THE NIGHTMARE OF THE AMERICAN DREAM
November 10, 2009
As Members of Congress consider whether to retain federal death taxes, they should ponder the principal reasons why they should join prior Congresses and repeal this tax, says William W. Beach, Director of the Center for Data Analysis at the Heritage Foundation.
Death taxes discourage savings and investment:
- For those Americans who think that their estates may one day pay federal death taxes, the tax sends a signal that it is better to consume today than invest and make more money in the future.
- Instead of putting their money in the hands of entrepreneurs or investing more in their own economic endeavors, Americans are encouraged to consume it now rather than pay taxes on it later.
Death taxes undermine job creation:
- Not only do federal death taxes have a corrosive effect on the virtue of savings and prudent investment, but they also directly undermine job creation and wage growth.
- Heritage Foundation economists estimate that the federal estate tax alone is responsible for the loss of between 170,000 and 250,000 potential jobs each year.
- These numbers do not appear in employment statistics because the investments that would have created these jobs are never made.
Death taxes suppress productivity and wage growth:
- The estate tax discourages investment, which holds down wage growth.
- Businesses are less able to purchase new tools and equipment, which makes workers less productive, which means less wage and salary growth.
- It is through productivity growth that enhancements to economic and social well-being are made and the virtues of America's form of economic organization are most abundantly seen.
Death taxes contradict the central promise of American life -- wealth creation:
- Most Americans oppose death taxes because they seem so un-American.
- The central promise of American life is that if you work hard, save, and live prudently, you will be assured the enjoyment of your economically virtuous life.
- There are few other places on the planet where this promise is made (let alone kept), and it--along with companion promises of political and religious freedom -- has attracted millions of immigrants to the United States.
- The death tax contradicts the very promise that has attracted so many.
Source: William W. Beach, "Seven Reasons Why Congress Should Repeal, Not Fix, the Death Tax," Heritage Foundation, WebMemo No. 2688, November 9, 2009.
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