“Economists tend to see the estate tax as one of the most economically harmful taxes per dollar of revenue raised. By raising the estate tax threshold and ultimately repealing the estate tax outright, the Tax Cuts and Jobs Act would remove an impediment to economic growth.” – Jared Walczak, senior policy analyst, Tax Foundation
We support the total abolition of inheritance taxes. – Idaho Republican Party platform
Frank Luntz, in his book Words that Matter: “Sure, some object that the term ‘death tax’ is inflammatory, but think about it. What was the event that triggered its collection? You pay a sales tax when you are involved with a sale. You pay an income tax when you earn income. And when you die – if you’ve been financially successful – and forgotten to hire really smart and expensive accountants – you may also pay a tax. So what else would you call that, if not a death tax?”
The short answer is, an “inheritance tax” or an “estate tax,” because that is what is actually taxed. Death is not taxed, nor do 99 American deaths (or more) out of 100. Luntz’ statement here ranks high among the most dishonest pieces of political gobbledygook ever – quite an achievement.
“Death tax” suggests that a tax will be imposed on anyone who dies. It does not.
That’s true most simply because the dead person isn’t around anymore to pay it – the heirs do.
This is also dishonest because it is actually so limited in scope.
The Center on Budget and Policy Priorities points out that “Only the estates of the wealthiest 0.2 percent of Americans — roughly 2 out of every 1,000 people who die — owe any estate tax.” And it’s not as though all of that inheritance is seized: “Among the few estates nationwide that owe any estate tax in 2017, the effective tax rate — that is, the share of the estate’s value paid in taxes — is less than 17 percent, on average, according to the Tax Policy Center.”
Luntz makes a passing feint at this with his reference to “financially successful,” but the fact is that if you’re not inheriting about $5.5 million, you don’t pay this tax at all. Are you not a millionaire? This tax does not apply to you. It applies only to the wealthy.
And even then, only in some cases. Note another of Luntz’ passing phases the one about “eally smart and expensive accountants.” Many people who would quality for paying the tax do not because they’ve apportioned their wealth in creative enough ways to avoiding it – and the tax code is larded with such loopholes.
The argument is often made about small businesses and especially farms that family members would like to pass on to children. Decades of desperate searches by anti-estate tax advocates have come up dry in finding instances. But then, these are areas where political compromises and levels can be had. The $5.5 million cutoff level, for example, is somewhat arbitrary, and efforts have already been made in the law to allow for keeping family businesses in the family. If need be, more can be done.
Some apologists for the tax like Walczak try to make the argument that the tax somehow constrains the economy. What it does is concentrate wealth into ever fewer hands, and concentrate it in the ranks of those who did nothing to generate it: The heirs are not business founders or economy expanders. There’s no social interest in pouring ever more money into their ranks. There’s a considerable social benefit to restraining it.