|
 |
|
|
|
Our Next President Must Address the Death Tax |
|
|
|
Written On: Friday, July 18, 2008 |
|
|
|
Until John McCain raised the federal estate tax during the Presidential campaign, it was the forgotten tax issue of 2008. Nevertheless, the next President will have to deal with it, or the consequences to American family-owned businesses and farms will be devastating.
The estate tax is often called the “death tax” because it is imposed when there is a death in the family. In many cases, the death occurs unexpectedly and family business owners haven’t had an opportunity to plan the transition of the business or farm. So, relatives must not only deal with the loss of a loved one, they also have to come up with the money to pay state and federal taxes, which often means selling all or part of the business. Some simply close up shop.
The federal death tax is scheduled to phase out in 2011, but unless Congress and the President act, it will automatically be reinstated at the full 55 percent of the family entire estate’s value.
The late Jennifer Dunn, former representative from our state’s Eighth District, recognized how the death tax literally dismantled businesses and farms at the most trying times of people’s lives. She championed the tax phase out but was never able to remove the provision calling for the automatic re-enactment at full value. She firmly believed it is a job killer and appropriately named: The Death Tax.
In fact, researchers at the Heritage Foundation calculate that 300,000 jobs are lost each year to the death tax because families have to sell the farm, manufacturing plant or store just to pay state and federal estate taxes.
Many who support the “death to the Death Tax” believe its purpose is misunderstood. The wealth in family and privately-owned businesses and farms is not in diamonds, gold, private jets, fancy island estates and high interest paying bonds. It is in equipment, machinery, inventory, factories, stores and buildings that provide jobs – jobs that have the highest probability of staying in the U.S.
Don Root, owner of GM Nameplate, is a long-time opponent of the estate tax. "Some may think this is a tax that just a few wealthy people will pay, so it does not matter what the percentage is. This thinking is far from reality. That wealth is creating more than 50 percent of the jobs in this country and most of the job growth in the country,” Root said.
Democrat Barack Obama would reinstate it at a 45 percent rate and provide a $7 million exemption for couples. At 45 percent, America would have the second highest estate tax in the world according to the American Family Business Institute (AFBI). If allowed to fully reinstate if Congress and the President take no action, the 55 percent rate would top the rest of the world.
McCain supports raising the exemption to $10 million while cutting the tax rate to 15 percent. While Root prefers no estate tax, the McCain plan is more in line with what family business owners can tolerate.
Like so many American entrepreneurs, Don and his family built a thriving business making the nameplates we see on many of our everyday products, from appliances to machinery and autos. He wants to turn over his Seattle firm to his four sons, Greg, Brad, Jack and Jeff. But, like most family-owned businesses, the state and federal estate taxes are the killer storm always lurking on the horizon.
In February 2005, Washington's state Supreme Court tossed out our state's death tax saying it was unconstitutional, only to have the Governor and Legislature re-enact it by April. Now, Washington’s death tax, which ranges from 10 to 19 percent, contains a $2 million exemption and a deduction for family farms.
Just over half the states impose no estate taxes, and Singapore, now the world’s second largest private banking center holding over $300 billion in assets, eliminated the death tax. Countries like France, Finland, Hungary and Jamaica are considering either wiping it out or significantly modifying it along McCain’s line.
AFBI concludes that many supporters of the estate tax think that eliminating the tax would reduce revenue to state and federal treasuries. But CONSAD Research Foundation found that repealing the federal tax would result in a net revenue gain of $38 billion between 2003 and 2012, because when those businesses continue to operate, they continue to produce income, payroll and capital gains taxes.
|
|
|
|
