Obama Budget Retains Death Tax

You should be concerned.

Larry Summers' own study, done in 1980 reveals that the death tax prevents capitalization of small business. In the midst of a recession, development of small business is exactly what we need to help the economy.

The liberal government presentation of the death tax as a matter of class envy is going to cost all U.S. citizens by prolonging the recession for the express purpose of punishing the "rich."

FROM WSJ

HEAD: Night of the Living Death Tax

SUB-HEAD: Obama's budget quietly resurrects it in 2010

This controversy dates back to George W. Bush's first tax cut in 2001 that
phased down the estate tax from 55% to 45% this year and then to zero next
year. Although that 10-year tax law was to expire in 2011, meaning that the
death tax rate would go all the way back to 55%, the political expectation
was that once the estate tax was gone for even one year, it would never
return.


And that is no doubt why the Obama Administration wants to make sure it
never hits zero. It doesn't seem to matter that the vast majority of the
money in an estate was already taxed when the money was earned. Liberals
counter that the estate tax is "fair" because it is only paid by the richest
2% of American families. This ignores that much of the long-term saving and
small business investment in America is motivated by the ability to pass on
wealth to the next generation.


The importance of intergenerational wealth transfers was first measured in a
National Bureau of Economic Research study in 1980. That study looked at
wealth and savings over the first three-quarters of the 20th century and
found that "intergenerational transfers account for the vast majority of
aggregate U.S. capital formation." The co-author of that study was . . .
Lawrence Summers.


Many economists had previously believed in "the life-cycle theory" of
savings, which postulates that workers are motivated to save with a goal of
spending it down to zero in retirement. Mr. Summers and coauthor Laurence
Kotlikoff showed that patterns of savings don't validate that model; they
found that between 41% and 66% of capital stock was transferred either by
bequests at death or through trusts and lifetime gifts. A major motivation
for saving and building businesses is to pass assets on so children and
grandchildren have a better life.

What all this means is that the higher the estate tax, the lower the
incentive to reinvest in family businesses.

full commentary:http://groups.google.com/group/alt.p...896553738cee1e

Desiring to pass on the fruits of one's lifetime of labor to one's family is hardly scheming the system. This money was already taxed when it was earned. Should a family really lose half of it's assets upon death simply because they saved for the future?

Families are forced to sell their farms and small businesses to meet death tax obligations that are confiscatory and punitive. If the death tax is such a great idea, apply it uniformly to all estates.
The death tax exists simply as a punitive measure to the "rich." The higher it is raised, the less revenue it produces. Cuting it would benefit the economy. How's that for cutting of one's nose to spite one's face?

Is the Estate Tax a (Revenue) Loser?

by J. D. Foster, Ph.D.

Arguments for Repeal
There are many good reasons to repeal the estate tax. It prevents small businesses and farmers from passing their businesses on to the next generation. It penalizes saving and capital formation. And it greatly discourages the creation of new wealth by America’s most innovative, productive entrepreneurs....

The Misleading Estimates of Estate Tax Revenue
With all this against it, the estate tax has one last remaining ally, and that is the belief, supported by official estimates, that it brings a lot of money into the U.S. Treasury. In fact, it certainly does not raise nearly the money that the official estimates show, and it may even lose money. There are five reasons why, and the first two come under the general heading of robbing the income tax to avoid the estate tax....

Conclusion
Even without considering the “supply-side” effects, the estate tax significantly reduces income tax receipts, first by encouraging donors to transfer assets to individuals whose personal income tax rates are likely to be below that of the donor. Second, by encouraging donors to transfer assets to tax-exempt entities, the estate tax removes the income produced by the assets from the income tax base. The official revenue estimates ignore these effects.

The estate tax is a levy without a mission. Its ill effects are legion, its social policy motivation obsolete, and even its revenue is an illusion. It should be repealed.

full comentary:http://www.taxfoundation.org/research/show/187.html