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This page was last updated on: June 16, 2006
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Shelby decries 'death tax'
as threat to small businesses

By Richard Shelby
Recently, Congress has taken a number of steps to reduce the tax burden on the American people. While we have made some progress, we still have a long way to go. I continue to be a strong advocate for a more simplified tax code that treats all taxpayers fairly. However, until there is consensus to completely overhaul the tax code, I plan to advocate legislation that further reduces the tax burden of all Americans. Specifically, I support the legislation signed into law by the President to extend a number of expiring provisions that would reduce the tax burden on millions of Americans. However, another important expiring provision continues to elude us -- elimination of the Death Tax. The Death Tax, one of the most egregious taxes in our code, continues to haunt many families and small business owners.

In 2001 Congress passed a law to gradually phase-out the Death Tax with complete elimination in 2010. Before the 2001 tax cuts were signed into law, family farms and small businesses and other holdings that were passed on to family members were taxed at a crippling fifty-five percent rate upon the owner’s death. Unfortunately, the bill also includes a sunset that would reinstate the Death Tax just one year later, in 2011. Without Congressional action, all progress will be reversed and once again, people will be faced with paying a fifty-five percent tax rate upon the death of a loved one. Recognizing the devastating effect that the resurrection of the Death Tax will have on families and small businesses, the Senate recently considered a House-passed measure, H.R. 8, the Death Tax Repeal Permanency Act of 2005 that sought to strike the sunset provision and make full repeal permanent. 

The death tax places an undue burden on our nation’s family-owned farms and small businesses. These individuals work tirelessly day in and day out to make their own way, to contribute to society and the economy only to be told their loved ones will be punished when they die. Too often, I hear of sons and daughters forced to sell a piece, if not all, of the legacy that their parents worked to create and sustain, simply to pay estate taxes.

That scenario is just wrong. We should not punish hard work and entrepreneurship – we should reward it. We should reward those that choose to continue their family businesses rather than shut them down. These people work hard to promote prosperity and growth in their local communities only to be told by the federal government that in addition to the taxes they have paid each year, they must now additionally pay the death tax, because someone died. 

Taxing death has a negative impact on the American desire to invest and save. A basic economics class will teach you that savings and investment are positive for individuals, families, and our economy. Punitive taxes such as the estate tax, capital gains tax, dividend tax and the gift tax all have a negative impact on our overall economic growth.

Whether it is a construction company, a cattle farm, a medical practice, or countless other businesses, they all require significant capital investment in land, equipment, and materials that quickly overcome the threshold we will return to in 2011. These investments are not part of the business -- they are the business.

I am also concerned, that like the other taxes I mentioned earlier, the estate tax serves as a second bite at the apple. Our current tax system too often taxes income and then asks for more. The estate tax illustrates this disturbing trend in our tax system.

I believe the Federal government should work to minimize the burden on the American taxpayer and simplify our tax system, rather than working against them. The Death Tax not only taxes assets a second time, it also is one of the more complicated taxes to comply with in our bloated tax code. 

I believe repeal of the Death Tax is one of many steps Congress should take to spur economic growth, lessen the burden on  small business, and simplify our tax system.  While I am very disappointed that the Senate did not act responsibly and fairly on behalf of American families and small business owners to enact a full and permanent repeal of the Death Tax, I remain hopeful that Congress can enact meaningful reform to reduce the impact of this unjustified tax in the near future.