NCPA - National Center for Policy Analysis

Death Tax Hurts Small Businesses and Minorities

July 25, 2014

The death tax should be fully repealed, contends Bartlett Cleland, resident scholar at the Institute for Policy Innovation.

A number of associations that form the Family Business Coalition recently wrote a letter to Congressmen Dave Camp (R-MI) and Kevin Brady (R-TX), asking for a vote on a bill sponsored by Rep. Brady, H.R. 2429 -- the Death Tax Repeal Act. 

The letter cited many of the problems with the law that taxes a deceased's assets at death:

  • Repealing the death tax would add almost 1 million new small business jobs, according to a study by Douglas Holtz-Eakin, former director of the Congressional Budget Office. Such job creation would reduce unemployment by almost 1 percentage point.
  • The death tax is just a drop in the bucket when it comes to federal revenues, accounting for just one half of one percent of all revenue.
  • The tax hits minorities especially hard. According to a study from two Boston College professors, the death tax will reduce net African American wealth by 13 percent.
  • A 2004 poll from Impacto Group found that half of all Hispanic business owners know someone who sold their business to pay the death tax. One quarter expect to sell their own business because of the tax.
  • Two-thirds of likely voters support permanent repeal of the death tax.

Cleland agrees that the tax needs to go, noting that the estate tax is highly complex and generates massive compliance costs. Additionally, medium-sized estates (often estates of people who have started successful businesses) pay the highest tax rates, and heirs are routinely forced to liquidate their family's businesses in order to pay the tax.

Abolishing the death tax, he says, would be one of the best achievements of the 113th Congress.

Source: Bartlett D. Cleland, "The Undead Death Tax," Institute for Policy Innovation, July 21, 2014.


Browse more articles on Tax and Spending Issues