UPDATE: Politico reports that Sen. Reid removed the death tax portion from his bill: “Senate Democratic leaders are eliminating a provision to tax wealthy estates in order to shore up support within their ranks for President Barack Obama’s election-year tax plan, senators and aides said Thursday.Since there was no consensus in the Senate Democratic Caucus over the levels to tax estates transferred after a person’s death, Senate Majority Leader Harry Reid told senators Thursday he’d drop that provision.
Senator Harry Reid (D-NV) has made a bad tax bill worse. His original bill proposed to raise the top income tax rates on owners of S corporations, sole proprietorships, and partnerships who file individual tax returns. Raising these tax rates would cost 710,000 jobs according to an Ernst & Young study.
Reid expanded the bill this week by jacking up the death tax rate to a level not seen in over a decade—raising it from 35% to 55%.
Estates valued at more than $1 million would be taxed at 55%. According to the non-partisan Joint Committee on Taxation (JCT), the number affected will explode from 3,600 to 46,700. Twenty times the number of farms and nine times the number of small businesses will be smacked with this increase. That will force many farms and businesses to close or be sold because they won’t be able to afford the death tax.
Punishing the successful won’t rev up the economy. There’s a better way. Give entrepreneurs and small business owners more certainty by extending current tax rates for at least one year, and then work on comprehensive, pro-growth tax reform.