Hawaii could add 7,000 new jobs at no cost to taxpayers if the federal estate tax were repealed, according to a new analysis by SmartBusiness Hawaii (SBH) and the SBH Entrepreneurial Education Foundation.
The estimates are based on research by the former director of the nonpartisan Congressional Budget Office, Douglas Holtz-Eakin. The research was conducted for the nonprofit American Family Business Foundation (AFBF), Washington, DC.
Holtz-Eakin, who served as chairman of the economics department at Syracuse University before going to Washington, estimated in his study that repeal of the Estate Tax, which impacts mostly small and family business owners and the owners of family farms, would lead to an increase of 1.5 million jobs nationwide. The Hawaii estimate is calculated based on the percentage of small-business jobs located in Hawaii.
"During our increasing tough economic times, it seems obvious that members of the Hawaii congressional delegation would support a measure that could boost employment without boosting taxes or the deficit. Repealing the estate tax, or the 'Death Tax' as it is commonly known, could do just that," said Sam Slom, president of SmartBusiness Hawaii. "If there is one thing Hawaii needs for true economic stimulus, it's an increase in the number of available jobs."
Under current law, the estate tax is assessed at a 45 percent rate on assets in an estate exceeding $3.5 million. Legislation passed during the Bush administration has slated the tax to sunset - or expire - at the end of 2009, only to return in 2011 at a higher rate: 55 percent on estates valued at more than $1 million. If that happens, then Hawaii could lose 2,300 jobs, out of an estimated 500,000 jobs that would be lost nationwide, according to Holtz-Eakin's analysis.
Congress is expected to take some action on the estate tax this fall, before the "sunset" provision kicks in. In his first budget proposal, President Obama proposed a permanent estate tax rate of 45 percent on estates valued over $3.5 million. Some lawmakers are pressing to raise the rate and lower the exclusion, while others would like to do just the reverse.
"What is certain is that the future of the estate tax should be decided based on facts and not rhetoric," says Slom. "If doing away with the estate tax will trigger the creation of more jobs at no cost to taxpayers, then it would make good sense to eliminate the tax."
SmartBusiness Hawai`i (SBH), formerly Small Business Hawaii, was founded in 1976 by tire retailer Lex Brodie. It is a private, independent, non-partisan free competitive market business association. In 2008, the SBH Entrepreneurial Education Foundation was created to assist in business education projects in Hawaii.
The American Family Business Foundation is the research and education voice of the American Family Business Institute, an organization representing American family business owners and farmers.