NCPA - National Center for Policy Analysis

Plenty of Reasons to Abolish the Death Tax

June 18, 1999

Political momentum seems to be growing to ditch the federal inheritance tax. In the first place, it doesn't bring in much revenue to the Treasury -- and some experts contend that it costs more than it reaps.

But there are other negatives as well:

  • Economist Alan Blinder assigns just 2 percent of the income gap between the rich and the poor to the estate tax -- so it certainly provides scant comfort to those who seek income "equality."
  • Economist Joseph Stiglitz argues that it actually increases income inequality by encouraging wealthy people to spend their own money while living, since they are unable to divide it up among their heirs -- a move that would promote equality.
  • Since the law discourages savings, it reduces the amount of capital available for investment.
  • Congress' Joint Economic Committee estimates that the death tax has slashed available capital stock by $497 billion, or 3.2 percent.

Then there is the impact on small businesses and small family farms. The JEC figures that 28 percent of small firms affected by the death tax are sold off.

When farms are sold to meet the obligations of the tax, they are often developed. So the tax even has negative environmental consequences, critics note.

Source: Macroscope, "Death and Taxes," Investor's Business Daily, June 18, 1999.


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