For a second consecutive year, a proposal to permanently repeal the estate (or death) tax sailed through the House only to again bog down in the Senate. In fact, the measure didn't even earn any Senate debate.
The question now is whether we'll see a compromise that dramatically raises the exemption levels. If nothing is done, anyone with more than $1 million in assets, and without an effictive estate-planning program, will have the government take half of it upon their death after 2011.
Since the Economic Growth and Tax Relief Reconciliation Act of 2001 passed June 7, 2001, the death tax is temporarily on a phase-out schedule, ending with full repeal in 2010. Without a permanent repeal, a sunset clause has the death tax reverting back to its pre-2001 levels of a 55% taxation rate of an estate's value, with only a $1-million exemption. The U.S. Senate, however, refused to even consider the House-passed measure for permanent repeal of the death tax, the "Death Tax Repeal Permanency Act of 2005" (HR 8).
South Dakota Cattlemen's Association (SDCA) president-elect Scott Jones said in and SDCA release that the vote "signifies how little the survival of the family ranch means to those in DC.
"Death taxes are one of the leading causes of the breakup of multi-generation family farms and ranches. I don't want my son to incur a burdensome debt to pay death tax on a ranch that has already been hit with that tax several times. In order to spare my son from that circumstance, my family will spend many thousands of dollars every year to conduct ongoing estate planning, a difficult process considering the ever-changing status of this unfair tax," Jones said.
The Senate result was a devastating blow for farmers and ranchers and a great triumph for the politics of class warfare and the expansion of government. It's also a triumph for what's become the only effective form of socialism in the world.
Overzealous confiscation of wealth typically shuts down productivity -- why bother working if you can't keep what your efforts bring you? Europe, the Eastern Bloc, China and others all went too far at one time, only to decline in competitiveness or forced to enact reforms to correct the situation.
The U.S. government has perfected the concept of Robin Hood. It lets you keep 55% or so of what you earn so you'll keep trying, as it redistributes the wealth. Then, if you're fortunate to build any equity with the money left over -- after it's already been taxed at least once -- the government will take 55% of that upon your death.
A failure to repeal the death tax essentially means the trend of the super-wealthy getting richer is assured, as the super-wealthy have the means to avoid the tax burden. As a result, they will be the only ones able to afford the family operations undergoing forced liquidation to pay their estate-tax obligation. There are many factors driving industry consolidation, but it's likely none play a more dramatic role than the U.S. tax system.
-- Troy Marshall