Monday, January 12, 2009

Obama/Democrats Plan to Keep the "Death Tax"

Sure enough, one day after finishing the book The End of Prosperity, I see that the Obama Administration (as well as the Democratic Party as a whole) will seek to keep the estate ("death" is more accurate) tax in 2010 and indefinitely after that. This is precisely one of the policies that was addressed in The End of Prosperity, and sure enough government does the reverse of what the authors would have done (which is eliminate the tax entirely).

Basically this tax is burdensome on small business owners and investors, as a number of small businesses have had to actually be sold since the original owner died and his descendants can't afford to foot the bill (since some of his estate is wrapped up in equity in the business). Besides this, there is a clear example of why this is a horrible tax: it gives the incentive to live large and spend one's estate into the ground instead of save, invest, and pass on wealth to one's family.

Someone who dies with a net worth of zero is taxed: zero. Someone who has saved and saved is taxed at whatever the death tax may be at the time (probably around 50%). Now, if one has to give half of what they have earned (well, what they have earned after already being taxed on those earnings when they DID earn them) what is the incentive to save, invest, and participate in activities that will help the economy?

Sure enough, as other countries across the globe do away with this "death tax" and other high tax rates, we will continually lose our competitive edge with our high income, corporate, and even "death" tax.

This was article was on the front page of the Wall Street Journal today, but you can read it online as well.

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