The Republican-controlled Congress in 2001 made a wise and responsible decision to phase out the estate tax over the next decade. Today the inheritance tax -- or death tax -- has been replaced with a capital-gains tax on the sale of some inherited assets.
The current system, while not perfect, is far more equitable.
The estate tax destroyed many family-owned businesses. The assets of the businesses had to be sold off to pay the tax, which was 55 percent in 2001. It didn't just hurt the family that owned the businesses, many employees of those businesses lost their jobs. It also took a toll on farms.
Often the assets passed from one family member to others is property such as equipment, buildings and land. So without liquid assets -- cash -- the property has to be sold to pay the tax bill. And another family owned business, or at least pieces of that business, ends up in the hands of giant corporations.
Many Democrats, who now control Congress, refuse to see that. They have deluded themselves into believing allowing the tax to be reimposed will impact only the rich. They also claim it will help reduce the budget deficit.
Yes, it will bring in an estimated $34 billion in 2011, but at what cost? Other taxes won't be collected as businesses close and jobs are lost. If the estate tax is reimposed it will be at the 2001 rate of 55 percent starting with estates of $2 million per couple. That's hardly rich when you consider total assets, which can include homes, investments and businesses. A millionaire in 2010 isn't the same as being a millionaire in 1950 or even 1980.
Adding to the problem in Washington state is the current budget crisis. Lawmakers are considering doubling the state inheritance tax, which could push the total federal and state tax bill to 70 percent.
More than 40 business organizations, including the National Federation of Independent Business, that lobbied to end the estate tax a decade ago are now asking Congress to reinstate the tax -- but at a more reasonable level. The organizations want to see the tax at 35 percent starting at $10 million per couple.
This puts the group behind legislation proposed by Sen. Jon Kyl, R-Ariz., and Sen. Blanche Lincoln, D-Ark.
Given the political realities of today, an estate tax at some level will be reimposed. The Democrats who control Congress and President Obama are focused on a 45 percent rate.
The Union-Bulletin is a family owned business. However, the situation with the Blethen family -- a large number of family members are involved -- is that the reimposition of the estate tax would not necessarily be devastating to the company. Our concern is the impact this tax would have on smaller family businesses and farms.
If Congress is going to reimpose the estate tax, the rate should be low enough and the exemption high enough that the damage done to the nation's workers and the economy will be minimal.