Killing the death tax

As Ben Franklin put it so well, "The only things certain in life are death and taxes." Leave it to Congress to find a way to merge the two.

One of the most egregious taxes is the federal estate tax -- more poetically known as the "death tax." The death tax was first enacted in 1916 to raise funds while America fought World War I, and Congress has kept it on the books ever since.

This tax, levied on estates after the death of the owner, most heavily strikes small- and medium-sized family-owned businesses and agricultural interests, such as family farms and ranches. It often causes the liquidation of family-owned business or, at the very least, diversion of resources from strengthening the business to just keeping it when the owner dies.

In 2001, Congress passed legislation to reduce the federal estate tax rate from 55 percent to 45 percent for calendar years 2007, 2008, and 2009, while at the same time raising the exemption from $1 million to $3.5 million. The tax is scheduled to fall to zero in 2010, but would then revert back to 55 percent in 2011. This arbitrary tax hike would exert a negative impact on small family farms, ranches, and businesses. Unless, of course, you time your death to the tax code.

A study by the bipartisan and bicameral Joint Economic Committee (JEC) found death tax liabilities depend on the skill of the estate planner, rather than on the capacity to pay. The JEC also estimated the death tax reduced the stock of capital in the economy by about $847 billion -- about the price tag of the so-called stimulus plan recently signed into law by President Barack Obama.

Family farms support Nebraska's economy and are a way of life in many communities. Yet policies like the death tax run counterproductive to Nebraska's interest by discouraging the next generation of farmers, ranchers, and small businesses. Tax policy should reflect this reality and provide incentives for new farmers and ranchers, rather than burden them with policies which allow the federal government to hit taxpayers twice as hard.

In 2006, the Death Tax Repeal Permanency Act was passed by the House of Representatives and sent to the Senate, but fell three votes short of passage. As 2010 approaches, there is increased urgency to ensure the permanent phase out of the death tax.

Nebraska families make their household budgets and small business plans for longevity, and you should be able to rely on a consistent and fair tax code which provides a sense of stability.

Reducing taxes and putting more dollars in the pockets of taxpayers is the best way to stimulate the economy, which is why I have supported efforts to make permanent the tax cuts of 2001 and 2003. These include the extension of the current marginal income tax rates, the 15 percent rate on capital gains and dividends, the state and local sales tax deduction, marriage penalty relief, and of course the elimination of the death tax.

Struggling farmers, ranchers and small business owners shouldn't have to shoulder the burden and devote resources to estate planning during a time of economic uncertainty, especially when their efforts could be better spent strengthening our economy.

As rural areas in Nebraska and across the nation struggle with declining population, I want to create an environment which will encourage entrepreneurs to start or expand businesses in our rural communities. The death tax does just the opposite by looming large over any family-owned enterprise without the resources to find tax loopholes.

There is no reason why family farms, ranches and small businesses must die because of a tax written to help pay for World War I. Our economy is too fragile to allow this tax burden to become permanent.