WHY IS THE ESTATE TAX BAD FOR OUR INDUSTRY?
The death tax imposes burdensome compliance costs and forces many NAED businesses to divert
productive capital into large life insurance policies and expensive estate planning.
The National Association of Manufacturers found that one-third of small business owners will have
to sell or liquidate part of their companies to pay estate taxes.
Repealing the death tax would spur job creation. According to a study by Douglas Holtz-Eakin,
former director of the Congressional Budget Office, repealing the death tax would add 1.5 million
additional small business jobs.
The estate tax is levied on the assets of an estate before it is passed on to heirs. Current law
exempts the first $5.45 million (The $5 million exemption was indexed to inflation as a part of the
“fiscal cliff” deal in the closing days of 2012) of the remaining estate after deducting debts and
certain other expenses. For couples, the exemption applies separately to the estate of each
spouse. The remaining assets are taxed on a schedule with a top marginal rate of 40%.
While the estate tax may be devastating to family businesses, it is a drop in the bucket of the
federal budget – typically amounting to around 1% of annual federal revenues. If policy makers
need revenue, there are better places to look.
The death tax contributes such a small portion of federal revenues that there is a good argument
that not collecting the death tax would lead to higher economic growth and thereby increase
federal revenue from other taxes. Former undersecretary of the Treasury Steve Entin found, by
using a “dynamic” economic analysis, that repealing the death tax would increase tax revenues by
nearly $89 billion over 10 years.
Download the Issue Brief.
Ask Congress to Permanently Repeal the Federal Estate Tax.