In recent years a consensus has emerged in favor of significant tax reform. While some prefer the flat tax, others advocate the sales tax. A third camp argues that Congress should avoid a complete overhaul and instead work to improve the existing system. Whatever path is chosen, it should include elimination of the federal estate tax — what I call the "death tax." Repeal of the death tax is the first step toward a fairer and flatter tax system.

Congress has levied estate taxes at various times throughout U.S. history, particularly during war. The current estate tax dates back to 1916, a time when many in Congress were looking for ways to redistribute some of the wealth held by a small number of super-rich families.

The United States has one of the highest estate taxes in the world. While income tax rates have declined in recent decades, estate taxes have remained high. Today, the top estate tax rate is 55 percent (a top marginal rate of 60 percent is paid by some estates), and the tax is imposed on amounts above the 2000 exemption level of $675,000 (rates begin at 37 percent and rise rapidly to 55 percent).

Generally the value of all assets held at death is included in the estate for purposes of assessing the tax. This includes residences, business assets, stocks, bonds, savings, personal property, etc. The 1997 tax bill increased the unified estate and gift tax exemption from $600,000 to 41 million. However, this is done very gradually and does not reach the $1 million level until 2006.

The estate tax can destroy a family business. This is the most disturbing aspect of the tax. No American family should lose its business or farm because of the estate tax. The estate tax fails to distinguish between cash and non-liquid assets, and since family businesses are often asset-rich and cash poor, they can be forced to sell assets in order to pay the tax. This practice can destroy the business outright, or leave it so strapped for capital that long-term survival is jeopardized. Similarly, more and more large ranches and farms are facing the prospect of breakup and sale to developers in order to pay the estate tax. In addition to destroying a family business, this puts the environment at risk.

While some businesses are destroyed by the estate tax, many more expend substantial resources in tax planning and compliance. Those that survive the estate tax often do so by purchasing expensive insurance. A 1995 Gallup survey of family firms found that 23 percent of the owners of companies valued at over $10 million pay $50,000 or more per year in insurance premiums on policies designed to help them pay the eventual tax bill. The same survey found that family firms estimated that they had spent on average more than $33,000 on lawyers, accountants and financial planners over a period of 6.5 years in order to prepare for the estate tax.

In fact, one of the great ironies of the estate tax is that an extensive amount of expensive tax planning can very nearly eliminate the tax. This results in a situation where the very wealthy can end up paying less estate tax than those of more modest means.

Repeal of the estate tax would benefit the economy. Without the estate tax, greater business resources could be put toward productive economic activities. Recently, the Center for the Study of Taxation commissioned George Mason University Professor Richard Wager to estimate the economic impact of a phase-out of the estate tax. This study estimates that if the tax is phased out over five years beginning in 1999, the economy would create 189,895 more jobs and would grow by an additional $509 billion over a 10-year period.

One might expect that with all the economic dislocation associated with the estate tax, it raises a significant amount of revenue. In fact, the revenue take is quite modest — approximately 1 percent of federal revenue. In other words, it is not worth all the trouble to retain this tax.

America is a nation of tremendous economic opportunity. Success is determined principally through hard work and individual initiative. Our tax policy should focus on encouraging greater initiative rather than on attempts to limit inherited wealth. The estate tax is a relic. It damages family businesses, harms the economy, and constitutes double taxation. It is time for the estate tax to go.