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Repeal the Death Tax
Discriminatory and Unfair Death Tax Should be Repealed
By Justin Williams
John's father had worked tirelessly for many years to create a productive, successful construction company to support him and his family. Carrying on the tradition, John took over the company after his father's retirement and ran the business with his partner Steve. After 20 years of living together and pouring themselves into a business that employed hundreds of workers, John unexpectedly passed away. Shortly after John's passing, Steve was faced with a death tax penalty of nearly half the company's value. Having almost 90% of the assets in equipment, inventory, and other areas, Steve couldn't afford the huge estate tax bill from Uncle Sam, so he was forced to sell the company. Tragically, Steve and John's story can be all too real and common for many Americans, especially gays and lesbians.
The death tax weakens the foundation of this nation—whose ideals reward hard work and provide basic fairness for all Americans. It is a redundant, burdensome, and discriminatory tax, especially for gay and lesbian Americans. Worst of all, the tax hurts our economy and destroys jobs.
According to an Internal Revenue Service report, 2% of Americans[1] are forced to pay the death tax, which has a top rate of 45%. Worse yet, this money has already been taxed at least once. Congress' Joint Economic Committee reports that revenue from the death tax accounts for only 1.4% of total federal revenue, however this revenue is offset by the compliance and collection cost of this tax[2]. Also, a study from Travis Research Associates found that businesses and individuals must spend thousands of dollars each year in preparation for the death tax; money that could be spent on employee benefits, creating new jobs, charitable donations, or economic growth[3].
The death tax is causing real harm to American businesses. A survey of 365 family-owned businesses by Travis Research Associates revealed that without the death tax, those businesses could have created over 5,000 jobs.[4] Furthermore, those businesses stated that a total of 15,000 jobs could be at risk if their companies were forced to pay an estate tax during the next five years.[5] In fact, according to the Joint Economic Committee, the death tax is the "leading cause of dissolution of thousands of family-run businesses."[6] There is no reason why hard-working small business people should be penalized with this unfair tax.
The impact of the death tax is even more detrimental to gays and lesbians because it contributes to the overall tax inequality faced by this community. Gays and lesbians already pay tens of thousands more in taxes and other governmental costs than their heterosexual counterparts[7], as highlighted in a National Gay and Lesbian Task Force report. This tax can be devastating to surviving partners who would likely face other tax liabilities even without the death tax.
Moreover, gays and lesbians cannot take advantage of the exemptions currently available to married opposite couples intended to lessen the effect of the death tax. Under the current system, assets passed on to the surviving martial spouse are not subject to the death tax. However, surviving partners in gay and lesbian commitments must pay almost half of their partner's estate in taxes noted a Gay Financial Network article[8]. This may force surviving partners to sell the assets of the deceased partner in order to pay the tax bill.
Also, as reported in a Gay Financial Network article, martial spouses can reduce the impact of the death tax by making a transfer of assets prior to death to the other spouse without paying a tax, but this option is not available to gay and lesbian partners. In addition, married couples get twice the exemption amount that individuals do[9]; thus, leaving many gay and lesbian families to have a greater tax demand at a much lower amount than heterosexual families.
The death tax can produce even worse financial burdens for certain members of the gay and lesbian community. Gay and lesbian business owners, as do other minority-owned businesses, spend upwards of $40,000 a year on planning and premiums to deal with the death tax, according to the Family Enterprise Center[10]. This is a tremendous financial strain on businesses that already face overwhelming obstacles. Also, 1 in every 10 same-sex couple includes a partner that is 65 years or older, according to the Human Rights Campaign[11]. Already facing rising medical costs and decreasing retirement income, senior citizens in the gay and lesbian community are hit especially hard by this tax. Given the disproportionate impact on the LGBT community, gays and lesbians across America should unite to ensure this inequitable tax is repealed.
Politicians in Washington should take notice that Americans from all backgrounds realize this tax is unfair and hurts the American economy. 79% of gays and lesbians recognize that the death tax is discriminatory and 82% stated that would support a law repealing the tax, according to Luntz Research Companies[12]. Polls consistently show nearly two-thirds of Americans support permanent repeal of the death tax.[13] According to Luntz Research Companies, 85% favor repeal or significant reduction of the death tax.[14] Also, a variety of organizations and business, including 60 national business organizations that have formed the Family Business Estate Tax Coalition, have joined to together to work to repeal the death tax.
Additionally, past attempts to find a compromise solution on this issue have proven to be ineffective, complex, and arbitrary. These so-called "reforms" do nothing to alleviate the obvious unfairness of this tax. They have focused on raising the exemption level using arbitrary amounts or creating business specific exemptions that proved to be so complex and restrictive that even the American Bar Association favors its repeal[15]. Congress should accept that the only reasonable solution is to appeal the death tax.
There is no reason why hardworking Americans such as Steve should face this undue, unreasonable economic hardship, especially after the tragedy of losing a partner or family member. It undermines American ideals of prosperity and fairness. Many are hard at work to ensure the end of this discriminatory tax. Gays and lesbians should join the fight against this unfair and harmful tax.
Click here to read Log Cabin's news release about the death tax.
[1] Barry W. Johnson and Jacob M. Mikow, "Federal Estate Tax Returns, 1998-2000". Internal Revenue Serivce Website. http://ftp.irs.gov/pub/irs-soi/00esart.pdf. 2000. 1.
[2] Joint Economic Committee United States Congress. "The Economics of the Estate Tax". Joint Economic Committee Website. http://www.house.gov/jec/fiscal/tx-grwth/estattax/estattax.pdf. 1998. 2
[3] Travis Research Associates, Inc. "Survey of the Impact of the Federal Real Estate Tax on Family Business Employment Levels in Upstate New York". 1999. 1.
[4] Ibid.
[5] Ibid.
[6] Joint Economic Committee United States Congress, iii.
[7] Terence Dougherty. "Economic Benefits of Marriage". National Gay and Lesbian Task Force Policy Institute. 2005.
[8] Michael Tripplett. "Repealing the Estate Tax: An Unintended Gift From Bush?". Gay Financial News Network website. http://www.gfn.com/archives/story.phtml?sid=8375. 2001
[9] Ibid.
[10] Family Enterprise Center. "A Report on the Impact of the Federal Estate Tax". Kennesaw State College. 1995.
[11] Human Rights Campaign Foundation Report. "The Cost of Marriage Inequality to Gay, Lesbian, and Bisexual Seniors" Human Rights Campaign. 2004.
[12] Frank Luntz. "The Death Tax & Gay and Lesbian Americans". Luntz Research Companies. 2001.
[13] Tax Foundation. "Annual Survey of U.S. Attitudes on Tax and Wealth". Harris Interactive Inc. http://www.taxfoundation.org/files/77325d48f758356c4e8e9a88844a4645.pdf. 2005. 8.
[14] Frank Luntz and Jeff Pollock. "Americans Talk Taxes". "Luntz Research Companies. 2005.
[15] Family Business Estate Tax Coalition. Economic Reports #4. http://www.nodeathtax.org/ECONOMICREPORTS/reports_04.pdf. 2004.
