Biden’s Killer Double Death Tax

At the 11^th hour before Memorial Day weekend, the Biden administration released their proposed fiscal year 2022 budget outlining the administration’s proposed spending and tax policies for the coming year. Perhaps the reason for the release timing was the tax side of the budget which relies on hiking taxes on many family-owned and operated businesses and is starting to cause heartburn amongst many rank and file Democrats in Congress.

Family businesses are the lifeblood of their communities. These family businesses in towns all across the country help to fund the local little league baseball teams, provide good-paying jobs, and hold communities together. When family businesses must be sold off to pay taxes, oftentimes, they are gobbled up by huge multinational corporations. When family businesses disappear, the jobs these businesses create on main street and the community enrichment they provide disappears as well. As it stands now, nearly 70% of family businesses don’t survive to the second generation, and this statistic has likely accelerated over the past two years with the closure of a record number of small businesses.

The Biden budget would make this statistic even grimmer by imposing a new double death tax through capital gains. Here’s how it would work. If your parents or grandparents started a small business from the ground up with almost no “basis” and worked their entire lives to grow that business, they could now be subject to capital gains taxes on the appreciation of the business over their entire lifetimes as if a profitable sale had occurred at death. Family businesses, farms, and ranches oftentimes appear valuable on paper, but their value is almost entirely tied up in land, equipment, and inventory. This means when Uncle Sam comes knocking for over 50% of the business upon the death of a business owner, these family businesses are forced to fire workers, sell off equipment, and in the worst cases, close the doors permanently to pay death taxes. Biden’s new double death tax would accelerate the dissolution of family businesses, farms, and ranches by imposing this second death tax at a rate as high as 39.6%, which would come in addition to the current 40% estate tax or “death tax” that is already on the books. This new killer double death tax would almost certainly be an insurmountable hurdle for family businesses hoping to pass to the next generation of ownership.

 The origin of the current death tax goes back to WWI, when it was imposed only to raise funds for the war. Now over 100 years later, the estate tax remains the last survivor of the Great War as it has remained on the books ever since. The Joint Economic Committee has calculated that the estate tax has drained over $1 trillion from the economy in deadweight loss since its inception, destroying businesses and jobs along the way. But the death tax serves a deeper purpose in the push for socialism in America. Karl Marx recognized that breaking the bond entirely between parents and their children makes society more dependent on the state. That’s why the third plank of Marx’s Communist Manifesto calls for “the abolition of all rights of inheritance.” For the socialist left, the death tax is not just a tool to raise revenue; it is a means to eventually centralize all production entirely in the hands of the government.

 The 2017 Tax Cuts and Jobs Act signed by President Trump protected many more businesses from the nightmare of the death tax, but a handful of squishy Republican Senators stopped short of fully repealing the tax as called for by President Trump and the House. Today, a few short years later, Democrats in Congress are marching in the opposite direction, hoping not only to reverse the progress made in the Tax Cuts and Jobs Act but also pushing to create a new second tax at death. Destroying the American Dream is only collateral damage towards their end of centralizing power and funding more government spending programs.

Democratic leadership now has the difficult task of satisfying liberal activists and the party’s ivory tower academic wing who have been tone-deafly calling for death tax rates up to 77%, even as the economy, limping towards recovery, remains on unsteady footing. The Democratic party is showing signs of splitting entirely on the issue of taxes, though, as some rural state Democrats are in full panic mode that their votes in favor of the Biden double death tax would spell doom for their 2022 election hopes. In the House of Representatives, an AMAC Action-supported bill to repeal the death tax entirely has the support of almost 150 members already, including lead Democratic sponsor Sanford Bishop (D-GA). Even Democrat Sanford Bishop understands that the death tax kills jobs and businesses. “I have always believed that the death tax is politically misguided, morally unjustified, and downright un-American,” said Rep. Bishop.  “It undermines the life work and the life savings of farmers and jeopardizes small- and medium-sized businesses in Georgia and across the nation.”  AMAC Action recently banded together with over 154 small business groups and advocacy organizations to strongly oppose the creation of a new double tax at death. Our team in Washington will continue to push back against any attempts to hike taxes on small businesses and seniors across the country. Simply put: no hard-working American business owners should have to visit the grim reaper and the taxman in the same day.

Palmer Schoening is Chairman of the Family Business Coalition and part of AMAC Action’s team in Washington, DC