planning is so complicated that the IRS maintains separate Death Tax units in its field offices. Many disputes between the IRS and estates end up in court, with more than 10,000 cases currently pending.

 By stifling economic growth, the Death Tax cuts other federal tax receipts, such as income and payroll taxes. (State and local government tax revenues also suffer from this smaller tax  base.) Repealing the Death Tax would, over time, lead to gains in these other tax revenues— quickly outstripping the immediate loss of the revenue that might occur.