How The Death Tax Kills Small Businesses, Communities—And Civil Society

Think that the "Death Tax" is an engine for redistributing wealth from the wealthy to the needy? Not so. A more accurate description would be that it redistrubutes wealth from small communities to large corporations.

This isn't to say that large super-chains like Wal-Mart and Target are to blame. No, far from it. The large corporations are simply taking advantage of the opportunities that the Death Tax makes available to them.

When the owner of a business or farm whose valuation is over the Death Tax threshold dies, those who stand to inherit the estate will have to pay the Death Tax. Now, if the deceased did not leave enough cash reserves to pay off the Death Tax, the heirs will have to come up with the money. That usually means selling off land or assets and most often, a large corporation will be there to make the purchase.

But it isn't only the business or farm that suffers. The community around which the business or farm existed also suffers, especially now since the new owner's have no vested interest in the local community the way a family-owned business does.

Writing for the Heritage Foundation, Patrick Fagan, Ph.D., illustrates this witrh crystal clear reasoning:

All across America, the day-to-day richness of Americans’ way of life is evident among families who live in tight-knit towns and small communities. Com­munities are formed through an intricate web of con­nections. The typical web-building process is familiar: Children gather at a local swimming pool or join a Boys & Girls Club. Their parents become acquainted. Parents and children form friendships and find their lives intersecting in a widening variety of places—at church, at school and local civic organizations, on ath­letic teams, and through charitable projects. They visit in one another’s homes, share their concerns about their children’s schools, and render mutual aid and moral support in times of difficulty. Through such interactions, individuals and families spontaneously knit the fabric of a community. Then the boy mar­ries the girl and it all starts over again. But community is not an inevitable result even when people live in close proximity to each other. The associations that form a community are like an ecosystem, where all the complex interactions depend on a few sources of sustenance: air, water, sunlight. Degrade one of those sources, and the eco­system is vulnerable to systemic breakdown. So, too, with communities. By undermining a primary source of sustenance for communities, the small business, the “death tax” (the federal estate tax levied on individuals, including owners of small companies, after their death) is a direct assault on a community’s ecosystem. In any typ­ical community, small businesses are not external sources of nurturance, like sunlight cast on an ecosys­tem from afar. They are integral parts of—and active participants in—a community. As such, they generate some of the most critical forces that knit communities together. These crucial economic resources are often destroyed by death taxes. ... Playgrounds, senior centers, volunteer organiza­tions—are all spaces within which people interact to form community. These spaces are not optional; a community cannot exist without them. In threatening the source of their support, the death tax is the Grim Reaper that can gut small communities by uprooting people’s livelihoods, decimating charity flow, cutting down young entrepreneurial talent, while in the pro­cess robbing small-town America and city neighbor­hoods of much of their civil society underpinnings.

While the Obama administration deems many businesses (usually those with large bodies of Union employees) as "too big to fail" they have yet to declare any community as "too small to steam roll."

You can access the complete article on-line here:

How The Death Tax Kills Small Businesses, Communities—And Civil Society
Patrick Fagan
Heritage Foundation
July 26, 2010