PUTTING THE DEATH TAX TO REST
“Nothing can be said to be certain, except death and taxes.” When Benjamin Franklin first spoke these famous words, he could scarcely have predicted the fate of his two certainties. Today, even death offers no relief from taxes. Supporters of the Death Tax do not believe that it affects hard-working, everyday people. Many ordinary folks, however, find it difficult to pass the American dream on to their children. The legacies we will leave to our children depend upon the government taking strong action against these taxes. I believe the Congress must repeal the Death Tax permanently and immediately.
When the Death Tax is calculated, an individual’s bank account holdings, investments, land and even insurance policies are considered taxable assets. The IRS may take up to 55 percent of portions of the deceased’s estate. Some people might think this tax only affects millionaires, but thousands of Americans lose their inheritances to taxes every year.
Numerous Texas families dedicate their lives to the land they work. A family ranch or farm is much more than the plowed soil or wide grasslands you see from the road. The land is the heart of the family -- a heritage passed on from father to son, from mother to daughter. Yet it is precisely these families whose property can be so adversely affected by the Death Tax
In 1966, the average acre of South Texas ranch land cost just $196, even after adjusting for inflation. Due to appreciation, this same acre is now valued at $1,779, making the tax burden nine times higher than when the land was purchased. To shoulder this burden and keep its land, a bereaved family may be forced to take out huge loans, incurring debt they may not be able to manage, or sell the land altogether.
One woman in Hill County was surprised to learn that her uncle left her 4,500 acres of land the family had owned since the turn of the century. She was even more surprised when she learned the family would have to pay $1.7 million in taxes to keep the land. When her father died, he too left his portion of the family land to her, along with a $565,000 tax bill. Unfortunately, she believes she will have to carry debt against the land for the rest of her life.
The Death Tax also attacks family-owned businesses. Only 30 percent of all family-owned businesses are passed down to a second generation, and only 13 percent reach a third generation. Current tax laws effectively force some families to sell all or part of their businesses rather than bequeath them. The Death Tax can also contribute to the complete failure of some small businesses, causing employees to lose long-held jobs. One study found that 77 percent of family businesses that entered bankruptcy had failed after the unexpected death of the founders.
Bruce Thompson began his career working for large grocery chains and later struck out on his own, founding Market Basket Foods. He worked hard and made sacrifices, and his small grocery business gradually grew into a family-owned chain of 37 stores. Today, his son, Skylar Thompson, is president of the company. Bruce fears that when he passes on, the Death Tax will take away most of the business’s capital base. This loss will jeopardize jobs throughout southeastern Texas and southwestern Louisiana.
Small businesses are the core of our economy. They are the engine that drives our nation, and they provide a livelihood for millions of our citizens. When family heads pass on, however, there is often little they can do to preserve their achievement. At present, the tax man comes calling, even for the dead.
Furthermore, the Death Tax embodies a culture that runs counter to the American Dream. Instead of teaching our young people to work hard and save their money, we demonstrate only a dim future that penalizes people for saving. Instead of showing our children how to provide for their own heirs, the current law teaches them that upon their death, the government will take away the prosperity they have achieved. The Death Tax disregards the sacrifice of those who risked everything to provide for today’s generation. It punishes American farmers, ranchers and business owners who worked hard to build their legacy.
Ranchers and conservation groups alike fear that the Death Tax will destroy priceless wildlife habitats. The need to sell part of their inherited land to pay the tax man forces many landowners to sell their land piecemeal to developers. Agricultural land near urban areas is particularly at risk. Today’s wheat field or pasture could become tomorrow’s parking lot.
We in Congress have began to phase out the Death Tax; and it is currently slated to disappear by 2010. In 2011, however, the tax will be back in full force. Individuals who would owe no tax before midnight December 31, 2010 will suddenly owe huge amounts if they pass away just moments later.
I am a strong opponent of the Death Tax, and I believe it should be repealed permanently. I am a co-sponsor of Senate Bill 420, which would make permanent the current phaseout of the Death Tax. I am also a co-sponsor of Senate Bill 988, which would make the repeal effective for people who have died since January 1, 2005.
Americans work hard for what they have and take pride in their achievements. All citizens have the right, and should have the opportunity, to pass the fruits of their labor on to their loved ones.
November 4, 2005