The federal estate tax is a huge drag on the economy. It costs almost as much to administer as it brings in. The revenues it generates are a drop in the bucket, less than 1 percent. It destroys small businesses and costs jobs.
The original purpose of the estate tax was to prevent the accumulation of dynastic wealth. While I'm not so sure that this isn't still a valid concern, when the first estate tax was enacted in 1916 it only applied to people owning property worth more than $11 million in today's dollars. Tax rates started at 1 percent and climbed to 10 percent for estates over $5 million (over $1 billion in today's dollars).
The people repealed the Washington state inheritance tax by initiative in 1981.
But that didn't stop our Legislature. In 2005 a new estate tax was imposed for estates over $1 million with rates from 10 percent to 18 percent. Last week a bill was introduced in the House (HB 3184) that will double the already onerous Washington state estate tax.
In Washington, under the proposed law, the taxpayer will have a $2 million exemption after which the tax will kick in at 20 percent with the top marginal bracket for estates over 9 million at 38 percent.
This tax is on top of the federal estate tax which, unless Congress acts this year, will tax all estates over $1 million at rates of 18 percent to 55 percent starting in 2011.
Why should the average person be concerned about all of this? After all, very few of us have estates worth more than $2 million. The reason should be obvious. Small business is at least 70 percent of our economy.
The estate tax clobbers small businesses. Decimating small businesses through taxation costs jobs, something desperately needed at the present time. Moreover business owners that can will simply move their businesses to other states that have no estate tax. Only 22 of our states have local estate taxes. The result will be less revenue for an already revenue-starved state.
Soaking the rich with confiscatory estate taxes might seem like a good idea to some but in the end all this tax will do is hurt everyone, not just the wealthy. Killing the goose that lays the golden egg is always foolish and short sighted. People need to let their representatives in our state Legislature know that HR 3184 is a bad, bad idea.
Charles B. Phillips