Sen. Orrin Hatch, R-Utah, took to the Senate floor Thursday to blast the estate tax, which is due to increase as part of the so-called "taxmageddon" that will hit Americans on Jan. 1, 2013 without action from Congress.
The death tax, as it is also known as, currently stands at 35 percent with an exemption of $5 million or $10 million for married couples. For those who die on or after January 1, however, that rate will rise to a 55 percent top death tax rate on estates, and the exemption rate will lower to $1 million. There will also be a 5 percent surtax on a portion of very large taxable estates, according to CNN.
President Barack Obama's proposal would return the estate tax to 2009 levels, meaning estates worth more than $3.5 million would be subject to the tax and would face a top rate of 45 percent.
People may consider the tax an issue that only affects Daddy Warbucks or the Monopoly Man, but Hatch called that a "cartoonish characterization." Instead, he said, the bill will hit the middle class, small business owners and farmers.
"The death tax adds inefficiency to our economy," Hatch said. "It is what economists refer to as a deadweight loss. In other words, it creates another burden on our free market system that prevents the full potential of economic growth. For instance, many small businesses have to purchase insurance in order to prepare for paying the death tax so they do not end up having to sell the business just to pay the death tax. This added cost is embedded into the cost of goods when sold. In other words, American consumers, American workers or Americans looking for work are those who will ultimately pay the death tax."
According to Hatch, who cited a Joint Committee on Taxation estimate, the nation will see a more than 1,000 percent increase in the number of taxable estates, a 2,300 percent increase in the number of farming taxable estates and a 1,000 percent increase in the number of small business taxable estates if Congress does not act.
The solution, Hatch said, is to fully repeal the death tax.
"There is something fundamentally unjust about the estate tax," Hatch concluded. "Contrary to the claims of this president and his most liberal supporters, a person's wealth is the result of his labor. When you build a business, you put your sweat and ingenuity into it. And to then be punished for this — to have it taken away at the moment of death by the federal government — is an assault on personal liberty and freedom."
According to the Urban-Brookings Tax Policy Center, if the exemption level falls in 2013, it will impact 53,000 estates and could raise more than $40 billion. The federal government currently spends more than $10 billion per day.
However, Tax Policy Center estimates suggest that few farms and family-run businesses will have to pay an estate tax, at least under the current rate. Fewer than 50 small farms and businesses — estates with farm and business assets making up at least half of gross estate and totaling $5 million or less — will pay any estate tax in 2011, its Wealth Transfer Taxes report said.
A 2010 analysis by Patrick Fagan of The Family Research Council argued that those "relatively few" small businesses impacted will affect the thousands who benefit from the jobs and charity generated by those businesses.
"Like water and sunlight in an ecosystem, small businesses provide sustenance essential to building and preserving communities," Fagan wrote. "So high is the death tax that a large portion of heirs to small companies cannot afford to pay it after the founder dies, and see themselves forced to sell to giant corporations — which have no personal ties to the communities of their new acquisitions, and thus no incentive to commit to local institutions. What does the death tax kill? The best of American life and civil society itself."
- XanGo co-founder accuses partners of...
- Frances Monson, wife of LDS prophet, passes away
- Utah State runner Brittany Fisher gaining...
- Airport TRAX ridership remains strong weeks...
- Search for Susan Cox Powell is over, West...
- Early diagnosis may be key in slowing...
- Mia Love announces she's officially running...
- Mitt Romney to live in Utah — at least...
- Frances Monson, wife of LDS prophet,... 66
- Mia Love announces she's officially... 37
- GOP delegates reject changes to... 31
- Utah GOP convention agenda includes... 21
- XanGo co-founder accuses partners of... 19
- Swallow headlines spark question:... 12
- Utah facing $1.2 billion-dollar water... 10
- New app helps consumers purchase... 9