In a report on the estate tax during the April 1 edition of Fox News' Special Report, correspondent Molly Henneberg uncritically aired misleading claims about the tax's reach and its impact on small businesses and family farms. During her report, Henneberg stated that “Republicans say this tax does not just hit the rich,” and then aired a clip of Sen. John Ensign (R-NV) saying that the estate tax “destroys a lot of small businesses and a lot of family farms and ranches in America,” as well as a clip of House Minority Leader John Boehner (R-OH) saying, “Many family farms find themselves in a situation where they've got to sell the family farm in order to pay the [estate] taxes.” In addition, Henneberg stated that “if the death tax is resurrected in 2010, economists say small businesses need to plan ahead,” and then played a clip of William Beach of the conservative Heritage Foundation claiming that "[b]y and large, the death tax is borne by people who own small businesses." However, an October 2008 report by the Tax Policy Center (TPC) estimated that in 2008, only 15,500 estates -- or 0.6 percent of all that year's decedents -- will owe any estate tax and stated that “relatively few estates [that contain small businesses or family-owned farms] owe any estate tax.” Moreover, under the higher estate-tax exemption level in 2009 -- which would be maintained under Obama's proposal -- the TPC estimated that “about 90 percent of the 700 small farm and business estates that will have to file estate tax returns will not owe any estate tax.”

The 2008 TPC report estimated that in 2008, only a small number of farms and small businesses are subject to the estate tax and that the vast majority would owe less than $500,000:

A key issue in the policy debate is the effect of the estate tax on estates containing small businesses and family-owned farms. Some critics of the estate tax claim that heirs of such estates must sell the business or farm in order to pay the tax. But relatively few such estates owe any estate tax. If we define those estates as ones in which farm and business assets total less than $5 million and make up at least half of gross estate, only 2,000 will have to file estate tax returns in 2008 and nearly three-quarters (73 percent) of those will have no estate tax liability. About 550 small farm and business estates will owe any estate tax liability and more than three-quarters of those will owe less than $500,000.

The TPC report also estimated that after the 2009 increase in the estate-tax exemption from $2 million to $3.5 million (and $7 million for couples), an even lower number would owe any estate tax:

The scheduled changes in the estate tax will also affect small farms and businesses. We estimate that, in 2009, about 90 percent of the 700 small farm and business estates that will have to file estate tax returns will not owe any estate tax (table 10). Of the nearly 80 such estates that will owe the tax, half will have liability below $1 million.

Moreover, during the segment, both Henneberg and host Bret Baier referred to the estate tax as the “death tax,” a term popularized by supporters of the repeal of the tax and which GOP pollster Frank Luntz reportedly found polls better than the terms “estate tax” and “inheritance tax.” As Media Matters for America has documented, Fox News has repeatedly used the term “death tax,” even though the official name of the tax in the U.S. Code is the "estate tax." By contrast, on the April 2 edition of Special Report, congressional correspondent Carl Cameron stated that “the death tax” is “what critics call” the estate tax.

From the April 1 edition of Fox News' Special Report with Bret Baier:

BAIER: The death tax is being resurrected by the Obama administration. Correspondent Molly Henneberg reports that one of the most despised of all taxes was supposed to be dead and buried, at least for next year.

[begin video clip]

HENNEBERG: If you are planning on dying in 2010 to take advantage of the one-year-only, zero percent federal death tax, you may need to rethink your plan.

There's one line in a footnote on page 121 of President Obama's budget that says, in 2010, the death tax does not go to zero, but, rather, quote, “The estate tax is maintained at its 2009 parameters” -- meaning 45 percent.

So, 45 percent of a dead person's wealth will go to the government for those who have total assets over $3.5 million, or $7 million per couple. Republicans say this tax does not just hit the rich.

ENSIGN: It destroys a lot of small businesses and a lot of family farms and ranches in America.

BOEHNER: Many family farms find themselves in a situation where they've got to sell the family farm in order to pay the taxes. This is inherently un-American.

HENNEBERG: In 2001 and 2003, Republicans helped push through President Bush's tax cuts that lowered the death tax from 55 percent to 45 percent this year, and then to zero percent next year.

Democrats say keeping it at 45 percent in 2010 is still a break from the 55 percent, and they insist the federal coffers would take too much of a hit if Congress completely repealed the tax.

REP. JOHN SPRATT (D-SC): The total repeal would have a substantial additional impact on revenues. And this is also a time when we need to -- we simply can't be profligate about tax cuts.

HENNEBERG: Still, President Obama's own top economic adviser, Larry Summers, has argued in the past that passing wealth from one generation to the next helps the economy. He co-authored a study in 1980 and wrote, quote, “The evidence presented indicates that intergenerational transfers account for the vast majority of aggregate U.S. capital formation.”

If the death tax is resurrected in 2010, economists say small businesses need to plan ahead.

BEACH (director of The Heritage Foundation's Center for Data Analysis): By and large, the death tax is borne by people who own small businesses, who haven't had the benefit of, you know, big corporate lawyers and big corporate accounting departments to prepare themselves for paying this tax.

[end video clip]

HENNEBERG: Senator Ensign says he wants a zero percent death tax, but since Republicans are in the minority, they're offering a counterproposal: zero percent death tax if your wealth is under $5 million; over 5 million, it's between 15 and 35 percent. That's the Republican counterproposal -- Bret.

BAIER: OK, Molly. Thank you.