Leaders in the House of Representatives recently discussed the possibility of extending the death tax at its current rate and exemption levels for one year through 2010. If this proposal becomes law it would be a massive tax hike.
Under current law, the death tax has a top rate of 45 percent and an exemption of $3.5 million ($7 million for couples) this year. But on January 1, 2010 it expires. It only stays expired for one year, however, as it springs back to life in 2011 with a top rate of 55 percent and an exemption of only $1 million ($2 million for couples).
With this impending one-year hiatus looming, members of both the House and Senate were coalescing around an agreement to extend the death tax permanently at a 35 percent top rate and a $3.5 million exemption. Senators Kly (R-Arizona) and Lincoln (D-Arkansas) were successful in including a provision for such an extension in the Senate’s 2010 budget resolution. Representatives Berkley (D-Nevada) and Brady (R-Texas) offered similar legislation in the House.
The Kly/Lincoln and Berkley/Brady plans would have increased the death tax for 2010 – any extension would be a tax hike since the death tax raises no revenue in 2010 under current law– but would have lowered the death tax in succeeding years.
This new agreement struck by some in the House would increase the death tax above the level proposed by Kyl/Lincoln and Berkley/Brady in 2010 and beyond, and opens the door to returning the tax after 2010 to its previous jobs destroying 55 percent rate and $1 million exemption.
• discourages savings and investment;
• undermines job creation;
• suppresses productivity and wage growth;
• contradicts the central promise of American life: wealth creation;
• hurts those who have their savings tied up in land; and
• hurts businesses owned by women and African-Americans.
Congress should turn back this attempt to hike taxes after considering the devastating impact the death tax has on family-owned businesses. As recently released videos from the Heritage Foundation show, the death tax hammers these small businesses and destroys jobs and weakens communities in the process.
The economy cannot afford an increase in the Death Tax. And while the Kyl/Lincoln and Berkley/Brady framework would be an improvement over the newest proposal, the economy really needs the boost full repeal of this harmful tax would give. It is time for Congress to do the right thing and kill the Death Tax once and for all.