The estate tax brings in minimal government funds while being a huge drain on family businesses, reports Antony Davies of The Washington Examiner. When a business owner dies and his or her property is taxed, the heirs may need to sell assets to cover this cost. In the case of a company whose value is made up of machinery, buildings and land instead of money, there is a strong risk that it will lose key parts of its operation. Assets like these are usually worth more to the business than they are on the market, so the compensation is generally not enough. To avoid this fate, many business owners channel their funds elsewhere, stunting their company’s growth, just to avoid the estate tax.
Repealing the estate tax would allow the rich to hold onto their wealth while depriving the government of a key income source, asserts the Center on Budget and Policy Priorities. It only applies to estates worth $5.5 million per person. This means only 0.2% of estates are required to pay it. Around 330 estates with a value over $50 million would save more than $20 million each without it. Supporters of repealing the estate tax claim that it burdens farmers and small business owners, but this is incorrect. In 2017, only 80 small farms and businesses, out of 2.7 million estates, had to pay it. The estate tax tackles inequality by reducing large inheritances that allow the rich to monopolize wealth.