Taxed Til Death

“Two things in life are certain,” Benjamin Franklin noted, “death and taxes.” Two hundred years later, Franklin’s observation remains as true as ever. During Franklin’s time, however, death itself was not always a taxable event. In the years immediately following the American Revolution, the death, or “estate” tax was levied sporadically – and temporarily – to finance wars throughout the nineteenth century.

The death tax was permanently codified in the Revenue Act of 1916 – the same law that introduced the modern day income tax. It was increased to help finance World War I, but the death tax didn’t go away upon conclusion of the war – and it’s been here to stay ever since.
It seems that the American people are taxed at every turn. Property, sales, income, capital gains, and death are all taxed – to name a few. Nebraskans know all too well that the list goes on, with new taxes emerging to pay for costly government programs like ObamaCare.
But I believe the death tax is especially egregious because it taxes hardworking Americans twice – once when they earn their money, and again when they give it away. Small business owners and family farmers and ranchers – our chief job creators – are hit hardest by the death tax. The Joint Committee on Taxation estimates that this year alone, 2,400 farms and 2,700 small businesses will be subject to the death tax.
These families invest time, resources, energy, and faith in growing their businesses, farms, and ranches, which many hope to pass on to the next generation. This legacy is undermined, and sometimes prevented all together, by the unfair death tax.
The devastating impact of this tax was dramatized on the silver screen in the 2010 film Secretariat. Many Americans remember the national excitement surrounding the famed racehorse’s Triple Crown victory in 1973 – the first horse to win the historic feat in 25 years. But what few recall is that the racehorse was almost sold off before it ever had the chance to win the trio of races.
Secretariat’s owners, members of the Chenery family, were forced to pay an enormous $6 million estate tax on their family farm upon the death of family patriarch, Christopher Chenery. At a time of grief, the family found itself with an impossible economic decision: they could sell the family farm, which Christopher had lovingly restored, or they could sell their newly trained race-horse, Secretariat, to pay the enormous federal death tax.
But for a shrewd, yet risky, decision to syndicate the thoroughbred, the Chenery family would have lost the countless hours and hard work spent training the horse, not to mention the profits from their investment. Fortunately, the Chenerys’ risk paid off – and Secretariat went on to win, stealing the hearts and capturing the imaginations of Americans from Belmont Stakes to the heartland.
Each year thousands of Americans are forced to make similarly difficult decisions to pay this tax, often during times of grief as they mourn the loss of loved ones. The result is the unraveling of family legacies: 70 percent of family businesses do not survive to the second generation, and 90 percent of family businesses do not survive to the third generation.
I am proud to cosponsor legislation to fully and permanently repeal the death tax. The bill, the Death Tax Repeal Act of 2013 (S. 1183) also lowers the gift tax to 35 percent with a $5 million exemption. The benefits of fully repealing the death tax extend beyond preserving existing family farms and businesses. Former Director of the Congressional Budget Office Douglas Holtz-Eakin has released a study explaining that repealing the death tax would create 1.5 million additional small business jobs. And after years of persistent joblessness, doing away with the death tax would shave almost a percentage point off the unemployment rate.
Repealing the death tax both generates needed economic growth and preserves a legacy of family farms, ranches, and Main Street businesses that color the very fabric of our Nation. Thank you for participating in the democratic process. I look forward to visiting with you again next week.
Deb Fischer
United States Senator