Myth: Death tax repeal only benefits the wealthy

Liberal myth

Death tax repeal will benefit only the very wealthiest Americans.

The facts

Repealing the immoral death tax will benefit all Americans. The death tax:

• Punishes hard work by small business owners and hurts their families
• Affects the millions of Americans who are employed by small businesses

Economically unsound

The death tax is a poor tax policy because it:

• Discourages savings and investment—the tax urges consumption today to avoid taxes later
• Undermines job creation and wage growth—the tax costs between 170,000 and 250,000 potential jobs each year
• Prevents the economy from achieving its full potential—by discouraging investment, prosperity is curtailed
• Contradicts the central promise of American life: wealth creation—Americans cannot pass on their prosperity to others

Punishing Americans

The death tax is immoral because it punishes those people who tax policy is intended to help.

• Women and minority small-business owners—the financial legacy of their hard work, which they hoped to pass on to their children, instead will fall victim to confiscatory taxation and liquidation
• Farmers—family farms are disappearing because the federal government heavily taxes the estates of people who invested most of their earnings back into their farms and had only meager liquid savings
• Workers—ordinary workers can lose their jobs as small and medium-sized businesses are liquidated to pay death taxes
• Low-income people—America’s most vulnerable are hurt not only when they lose jobs but also because the death tax discourages savings and encourages consumption

Regressive taxation

The death tax is in many ways a regressive tax, since the wealthiest Americans can end up paying less.

• Taxpayers who cannot pay tax-planning fees frequently lose more of their estates to death taxes than do wealthier taxpayers
• The use of legal mechanisms to avoid high death tax liabilities is closely related to the amount of fees taxpayers are able to pay for expensive tax-planning advice

Related Heritage research

• Ed Feulner, “Keep the Death Tax Dead,” August 30, 2005
• William Beach, “Now Is (Still) the Time to Permanently Repeal Federal Death Taxes,” April 12, 2005
• William Beach, “Killing Off the Death Tax,” August 23, 2004
• William Beach, “Now is the Time to Permanently Repeal Federal Death Taxes,” June 16, 2003
• William Beach, “Death Taxes: Killing the Economy,” January 23, 2003
• “Pushing Permanent Death Tax Repeal,” June 4, 2002
• William Beach, “Time to Repeal Federal Death Taxes: The Nightmare of the American Dream,” April 4, 2001
• William Beach, “Time to Repeal the Costly Death Tax,” June 8, 2000