- The Washington Times - Sunday, November 29, 2009

ANALYSIS/OPINION:

The Obama administration and its congressional allies have a pretty straightforward choice when it comes to the death tax, which Democrats like to call the estate tax. They can set aside their ideological fixation, kill off the counterproductive death tax and reap a harvest of jobs before the 2010 elections, or they can stick to their fixation on robbing the productive rich at the cost of a bigger political bloodbath in 11 months.

Tempting as it is to back President Obama’s tax-increasing plans, which could strip him of his congressional majority, the need for a real stimulus is too great. If Congress and the administration do nothing, the death tax is scheduled to disappear in a few weeks, only to be reinstated to its pre-2001, 55 percent rate in 2011. The tax on the accumulated savings, property, income and long-term profits of the nation’s job creators when they die is a killer of family businesses and farms and the jobs they create.

Nevertheless, with unemployment at 10.2 percent and rising, Mr. Obama and congressional Democrats don’t plan to let this death charge slide even for one year. Mr. Obama’s budget relies on next year’s repeal being canceled, and Congress is expected to comply soon. The president has proposed making the current 45 percent tax rate on all portions of estates above $3.5 million a permanent part of the tax code.

That’s little better than the $1 million exemption at a 55 percent rate that otherwise would be reinstated in one year. The Obama White House is sure to claim it is seeking a middle ground and cite the record-high federal deficit. But not only does the death tax hurt the economy, it is not as important to federal coffers as it once was.

Decades ago, the death tax supplied 5 percent of federal revenues. Today, death taxes account for less than 1 percent. Getting bureaucrats to let go of that 1 percent is a small price to pay for the jobs a permanent appeal could unleash - and the income tax revenue those jobs would generate.

One recent study by Douglas Holtz-Eakin, former director of the Congressional Budget Office, and Cameron T. Smith found that repealing the death tax would allow the creation of 1.5 million jobs. With congressional Democrats looking to enact a second stimulus package with a still unknown level of spending, a permanent repeal of the death tax would enable the creation of valuable jobs. Yet Democrats appear poised to toss this genuine stimulus aside.

Taxing estates punishes the most productive and innovative members of society for serving the public good by investing and creating jobs. That is foolish by any measure but all the more so as the economy remains mired in recession. For once, Mr. Obama should take off the ideological blinders and put the needs of workers and their employers ahead of perverted Democratic Party orthodoxy.

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