NCPA - National Center for Policy Analysis

Abolishing the Death Tax Could Increase Wages and Investments

April 16, 2015

Currently, the federal government seizes over 40 percent of an individual's estate when they die. While the President wants to destroy so many of those legacies and raise taxes, Congress has the chance to go in a different direction.

Supporters often claim the death tax is vital for revenue, but in reality, it is a poor way for a state to raise revenue and has led people to leave a given state. According to a study by the Ocean State Research Institute, the death tax was the primary factor in residents leaving Rhode Island. The study found 107,086 or (one in ten) residents left the state between 1991 and 2009. While the state collected $341.3 million in estate tax receipts, it lost over $500 million in other taxes due to people migrating to other states.

According to former Congressional Budget Office (CBO) director Douglas Holtz Eakin, the benefits of killing the death tax include:

  • Some 1.5 million jobs would be created;
  • Business capital would increase to more than $1 trillion;
  • And payrolls will increase, investments will expand and more jobs will be created.

By contrast, under the current system of punitive taxes, the Joint Economic Committee reported that over $1 trillion worth of capital has been lost, contributing to fewer jobs and lower wages. Economists have also cast doubt on the effectiveness of the death tax. The death tax discourages savings and its compliance costs are more than the revenue it takes in.

Therefore, federal lawmakers should look to the states for guidance. While twenty-one of them carry an additional death tax on their books, many states have reformed and in some cases eliminated the death tax in recent years. States such as Oklahoma, Ohio, and North Carolina simply abolished their death taxes.

Source: Thomas Fletcher, "Kill the Death Tax," Washington Times, April 14, 2015.


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