Death Tax

August 23, 2017 By Robert Rivinius 3 Comments

Milton Friedman was a world-class economist, won the Nobel Prize for Economics in 1976, and passed away in 2006. Friedman championed repeal of the death tax (estate tax) for years. In 2001 he wrote an open letter on the subject and convinced 276 economists to sign on. This week the national Family Business Coalition, of which the Family Business Association of California (FBA) is a member, has announced the letter now has 723 economists signed on including four winners of the Nobel Prize. Here are a few excerpts from Dr. Friedman’s letter:

“Spend your money on riotous living – no tax; leave your money to your children – the tax collector gets paid first. That is the message sent by the estate tax. It is a bad message and the estate tax is a bad tax.

The basic argument against the estate tax is moral. It taxes virtue – living frugally and accumulating wealth. It discourages saving and asset accumulation and encourages wasteful spending. It wastes the talent of able people, both those engaged in enforcing the tax and the probably even greater number engaged in devising arrangements to escape the tax.

The income used to accumulate the assets left at death was taxed when it was received; the earnings on the assets were taxed year after year; so, the estate tax is a second or third layer of taxation on the same assets.

Death should not be a taxable event. The estate tax should be repealed.”

The current federal death tax comes into play when an estate is valued at over $5.49 million and is then 40% of anything over that. It doesn’t take long in California for an estate to get to that size if there is real property and equipment involved. Farmers are particularly hard-hit as many are “land rich and cash poor” meaning they have to sell some or all of the property to pay the death tax bill, saying goodbye to some or all of the family farm.

Just when California families saw some hope as the President and Congress are looking at eliminating the federal death tax in the current round of tax reform proposals, State Senator Scott Wiener of San Francisco introduced a bill that would put the creation of an equal tax, just for Californians, on the state ballot in the event the federal tax is eliminated. It must go to the voters because two initiatives passed by the voters in 1982 prohibit an estate tax in California, and that can only be changed by the voters. Family businesses vigorously oppose a death tax for Californians. FBA leads a coalition of 40 associations opposed to the bill. To again quote Dr. Friedman, “It is a bad message and a bad tax. Death shouldn’t be a taxable event.”

Robert Rivinius is Executive Director of the Family Business Association.

This article was originally published by Fox and Hounds Daily

Congresswoman Says Kids Should Be Drug-Tested Before They Can Inherit

March 19, 2015 By Rachel Stoltzfoos 10 Comments

Democratic Rep. Linda Sanchez offered a baffling defense of the death tax Wednesday during a hearing examining the sometimes unbearable burden it places on family farms and businesses.

People receiving food stamps have to pass drug tests or meet work requirements to receive taxpayer dollars, Sanchez reasoned, so it’s only fair that those “lucky” enough to inherit wealth should have to do something to earn it or, in this case, pay a tax.

“What work requirements are there to inherit up to $10 million tax free?” she asked a witness, rhetorically.

“Why is that [a single mother] should be drug tested, which is an unrelated requirement to receive food assistance, to make sure that her family has enough to eat,” she asked. “And people who are lucky enough to inherit millions of dollars are literally required to do nothing to get the federal tax benefit with their inheritance?”

Sanchez acknowledged that Americans should value hard work, but bemoaned the “paradox” that occurs when they want to work hard so they can accumulate wealth to live off of in retirement and pass on to their children.

“We don’t believe in an aristocracy, or that it’s a good societal thing for dynasties to hoard their wealth and leave the rest to fight over the crumbs,” she said. “That’s just not how this country was founded.”

“But we have a paradox here in this country, where we think you should work hard to get where you are … but by the same token, everyone wants to make enough money to where they can retire and not have to work,” she continued. “And they want to preserve increasingly larger and larger chunks of their wealth.”

Sanchez made the remarks after hearing a witness describe the heartbreak her family is going through watching her father try to find a way to pass his business along to his children without breaking it up in order to pay the death tax.

“Our whole lives we watched my dad work,” Illco, Inc. CFO Karen Madonia said. “You know, 10 to 12 hours a day … he did all of it. And we watched him struggle through all that, and to watch him figure out how he can pass it onto us and let us make our mark on it without having to dismantle part of it is really just heartbreaking.”

The government currently taxes inheritance at a rate of up to 40 percent. (RELATED: Obama Proposes A Second Death Tax)

“I understand the desire to keep things running in a family business,” Sanchez said. “I get that. I get the hardships you guys encounter. But let’s not throw the entire baby out with the bathwater and say we’re going to eliminate the estate tax altogether.”

Republican Rep. Kevin Brady introduced legislation last week that would repeal the death tax, which prompted the hearing Wednesday by the House Ways and Means Select Revenue Measures Subcommittee.

“The Death Tax is still the No. 1 reason family-owned farms and businesses in America aren’t passed down to the next generation,” Brady said in a statement announcing the bill. “It’s the wrong tax at the wrong time and hurts the wrong people.”

Originally published by the Daily Caller News Foundation

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