NCPA - National Center for Policy Analysis


July 23, 2010

Due to a legal quirk, the death tax is scheduled to come back to life in 2011. The renewed death tax would once again inflict serious harm on family businesses, workers, and the economy.  Congress should act before the end of the year to repeal this economically harmful tax permanently, says Curtis S. Dubay, a senior analyst in tax policy at the Heritage Foundation. 

The death tax slows economic growth, destroys jobs and suppresses wages because it is a tax on capital and on entrepreneurship.  In fact, there is a general consensus among economists that there should be no taxes on capital, says Dubay.  

The death tax discourages savings and investment: 

  • 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.  

It undermines job creation: 

  • Because the death tax discourages saving and investing, it also undermines job creation; resources that otherwise would have been available for businesses to use to expand their operations and add new workers are consumed by people who deem it wiser to spend the money now than invest it.
  • Furthermore, resources that businesses otherwise would have used to add jobs are diverted to protect families from the death tax.  

And it suppresses wages and productivity: 

  • Since the death tax lowers saving and investing, there are fewer resources available for businesses to purchase additional tools and equipment, or replace old and worn-out pieces with new ones.
  • That means less capital their workers can use, and therefore the workers' productivity does not increase as much as it would have in the absence of the death tax.  

Source: Curtis Dubay, ''The Economic Case Against the Death Tax: Tax on Jobs and Wages,'' Heritage Foundation, July 20, 2010.   

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