WASHINGTON, March 30 (UPI) -- President George W. Bush renewed his call for permanent repeal of the estate tax on March 19. "It is unfair, patently unfair, for any entrepreneur ... to develop her own business and have that business taxed twice as she tries to leave her assets to whomever she chooses," Bush told a Women's Entrepreneurship Summit in Washington, D.C. "We must make the repeal of the death tax permanent. I call upon Congress to do this immediately."
The tax cut signed by the president last summer kills the so-called death tax, but slowly and for only one year. The tax is not fully repealed until 2010 and is resurrected the next year, when all Bush's celebrated tax cuts die and the nation's tax code returns from the grave as it was in the year 2000.
"I do not believe the role of government is to create wealth," the president told last Tuesday's group at the Ronald Reagan Building and International Trade Center. "The role of government is to create an environment that encourages risk taking, an environment that facilitates the flow of capital, and an environment in which people can realize their dreams. ... And that's exactly what I intend to do as the President."
That is also exactly what the death tax does not do.
The entrepreneurial summit was a fitting venue for Bush to renew his call for estate tax repeal, as the tax is particularly harmful to small businesses. The death tax punishes responsible risk-taking, diminishes available capital needed to start the small businesses on which so many American families depend, and steps between hard-working people and their dreams.
Nearly 90 percent of family-owned businesses do not survive past a second generation due to the need to sell off assets to pay this tax, according to 60 Plus Association President James L. Martin. Often this is because these small business owners and family farmers consistently invested most of their earnings back into business, for example by purchasing machinery.
While this often is the only way to keep the business or farm surviving or thriving, it leaves owners with little in the way of liquid assets. This means that when estate taxes come due, cash-poor heirs must sell off all or part of the farm or business just to pay the government. As Tennessee farmer Danny Rochelle puts it, "Every time a farmer dies, you may as well have a funeral for the family farm that goes with him."
It is not only entrepreneurs who are injured by the death tax. The tax reduces the number of available jobs for everyone. Economists Gary and Aldona Robbins estimate that if the estate tax had been repealed in 1999, the U.S. economy would have created an additional 236,000 jobs by 2008.
Not only does the death tax squelch the pursuit of dreams, it squelches the pursuit of the virtues on which healthy republics depend. A successful business requires vision and planning. It requires the willingness to delay gratification, to save for capital investment, to put in the long hours and make the financial sacrifices necessary to nurture a newborn business, to focus on long-range rewards instead of the frustration of short-term setbacks.
It requires the discipline to work hard without giving in to discouragement. It requires the courage to take responsible risks and to rise to challenges. It requires dependability: Meeting payroll, paying bills, and delivering products on time. It requires the exercise of wisdom and discernment to choose among different options in product planning, marketing, hiring, and in investments.
The virtues needed to raise a successful business from the ground up carry natural rewards, including prosperity. They also bring less tangible benefits to the individuals and families who practice them, such as greater freedom from worry, the trust and confidence of others, and self-respect. Like all virtues, these build upon themselves when exercised to productive ends. Industry, discipline, and responsibility become habits when practiced regularly, contributing to healthy families, healthy businesses, and a healthy nation.
The estate tax discourages this very behavior. It clouds vision because it decreases the likelihood that what an entrepreneur builds will survive over the long term. It discourages delayed gratification because it makes immediate consumption relatively cheap. It blunts the exercise of wisdom by forcing people into making decisions due to estate planning considerations that they might not otherwise make. It teaches that courage and responsibility aren't worth pursuing, because it seizes their rewards.
For these reasons, the estate tax is a tax on virtue, corroding the moral as well as the economic strength of the nation.
A nation that squelches economic growth and moral virtue is a nation in peril. Congress should heed President Bush's sage advice and repeal the death tax permanently and immediately.
Leslie Carbone, former director of family tax policy at Family Research Council, is writing a book, "Slaying Leviathan: The Moral Case for Tax Reform."
Special to United Press International.
Copyright 2002 by United Press International. All rights reserved.
