Senate Holds Key to Death Tax Repeal

By Stephen Moore and Phil Kerpen

For the first time in decades, Republicans in Congress have an opportunity to entirely repeal a federal tax—squish it like a bug.

We are speaking of the death tax, which has been around for about 90 years and now could finally be permanently banished. This would be an enormous victory for the economy—as the confiscatory death tax is a job destroyer and a wrecker of family businesses. Politically, this would also be a huge coup for Republicans if they can prevail, as death tax repeal has been one of the GOP’s signature promises.

One reason for confidence is that the House recently voted 272 to 162 to pass H.R. 8, which repeals the federal estate tax after 2010. More than 40 Democrats voted with the Republicans for repeal. (See RollCall in Human Events last week.)

Legislative Filibuster

Some readers may be surprised that this issue is still being debated, as the Republicans claimed to have won on death-tax repeal back in 2001. But that victory turned out to be mostly symbolic, as the bill repealed the death tax effective 2010 and then reestablished the tax in 2011. This new bill would drive a stake through the heart of the death tax so that after 2010 it would be forever gone.

Winning in the Senate won’t be easy. In the last two Congresses, victory has been repelled by Senate Democrats’ use of the filibuster. To overcome this blocking action, Republicans have needed 60 votes, and so far, they have come up a few short.

That obstructionist strategy has come at a high political price for the Democrats. Last year the American Family Business Institute (AFBI) ran TV and radio ads against then-Senate Minority Leader Tom Daschle of South Dakota. This ad campaign educated voters about Daschle’s votes against killing the death tax—in a state where about three of four voters want the death tax extinguished. Daschle lost, of course, and the death tax campaign clearly contributed to his historic demise.

Many Democrats say that we “can’t afford to eliminate the death tax” because of high budget deficits. This excuse is squirrelly because the tax raises only about 1% to 2% of all federal tax revenues. It is fiscally irrelevant in the grand scheme of things.

What is clear then is that the Democrats’ emotional attachment to this tax is purely a result of the basest of motivations: greed, envy and hostility to wealth creation.

This is the underlying message of one anti-death tax repeal group called Responsible Wealth, funded mainly by Warren Buffet, Bill Gates and other super-wealthy Americans who have hidden their wealth in trusts and foundations, and thus don’t pay the death tax themselves, but want small farmers, ranchers and successful businessmen to pay the tax.

Many Democrats and liberal pundits remain convinced that inheritance is in some way morally tainted and that estates should be confiscated largely to “level the playing field.” But the myth of the idle rich has long been debunked, with bestsellers such as The Millionaire Next Door’s revealing that nearly all millionaires are frugal, hard-working Americans.

The death tax penalizes virtue and rewards vice. It allows the IRS to rob at death those who have saved and created wealth so they can leave money to their children. For those who spend their wealth on a lavish and ostentatious lifestyle, there is no tax. The best way to avoid the death tax is to die broke and leave nothing for posterity. Is that what liberals really mean by tax fairness?

Sen. Jon Kyl, the superbly talented Republican from Arizona, says that he may be willing to cut a deal with the Democrats, but only if they agree to a 15% capital gains tax applied to estates, and not one percentage point higher. He’s right to draw a clear line in the sand. Democrats have offered up a plan that would “carve out” family businesses from the estate tax, but Dick Patten, director of AFBI, calls this compromise “a scam.” He says that more than half of family businesses wouldn’t qualify. Moreover, the death tax is unfair to all Americans it is levied against—whether they have an estate of $10 million or one of $10 billion. The Democrats’ plan makes about as much sense as eliminating all of the cancer cells in a patient except for a few.

Republicans must reject any plan that retains the confiscatory 55% tax rate—period.

Sen. Jeff Sessions (R.-Ala.) has introduced the best repeal bill of all. It would eliminate the death tax permanently—and immediately this year. The logic here is that if the death tax is profoundly unfair and anti-growth, why wait five years to pull it out by the roots. A Senate vote on the Sessions bill would bring the weight of public opinion to bear on Democrat wafflers, especially if the White House weighs in to raise the public profile of the issue.

This week the Free Enterprise Fund is partnering with AFBI to roll out a targeted television advertising campaign to solidify waffling Democratic support and to move the one or two additional Democrats needed. The campaign, which will run for two weeks, centers on the moral wrong of imposing a punitive tax on the members of the Greatest Generation. The ad notes that about 1,500 World War II veterans are dying every day. Their families can’t wait for the death tax repeal.

Our Founding Fathers considered seizing estates so pernicious that they included a provision in the Constitution that forbids it as a penalty for treason; it is time to stop applying this confiscatory tax to people whose only crime is achieving the American Dream.