NCPA - National Center for Policy Analysis

The Economic Case Against The Death Tax: Number Of Estates Paying Death Tax Not The Issue

August 13, 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. 

A common argument in favor of the death tax is that it only affects a small number of estates and as such has a small impact on the economy.  The number of taxpayers that pay a particular tax is economically irrelevant.  What matters is the impact the tax has on the economy, says Dubay: 

  • The number of estates subject to the death tax has declined steadily since passage of the 2001 tax relief.
  • That package steadily phased out the death tax by reducing its rate and increasing the portion of estates exempt from the death tax from $1 million to $3.5 million, before doing away with the death tax entirely in 2010.
  • In 2000, before the tax relief packages began, 52,000 estates paid the death tax; as a result of the increased exemption level, by 2008 (the latest year of available data) just over 17,000 estates paid the death tax. 

Fewer estates paying the death tax has reduced the economic cost it imposes, but as long as the death tax remains in place it will continue to slow economic growth, destroy jobs and lower wages.   It is little consolation to workers that remain unemployed or see their pay stagnate because of the death tax that the impact of the tax has been slightly lessened, says Dubay. 

Source: Curtis Dubay, "The Economic Case Against the Death Tax:  Number of Estates Paying Death Tax Not the Issue," Heritage Foundation, July 20, 2010.   

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