WASHINGTON, July 24, 2012 – “By every measure the estate tax has failed to achieve the misguided goals Congress initially set for it when it established it nearly a century ago,” said Vice Chairman and top Republican on the Joint Economic Committee (JEC) Rep. Kevin Brady, R-Texas, in a call with members of the media earlier today.
“It fails to generate sufficient revenue; it fails to redistribute income or boost the economy, and it fails to meet any basic standard of fairness,” he said.
The economists from the Republican arm of the JEC released an update from a 2006 report entitled “Costs and Consequences of Federal Estate Tax” to detail the economic impacts of the estate tax or the “death tax” as some label it.
Key points from the study indicate that the death tax continues to harm the economy. It is estimated that since its creation in 1916, the federal estate tax has taken as much capital stock from the American economy, $1.1 trillion, as it has generated in federal revenue, $1.2 trillion.
“There are extensive costs associated with the estate tax in terms of dissolution of family businesses, slower growth of the capital stock, and the resulting loss of output and income over time,” the report states.
Brady said H.R. 1259, a bill to abolish the death tax, has 218 cosponsors in the House of Representatives, noting that “the bill is building very strong support and momentum within the chamber.”
“The bottom line is that both our economy and federal tax revenues would grow faster if the death tax were simply abolished, ” he added.
Senator John Thune, R-S.D., agreed with Brady calling the estate tax a “very onerous and punitive death tax.”
Thune introduced the companion bill in the Senate, The Death Tax Repeal Permanency Act of 2012, noting that the bill had 37 Republican cosponsors but is looking for more support.
“The death tax discourages savings and capital formation and ultimately success,” said Thune. “This should not be a partisan issue.”
Thune highlighted that the Senate will vote later today on a plan introduced by Sen. Harry Reid, D-Nev., that would allow the death tax to revert to pre-2001 levels, vastly expanding the reach of the death tax “subjecting farms and ranches to a new tax burden.”
“According to the JEC, Sen. Reid’s proposal would hit 24 times more farms and 13 times more small businesses than current law,” noted Thune. “You are talking about a huge impact on the very people out there that we count on to keep our economy going.”
Hoping for a “resounding defeat of the Reid proposal,” Thune said he hopes the Senate will move in a more reasonable direction to repeal the death tax permanently because “it is clear that the death tax runs counter to the very things we want to encourage.”
The American Farm Bureau Federation (AFBF) announced today that it concurs with the JEC report.
“With the average age of a farmer being 58 years old, the estate tax creates even a steeper barrier for young farmers and ranchers to take up the profession at a time when farming is already difficult to enter,” said AFBF President Bob Stallman.
“When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings or equipment to keep their businesses operating,” said Stallman. “With 88 percent of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax.”
“Washington often talks about fairness,” said Brady. “How is it fair that you work your whole life and sometimes several lifetimes as families build a business or farm only to have Washington swoop in and take up half of what you have built a lifetime of, that is not fair at all.”
“And to do all of that for the equivalent of one day of federal spending, seems just crazy,” Brady concluded.
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