Congressman Bob Latta wants to kill the so-called "death tax."
On the first day of the 112th Congress, Latta, R-Bowling Green, introduced House Resolution 143 which
would permanently repeal the estate tax, a federal tax levied against the assets of a person’s estate
after death.
"The estate tax is archaic and goes against the grain of hard-working American families who strongly
believe in a founding principle of our country that with hard work, future generations can be better off
than the last. Permanently eliminating the estate tax is an important step in ensuring that our small
businesses and farmers, an integral part of our nation’s economy, can grow and prosper into future
generations," Latta said. "While the federal government may have taxed a portion of
hard-earned American family dollars in the past, it doesn’t mean they have the right to do the same to
future generations."
Historically, the estate tax was levied at 55 percent of any estate over $1 million, but the exemption
level was increased over the past 10 years after a series of tax cuts were signed into law in 2001 and
2003. In 2010, the federal estate tax was temporarily dropped. Then this past Saturday, the estate tax
was reinstated for a two-year period at a 35 percent rate and a $5 million per person exemption.
Latta said there is a need for consistency in estate taxes, so citizens can plan ahead and not worry
about changes in the system each year.
"People can’t really figure out what’s going on because it’s always temporary," he said.
He also said the taxes are unfair since in many cases taxes have already been paid on the income.
Latta said the tax also discourages individuals from investing in businesses and hiring more employees,
in order to remain under the exempted threshold.
Proponents of the estate tax note that nearly all family farmers and small business owners are exempt
from or are not subject to the estate tax.
Latta said he was unsure what percentage of U.S. citizens are affected by the estate taxes, since it only
impacts people passing on inheritances of $5 million or more to their descendents. In Wood County, the
law affected 121 estates that were settled in 2010, according to Wood County Treasurer Jill Engle.
"The number has gotten lower," Latta said, estimating the taxes collected make up 1 percent of
the federal revenue.
The loss of that revenue should not be an issue, since now that Republicans are in charge of the House,
Latta said spending will change in Washington.
"We’re looking at how we’re going to rein in federal spending. What we need to do is start scaling
back," the congressman said. That means those dollars brought in by the estate tax won’t be needed,
he added. "Washington doesn’t have a revenue problem, it has a spending problem. We’re going to
live within our means and we’re not going to tax what has already been taxed."
To understand the negative impact of the estate tax, Latta said he only has to go to county fairs and
look at the massive investments farmers make in their equipment.
"How do you save a family farm," when much of it is lost to estate taxes when it is passed on
to younger generations, he said.
Though there are several exemptions available to farmers, Latta said the taxes are always looming.
"There is no certainty," he said. "The death tax has to be abolished."
Though the bill should have no problem getting through the Republican-ruled House, its chances in the
Democratic-controlled Senate are less likely for passage. But Latta said Senate members may want to look
ahead to the next election, and realize that American voters are watching.
"They have to start listening to the will of the American people," he said. "The people
have said ‘enough is enough.’"
Prior to 1916, death taxes were enacted temporarily to raise funds for a specific purpose. The first
version of the estate tax was enacted by Congress in 1797 to fund the formation of the American Navy.
The Revenue Act of 1862 enacted an inheritance tax and introduced a gift tax for the first time to fund
the Civil War effort. The War Revenue Act of 1898 implemented an inheritance tax used to fund the
Spanish-American War.
Proponents of the estate tax argue that it serves to prevent the perpetuation of wealth, often free of
tax, in wealthy families. Supporters point out that the estate tax affects only estates of considerable
size and provides numerous credits that allow a significant portion of even large estates to escape
taxation. Regarding the tax’s effect on farmers, proponents counter that this criticism is misguided as
there is an exemption built into the law that is specifically designed for family-owned farms. They note
that abolishing the estate tax will result in tens of billions of dollars being lost annually from the
federal budget.