Estate Taxes - It's Time to Pull the Plug

OUR nation's economy is not recovering at the pace any of us would like and it is well past time to think outside the box to shake up the economic status quo. A bipartisan measure in the U.S. House of Representatives has garnered a majority of cosponsorship, and momentum is building in state capitals, including Trenton, to eliminate the onerous estate tax. Doing so could create jobs and actually increase revenue to the Treasury, and definitely would encourage savings and investment to boost overall economic growth.

No one likes paying taxes. But the estate tax, also known as the "death tax," is especially unpopular and punitive. The fruits of one's labor belong to that person's family at his or her death, not to the government. These estates have already been taxed during the life of the person who has died. Too often an overzealous effort to tax success twice only results in job losses, stifled innovation and less economic activity.

The top federal estate tax rate is 40 percent. In New Jersey, we take a double hit, being one of only two states in the country with both an estate and an inheritance tax, which forces countless small-business owners and farmers to be treated like robber barons, not hard-working businessmen and women. Because New Jersey has some of the highest property values in the country, the value of assets at death is particularity steep.

Property values

Our excellent schools, quaint small towns and proximity to major metropolitan areas make living in New Jersey highly desirable and this reality is reflected in our residential property values. But in the eyes of the IRS, these high property values in conjunction with owning a successful small business or farm could push an estate into the threshold for paying the federal estate tax.

Some have had to sell their business because they do not have enough liquid assets to foot the federal estate tax bill. Unexpected death also complicates estate planning, where assets had been set aside for investment or for the cost of higher education for children or grandchildren. Currently Uncle Sam must come first.

People would more likely save and invest if they knew the federal government would not seize a significant portion of their assets at death. In turn, a pattern will form. A part of those savings will be spent in economic activity, resulting in more sales tax revenue to state capitals. Investment will result in capital gains with greater revenue for Washington. And businesses that buy new equipment and start new endeavors will create jobs, sending more personal income taxes to the federal treasury. The estate tax accounts for less than one percent of federal tax revenue; its repeal might actually result in greater tax revenue, not less.

Not worth loss of jobs

Legislation to repeal the estate tax has more than 220 cosponsors in the House of Representatives, but Congress has not held a vote on this matter in nine years, before the Great Recession. These are the economic policy decisions that should be debated in Congress. Is the potential revenue from continuing to impose the estate tax worth the loss of jobs and stifled productivity to the Nation's economy? Is it fundamentally fair to tax twice, during a person's life and again at death?

Estate tax elimination, or raising the threshold in a compromise package, solves only a portion of the problem of our nation's outdated and antiquated tax code, but it should be part of the economic shake-up our stalled economy needs.

With trillions of dollars in debt and high unemployment and underemployment, growth is more important than ever. No idea should be off the table, including elimination of the federal estate tax. Death should not be a taxable event.

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