Government: What's Yours is Mine, Even after You Die

By U.S. Senator Jon Kyl Throughout your entire life, the government taxes you on everything. There's a tax on your income, your home, your family business, and even your furniture. And when you die, the government swoops in and taxes you on everything you own all over again. It's no wonder that a vast majority of Americans think the death tax is the most unfair provision of our tax code. A 2005 survey conducted by Global Strategies and Luntz Research found that 41 percent of respondents believe the death tax should be zero (or no more than the capital gains rate) while a full 70 percent said the rate should be no more than 25 percent. And a 2006 Gallup poll found that 58 percent of respondents said that the "inheritance tax" is unfair. As a result of the 2001 Republican tax relief package, the death tax rate is reduced to 45 percent through 2009, and is fully repealed for one year in 2010. But because of concessions made to Democrats when the relief package was first adopted, the death tax will return to its original levels in 2011, with rates skyrocketing to as high as 60 percent! This means that the government will confiscate over half of all estates over $1 million in value. While most Americans won't have to pay an estate tax, millions engage in expensive estate planning to avoid its effects. In fact, it is estimated that as much is spent each year to avoid the tax as is paid to the U.S. treasury (about one percent of federal revenues). Warren Buffett with an estimated wealth of $57 billion and ranked by Forbes magazine as the third richest man in the world in 2007 is one of the most outspoken advocates of the death tax, and recently testified before the Senate Finance Committee urging Congress to preserve the tax. Even so, he too shields his assets from the tax (and can afford the best lawyers and accountants to do so). But it's not people like Buffett who are hurt most by the tax. It's the small-business owner who works hard throughout life, building a business from the ground up, and making it a success. Or the farmer who re-invests all of his profits back into his operation and has valuable land and expensive equipment, but very little liquid cash. Small, family-owned businesses, particularly manufacturers, often earn relatively low profit margins but are considered "wealthy" by the government because they own expensive production machinery or real estate. When the owner of such a company dies, the heirs are often forced to sell off the business (or parts of it if they can) just to pay the death tax. The recent Senate Finance Committee hearing (where Buffett testified) was the first of two hearings the panel will hold examining the death tax. A subsequent hearing will examine possible solutions, after which the committee will consider legislation in early 2008. I support full repeal of the death tax, but that is not possible given the current political makeup of Congress. However, a significant reform could be adopted that would minimize its damage. I will continue to work to that end.