A death-tax rate we can live with
The Seattle Times, which is a family-owned business, believes the right rate of death tax is zero. We pay taxes, and we believe in paying them as an ongoing business, but we see no fairness in a punitive tax that falls due only when an owner dies. That said, there is a good deal of difference between a top rate of 55 percent, which it will be after 2011, and 15 percent, which may now be politically possible in Congress.
A 15-percent federal death tax is not ideal, but we can live with it.
Those who think 15 percent is "a gift to the rich" should think of having to pay, for one time only, a 15-percent tax on their house. It is a lot. But for a son or daughter inheriting a business, 15 percent is at least conceivable. Fifty-five percent is confiscation. Facing a 55-percent tax, owners have had to divert their capital from job-creating investment to the purchase of obscene amounts of life insurance, which is simply hiring an insurance company to pay the tax in the future.
The issue ought to have been one of straight economics — of what is the least job-killing way to collect the government's income. Considered that way, the death tax wouldn't have a chance. But it has become politicized, with Republicans championing repeal and Democrats tending to portray repeal as a gift to the rich. Each side has made a moral issue of it, to work their constituents for donations; what gets lost is sensible policy.
It is common sense that tax rates on assets should be lower than on income, because assets do not renew themselves every year. The top rate of federal income tax is 35 percent for wages and salaries. For income from selling a capital asset, it is 15 percent, and on the gain only. A death tax, which is on the whole estate, ought to be at a lower rate still — but certainly not any more than 15 percent.
If Sen. Jon Kyl, R-Ariz., can get agreement on 15 percent, we will support it, and we hope that Washington Sens. Patty Murray and Maria Cantwell, who have been reluctant to sign on to full repeal, will also support it. It will get this issue off the political table and out of the Republicans' fund-raising appeals.
It will be a show of Democratic resolve, and for a moderate result. And it will show the thousands of family-owned businesses in Washington that their senators do, after all, care about them.