The House approved Thursday a measure making the current estate tax rate permanent, overcoming the objections of an unusual coalition of liberal and conservative critics.
The bill passed, 225 to 200, with 26 Democrats joining all Republicans present to vote no. It would make permanent the current estate tax rate of 45 percent, with an exemption of $3.5 million per individual. If Congress does not act, the estate tax would disappear altogether in 2010, then return in 2011 under the higher rates — 55 percent and a $1 million exemption — that existed before President George W. Bush took office.
We understand that the leftist majority in the House harbors a long and deeply held desire to redistribute wealth in the country. But as we have explained before, the Death Tax is a killer for family-owned businesses and their workers:
A recent study found that a full repeal of the death tax would create 1.5 million jobs. This is half the number of jobs President Obama claimed the $800 billion stimulus package would create–at one-fifth the price.
Additional benefits from full repeal of the estate tax include:
* Increasing small business capital by over $1.6 trillion;
* Increasing the probability of hiring by 8.6 percent;
* Increasing payrolls by 2.6 percent;
* Expanding investment by 3 percent; and
* Slashing the current jobless rate by 0.9 percent.
The unemployment rate is already 10.2%. How high must the unemployment rate go before the left abandons their redistributionist fetish and allows for some pro-growth economic policy?
The Associated Press reports:
Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It’s forcing higher state taxes on companies to pay for unemployment insurance claims.
Some employers say the extra costs make them less likely to hire. That could be a worrisome sign for the economic recovery, because small businesses create about 60 percent of new jobs.
…
Sam Schlosser, owner of Plymouth Foundry Inc. in Plymouth, Ind., said his unemployment tax bill could double next year. Revenue at the family-owned company, which makes iron castings for machine parts, has fallen about 50 percent, he said. In case of higher taxes, his company may have to consider layoffs, he said.
President Obama’s failed stimulus only compounds this problem. The New York Times Jay Goltz explains:
A lot of people — including a lot of business owners — don’t understand how this works. Because the government cuts the unemployment check, it is widely assumed that it’s the government that pays the unemployment benefits. In reality, those benefits are funded by employer taxes. And here’s the killer: The more unemployment benefits your former employees collect, the higher your taxes go.
It works like insurance. If the government pays a claim, your rates go up. In fact, if your former employee collects $10,000 in unemployment payments, you can expect to pay close to twice that in increased premiums. At least that’s how it works in my state, Illinois.
Thus, this becomes another cost of doing business that smart owners attempt to control. How do you control it? By making as few hires as possible, by making sure that those hires you do make are as strong as possible, and by combining documented rules with good management.
And now, thanks to the stimulus package, unemployment insurance has been extended as much as an additional 20 weeks. If you’ve had to lay off 10 people, this could easily result in additional taxes of $10,000, $50,000, or even $100,000. It’s a time bomb that won’t go off until after employers get their contribution-rate increase in November, but it will go off.
And therein lies the final irony: Even after the economy improves, I’m going to think long and hard before I hire anyone. Thanks to the stimulus package — the stimulus package — the costs, paperwork, and legal exposure associated with hiring employees is on the rise.