Hey, Small Business Owners. Better Brace for that Death Tax Compromise.

When the most recent tax deal passed, one of the great triumphs Republicans claimed was that the “death tax” would be only 35 percent on estates of more than 5 million dollars. The Democrats wanted a rate of 55 percent and a much lower exemption. What wasn’t widely reported by either Republicans or Democrats was that the estate tax was zero for the entire year of 2010. So, what Republicans claimed as a triumph was actually a massive tax increase on the lifetime earnings of hard-working people who spent years and countless hours of their lives building a business or farm they could pass along to their children.

I’ve caught heat for opposing the tax deal. The argument from the Republican party stalwarts is that we weren’t really talking about a tax increase on a small percentage of people from zero to 35 percent but an increase from zero to 55 percent. Perhaps that’s true in a political, theoretical sense. What we got, however, was a 35 percent tax increase that won’t simply punish those mean old rich people who hoard their money like Smaug inside his lair in the Lonely Mountain. This tax increase is going to hammer tens of thousands of small businesses and farms (via Instapundit).

With family businesses and farms accounting for a significant percentage of the “wealth” of elderly Americans (those 65 years of age or older), the return of the estate tax starting on January 1st will force many families to divert resources into measures to minimize the tax, rather than grow their businesses, according to a new report released today and authored by Duquesne University Economist Antony Davies.

Published by the American Family Business Foundation (AFBF), the report finds that up to 67% of estates subject to the estate tax in 2011 would own small business assets, with more than 22,000 farms, 29,000 private corporations and 14,000 real estate partnerships likely to be affected if the owner dies.

Guess what’s going to happen when those tax bills come due? At best, the inheritors will have to divert money from the business to pay the tax that would have otherwise gone to hiring new people, giving employee raises, and buying new buildings and equipment. At worst, they will sell the businesses and fire all the employees.

Is that likely to help the economy? Is that fiscally-responsible? Does that even make a lick of sense? Of course it doesn’t. Democrats wanted a big, fat death tax because they can’t stand people who have money they don’t control. That’s their nature and we can hardly expect them to change even after we gave them a spanking the likes of which none of them have ever experienced. Republicans compromised on a job-killing tax that will without question hurt the economy because they were too timid to put up a real fight. That, also, has become their nature even though they know they’re on notice. The politics of the situation was very straightforward. In the real world, however, where people are still struggling mightily to dig themselves out of the hole into which our leaders — Republican and Democrat — have sunk them, we were hung out to dry.

That’s going to have to change, and soon. If it doesn’t, we’re going to hand out a lot of pink slips in November of 2012.

Other Posts of Interest:

• Only Three Things Are Guaranteed: Death, Taxes, And Dems Loving the Death Tax
• Maryland Waves Bye-Bye to Business
• The GOP’s Tax Deal Isn’t a Very Good Deal for Us or the Economy (Updated)

Tags: Taxes

Category: The Economy and Your Money, The Republican Minority