Death Tax Repeal Would Benefit NC Economy

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Death Tax Repeal Would Benefit NC Economy

Special Report - September 9, 2009
Eliminating the federal estate tax (“death tax”) could potentially lead to the creation of over 40,000 jobs in North Carolina and boost the nation’s struggling economy, according to a new report released today by the North Carolina Family Policy Council, the Family Research Council (FRC), and the American Family Business Foundation. The report, “Repealing Death Tax Will Create Jobs and Boost Economy,” analyzes the effects of the estate tax, which is commonly known as the “death tax,” on jobs, government revenues, and economic growth. It combines two recent analyses of the estate tax by Douglas Holtz-Eakin, former Congressional Budget Office director, and Stephen J. Entin, president and executive director of the Institute for Research on the Economics of Taxation (IRET).

The “death tax” is defined in the report as “a tax on ‘your right to transfer property at your death,’” and notes that it “unfairly targets family businesses.” Congress will have to act on the “death tax” this fall, since it is scheduled to expire for one year in 2010 and then “to reappear in 2011 at 2001 tax rates,” when the rate was at 55 percent with only a $1 million exemption.

“In a rare opportunity, Congress can increase its revenues, increase employment and stimulate the economy if it chooses to repeal the death tax,” the authors of the report write. “If the death tax returns to its 2001 (high) levels, Congress will collect less revenue while the country will have fewer companies and fewer jobs. All sectors of the economy, and especially the individual states, have much at stake.” Among the report’s major findings:

Eliminating the “death tax” could create over 1.5 million jobs for small and family business workers across the nation.
North Carolina could create an estimated 42,669 jobs in the small business sector if the “death tax” were repealed.
An increase in the “death tax” rates to 55 percent with only a $1 million exemption (which is the 2001 rate) would cost North Carolina 14,223 jobs, according to the report’s estimates.
Ending the “death tax” would boost workers’ income by $79 billion.
The “death tax” targets small businesses, which have been responsible for 60 to 80 percent of all net new jobs in the last decade.
Large publicly traded corporations pay no “death tax” at all. Thus, family businesses undergo repeated trauma as they are passed from one generation of employers to the next, while their publicly traded competitors gain a strong competitive advantage.
The distortion the “death tax” causes with respect to other tax collection methods results in a net revenue decrease for the federal government. Government could bring in nearly twice the revenue by eliminating the tax.

“Congress should eliminate the ‘death tax’ once and for all,” said Bill Brooks, president of the North Carolina Family Policy Council, which co-released the report with FRC and the American Family Business Foundation. “As this report points out, the ‘death tax’ often unfairly targets family-owned businesses, and the most recent national survey shows that over two-thirds of Americans support its permanent repeal. Repealing the ‘death tax’ will not only potentially create new jobs in our state and nation, but also stop punishing the success of small family-owned businesses with an additional tax at the time of a family’s personal loss.”