Letter to the Editor: So-called "Death Tax" is not bankrupting anyone

We are told the “death tax” is terrible and should be repealed because it hurts small businesses. If it were only true.

First, the federal estate tax provides an exemption from taxes for the first $5.43 million for an individual or $10.86 million for a couple. This means that 99.8 percent of taxpayers have NO federal estate tax to pay. Not one penny.

Only 0.2 percent of taxpayers, who are also top income earners, pay this estate tax – after the exemptions and other tax breaks. While the top statutory rate is 40 percent, the average paid tax rate is 16.6 percent according to the Center on Budget and Policy Priorities.

Second, the Small Business Administration’s February 2015 publication “Small Business Profiles for the State and Territories” indicates that 5,707,941 small businesses have fewer than 250 employees and 22,735,915 family-owned small businesses have no employees.

Of these 28,443,856 small businesses, “Only roughly 20 small-business and small-farm estates nationwide owed any estate tax in 2013” (according to the Center on Budget and Policy Priorities). Those 20 estates owed just 4.9 percent of their value in tax, on average, instead of the top rate of 40%. Exemptions and other tax breaks were applied first.

The federal estate tax will generate $246 billion between 2016-2022 (CBPP). This is less than one percent of the total federal revenue for the same time period. Not much, to be sure, but it means 99.8 percent of American taxpayers will not have to pay the difference if the estate tax were repealed.

A terrible “death tax”? Not for 99.8 percent of taxpayers. For the top 0.2 percent, the estate tax is less than the capital gains tax, even after exemptions. A bargain for everyone.

Will small businesses and small farms be hurt? No, unless one believes the 0.0000007 percent will go bankrupt paying 4.9 percent. None have yet.

Duane Pitts

Moses Lake