Double Taxed

Fighting to end destructive double taxation

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    Double Taxed is the official website for the Double Taxation Working Group, a project of the Coalition for Tax Competition. Our mission is to eliminate instances of double taxation, including death, capital gains and dividends taxes.
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The Death Tax Indeed Affects Everyone

Posted by Heather Edwards on September 2, 2010

Science-fiction author Jim Worth argues in his August 31st Huffington Post article that individuals in lower tax brackets should not be concerned about an impending January 1, 2011 increase in the death tax, because “the estate tax has absolutely no affect on 97.5% of the people in this country.” Is such a claim correct? Not unless one considers the many small and expanding-business owners across the U.S., along with those they employ and the organizations that benefit from their charity, to be a relatively small and inconsequential group.

It is well-documented that the death tax adversely affects heirs to small companies, as well as employees and community residents, when businesses fail due to an inability to pay taxes on an estate. Typically, in such situations small companies must sell out to larger corporations, which tends to empower those wealthy individuals and corporations that Mr. Worth disparages (and who do not pay the estate tax), in turn destroying local civil society and institutions with local ties in both small towns and big cities.

Take the case of Hancock Lumber in Casco, Maine; begun by the family six generations ago, enlarged to ten retail stores and numerous sawmills employing 550 persons, and which today includes 30,000 acres of carefully-maintained forestland. Kevin Hancock, President of the company, explained that when his mother dies they will be forced to sell part or all of the business or land to a developer or large corporation, in spite of the fact that they spend $75,000 annually in life insurance premiums designed to cover the tax. Thus, the death tax will not only decimate a family business, but has already for some time been a leading cause of green-space and forest loss in Maine as private lands are sold to pay estate costs.

Additionally, one in five Hispanic family business owners say they will have to sell their business or property early in order to provide liquidity to pay the death tax. Many black-owned businesses also will not survive if the tax is reinstated. Even a company as large as Black Entertainment Television will likely have to sell to a big conglomerate when its founder dies, or claim bankruptcy as The Chicago Daily Defender was forced to do in 2003.

If one has an understanding that is not wracked with class-warfare mentality, it is crystal clear that taxing private wealth accumulated over a lifetime – and which has already been taxed on multiple occasions – does nothing but harm a critical sector of American economy for jobs and overall growth, as small businesses employ over half of the nation’s private sector workers and have generated 65% of net new jobs over the past fifteen years. Such a move will certainly not assist the middle classes and “distribute” wealth equitably, as Mr. Worth claims to be concerned about, but in fact most adversely affects those who are the entrepreneurs of the nation, their employees, and ultimately trickling down to the communities they serve.

Can this country withstand additional slowing of the economy when it is already so anemic? The truth is that an estate tax is not productive on net at any time, and ultimately only generates about 1% of federal revenue. If Mr. Worth is correct, as he claims in his assessment that the “elite” have usurped the buying power of the middle class, he should realize that the death tax only serves to entrench such interests.

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