NCPA - National Center for Policy Analysis

The Economic Case Against The Death Tax: Always A Tax On Jobs And Wages

August 5, 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 is a tax on capital whether it falls on an estate that consists mostly of a family-owned business or an estate that consists of other more liquid types of assets, such as real estate, stocks, bonds and cash.  Nor does the economic well being of the heirs mitigate the negative economic impact the death tax imposes, says Dubay. 

For example: 

  • If the heirs that inherit the estate do not have their own financial means to pay the death tax bill, the effect is similar to what happens when a family business is tagged with the death tax.
  • The heirs would have to sell pieces of the estate to gather enough cash to pay the estate's death tax. 

Whether the assets are part of a business, stocks, bonds or real estate, the death tax forces heirs to sell assets to pay the government instead of letting them choose to do so for economic or personal reasons.  

This reduces the returns the assets would have otherwise earned and takes resources away from pursuits that would likely have continued to appreciate and support more jobs and higher wages, says Dubay. 

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

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