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Editorial: 'Death tax' drives nail in coffin for many small businesses

- Last modified: September 21, 2012 at 7:40 AM

Equal treatment under the law, the right to property, the freedom to pursue personal dreams through economic endeavor and build a better tomorrow for our children. These are the backbone of American business.

So why does Pennsylvania penalize business owners — indeed, anyone with even the smallest of tangible holdings — through the inheritance tax?

At the least, it amounts to double taxation. At worst, it can mean the forced sale at a loss of assets that represent a lifetime of hard work, careful management and sacrifice.

The state's farmers finally succeeded this year in winning exemption from the inheritance tax for family farms that meet certain conditions. The same arguments used for farmers — that "death taxes" put the business at risk, make it difficult to continue a family enterprise and threaten a family's way of life — apply equally to any number of other small businesses.

And even the farm exemption doesn't go far enough. Requiring the heirs to continue the operation for a minimum seven years following the transfer in essence denies them the right to use their property as they see fit and as conditions change. That's hardly liberty.

The purpose of the state's inheritance tax is misunderstood. Though it was intended to be a levy on a person's right to direct the ownership of property after death, it has become yet another way for government to grab what it can, whether that means heirs give up a slice of Granddad's bank account, sell Mom's home or dissolve the factory Dad poured his life into.

In Pennsylvania, the inheritance tax brought in roughly $805 million in 2010-11. While that's nothing to sneeze at, it represents less than 3 percent of state revenue overall. We think that money would be better used if left in private hands, where it would continue to support the economy directly.

Inheritance taxes are a form of social engineering — with unintended consequences.

Social engineering comes in many forms. Death duties can be imposed, as they have been in Europe, to deliberately strip wealth from families and prevent wealth accumulation. The intent there is social equalization, even if that means everyone is a little poorer.

The absence of inheritance taxes can be a powerful instrument to encourage and sustain private investment and savings — to encourage people to look toward the future and help build a stronger society through ingenuity and individual responsibility.

We know which we prefer. Level the playing field for all Pennsylvanians, not just farmers, and watch the economy grow.

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