The federal estate tax—also known as the “death tax”— is destructive to entrepreneurship, job creation and economic growth. In many instances, heirs must sell family businesses, farms and ranches, just to pay this unfair double tax. The death tax is so problematic from a policy perspective that many states have repealed their state-level death taxes in recent years, with Delaware becoming the most recent during the 2017 legislative session. Only 17 states still levy the tax.
Despite this whirlwind of economic havoc—including egregious compliance costs and administrative costs—the death tax generates only a minimal amount of revenue for the federal government. In 2016, estate and gift taxes generated just $21.4 billion of the $3.27 trillion of federal revenue, less than 66 cents of every $100.
A plethora of academic analysis corroborates painful anecdotes in identifying the death tax as destructive to job opportunity and expansion, especially to family farmers and entrepreneurs. The ensuing tax bill after losing a loved one imposes a severe hardship on many family businesses and family farming operations. Often, family members are forced to partially or completely liquidate these businesses which may have taken generations to build. In addition to the calamity on these families, state and local governments are often deprived of an important ongoing source of revenue from these businesses—all in order to pad the federal coffers by a fraction of one percent. State and local primary and secondary education centers – along with churches and numerous other charitable activities – would greatly benefit from the increased employment and continued family business leadership provided by these stunted firms.
With these facts in mind, it’s no surprise that a strong majority of Americans consistently find the death tax to be the “most unfair” of all taxes and therefore favor total repeal of the tax.