The Death Tax Returns

When Congress voted to pass President Bush's tax-relief legislation last year, many Americans were not aware that all of those tax cuts would expire in a decade.

We are in this situation because of a Senate procedural rule under which tax legislation sunsets in ten years. Thus, unless Congress acts again, all of these taxes will be reimposed on Americans in 2011 - at the same level as existed in 2001. It will be as if the tax cut had never happened. Congress needs to act now to avoid what amounts to a massive new tax increase on the American people in just a few short years.

This week Senator Phil Gramm and I tried to address one component of the 2001 tax-relief bill by making permanent the repeal of the federal estate tax (the "death tax"). Unfortunately, we came a few votes short in the Senate. Though a majority in both houses of Congress support this repeal, we were thwarted again by a minority of liberals, many of whom oppose tax relief because it leaves less money to spend in Washington.

We will not give up on a permanent repeal, and I want to tell you why. The death tax is one of the cruelest taxes ever conceived. Death itself should not be a taxable event. Small-business owners, farmers, and ranchers pay taxes on their income and property all their lives. Their families should not be taxed on those same assets once again at the time of death. Families often have to sell those very properties just to pay the tax imposed on them.

The American dream is supposed to encourage entrepreneurs to work hard and build something of their own to pass on to their families. The death tax turns that dream into a nightmare.

For this reason, it was a great relief to many of these small-business owners that we were able to enact death tax repeal at all in 2001. But, because of the parliamentary rule I mentioned, we were unable to make that repeal permanent. Over the next decade, the death tax is slowly phased out until 2010, then reimposed in full in 2011.

This temporary repeal makes no sense. One of the reasons the death tax is so unfair is that families spend an exorbitant amount of money every year in estate-planning costs to try to keep their assets and still pay the tax. This is money that could be put to better use, such as hiring more people, expanding a business, or saving for their children's future. But since there is no assurance that the death-tax will ever be fully eliminated past 2010, Americans have to keep paying these estate-planning costs. Unless Americans are planning to die before 2011, any repeal that is not permanent doesn't really provide much of a benefit.

Consider Maria Coakley David of Falls Church, Virginia, whose mother owns a construction company that she hopes to pass on to her children. Maria estimates that her family spends approximately $120,000 every year in attorneys' fees and estate-planning costs to avoid losing the business to the death tax when her mother dies. As Maria says, "It's important to realize that this $120,000 is money that is not spent on growing our business or on providing better employee benefits, like health care, dental plans or 401 (K) plans. These are products that we want to offer to our employees in order to maintain a quality work force."

Maria's case is one of thousands, and demonstrates why the death tax is an impediment to economic growth. Some studies have concluded that eliminating the tax would immediately save taxpayers as much as $23 billion in expenses related to estate planning and life insurance policies. That saved money would strengthen the economy through an increase in consumer spending or investment in the growth of businesses.

In short, it's time to kill this unfair tax that casts such a cruel shadow over families trying to preserve something to pass on to future generations. We fell short this week - but we will be back to try again.

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