Consequences of U.S. estate tax repeal

In early September, the U.S. Family Research Council (FRC) and the American Family Business Foundation released a report analyzing the effects of maintaining the estate tax on jobs, government revenues, and economic growth.

Their report, “Repealing Death Tax Will Create Jobs and Boost Economy,” combined two recent analysis of the estate tax by a former CBO director and president of the Institute for Research on the Economics of Taxation.

It provided compelling documentation for why the estate tax should be repealed or at the very least, not changed through declining exemptions and increasing rates. Here are some of the findings:

• eliminating the estate tax would create over 1.5 million jobs for family and small business workers;
• an increase in the estate tax rate and exemption prior to 2001 would eliminate 500,000 jobs;
• the collection methods of the current estate tax actually decrease revenue to the U.S. government and if the tax were repealed, increased revenues would be received by the government through more effective collections means;
• estate tax repeal would increase GDP and worker income by some $79 billion;
• estate tax targets America’s main economic engine – small business – which are responsible for 60 to 80% of all net new jobs in the U.S. over the last decade; and
• given that large publicly traded companies are not subject to an estate tax, small and/or family businesses undergo repeated trauma as they are passed from one generation of employers to the next, while their publicly traded competitors gain a strong advantage.

All fairly persuasive points, but if I were to bet on it, I highly doubt we will see the repeal of the U.S. estate tax any time soon.