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

Obama Wants Renewed Assault Against Family-Owned Farms And Small Businesses: The Death Tax

One thing you can say about Barack Obama is that he never misses a chance to screw the American people with new taxes. And, although he claims to be the friend of small businesses and family-owned farms, he wants to re-apply the tax that has done more damage to Mom & Pop businesses and small farms than any other tax: The Death Tax.

From Fox News:

For those dying to take advantage of next year's zero percent federal "death tax," they may want to kill those plans. President Obama's budget keeps the estate tax at its 2009 level, which means the government gets 45 percent of a dead person's estate valued over $3.5 million dollars or $7 million for a couple. Republicans argue this tax doesn't just strike the wealthy. "It destroys a lot of small businesses and a lot of family farms and ranches in America," said Sen. John Ensign, R-Nev. "People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes," said House Minority Leader John Boehner, R-Ohio. In 2001 and 2003, Republicans helped push through President Bush's tax cuts that lowered the estate tax from 55 percent to 45 percent this year and would have eliminated them next year.

To understand how this works, read the following example:

Suppose a man started his own small business or purchased a farm back in the 50's or 60's. He bought property and built up his trade over the years. He bought a house and some land and paid it off over time. When he originally purchased his property, it was a total value of, say, $50,000.

Then he dies in 2009 leaving his business (or farm) and property to his family survivors. Today the business and property (or farmland) is worth over $5,000,000. If the Death Tax was 45%, then his survivors would owe $2,250,000 in taxes as a result. If he left only $20,000 in his bank account, his survivors would have to come up with $2,230,000 to pay off the tax or the government would come in and take everything leaving them with nothing.

What is the family going to do to raise $2,230,000? They sell the business (or farm) and the property, usually to a major corporation who developes the land for commercial or residential use.

The small business or farm is then lost forever, all due to a very unfair tax that the Democrats use to supposedly "stick it" to the rich, but end up sticking it to the middle class instead.

You can access the complete article on-line here:

Obama's Budget Resurrects 'Death Tax'
Molly Hennenberg
Fox News
April 1, 2009