This year, Tennessee has the opportunity to follow the lead of Indiana and repeal its inheritance tax, a double tax on hardworking American families.
Death and inheritance taxes are owed to the government by the recipients of an inheritance. If the payee lacks the necessary funds, they are often forced to sell property or business in order to pay the tax.
The result? This tax devastates small businesses and farmers, many of whom are forced to sell part of their business or farm just to afford the tax. This also has a real impact on jobs and growth: former Congressional Budget Office Director Douglas Holtz-Eakin estimates that the current death tax has destroyed over 850,000 jobs.
In addition, since the tax is on over a third of an individuals assets above the exemption threshold, many choose to spend rather than save or invest in their businesses, thus depriving the economy of growth and potential new employees of job opportunities.
Until recently, 22 states across the U.S. imposed an additional inheritance tax on their citizens; however, states are beginning to recognize the damaging impact these taxes have. States which do not impose an inheritance tax produce twice as many new jobs and their economies grew nearly 50 percent more from 2004-2007 than the states with such taxes, according to the Connecticut Department of Revenue.
Dr. Art Laffer, former advisor to President Reagan and renowned economist, released a report on Tennessees death tax, concluding that its repeal would result in 200,000 more jobs in the state, grow Tennessees economy by 14 percent, net 7 billion more in state and local tax revenue due to increased economic activity, and foster a competitive business climate.
Despite the weight of evidence, Tennessees Governor Haslam has stalled on the repeal process, taking baby steps to increase Tennessees death tax threshold from $1 million to just $1.25 million. This year, Tennessee and other states have a golden opportunity to reduce the tax burden on their citizens and encourage growth, prosperity and the free market.