Small Business News: Death Tax Inevitable?
Though we generally try to bring you the latest in small business news, this Small Business trends roundup attempts to dig deep, not only into the present but into the history of the federal estate tax, often call “the death tax” which was repealed at the beginning of 2010, but threatens to make a comeback bigger than ever in 2011. The death tax has a clear impact on family businesses in particular because of its impact on the assets of a business passed from generation to generation. Here are some of the basics including the very latest and some history on this epic issue for small businesses and entrepreneurs seeking to build a future.
The Facts
Small family businesses will suffer from death tax resurrection. Hancock Lumber President and CEO Kevin Hancock talks about the possible impact of the death tax on his 160 year old, six generation family lumber business in main. The tax, he says, will likely result in the sale of much open space owned by the lumbering company for development and is a disincentive for businesses to stay small and an incentive for family businesses to sell rather than continue operating. Webneur.com
Think the death tax doesn’t make a difference? The reinstatement of the estate tax, often called the “death tax”, will take the current rate from zero percent to an incredible 55 percent in 2011. This means a huge increase in this tax which can be particularly injurious to family owned small businesses if Washington does nothing to stop it. Trib Live
The History
Opposition to the “death tax” is nothing new. As early as last year a former director of the Congressional Budget Office, Douglas Holtz-Eakin, who served from 2003 to 2005 was already arguing about fiscal absurdity of the federal estate tax, arguing that to kill the death tax permanently was the best solution. Holtz-Eakin: “Few taxes raise less revenue or make less sense than the federal estate tax.” Los Angeles Times
Opponents of the “death tax” say repeal would create jobs. More specifically, U.S. Sen. Jim DeMint or South Carolina, who led an unsuccessful move to force a vote to kill the death tax permanently, claims the taxes demise would create more than 1.5 million jobs. Conversely, DeMint’s office says reinstatement of the tax could in seizure of 55 percent of estates, family farms, and, yes, family owned businesses. U.S. Sen. Jim DeMint
DeMint and the fight against the death tax. An important lesson in the legacy and history of the death tax is that it is better to have money in the hands of entrepreneurs or small business owners who will spend this money by investing in new companies and creating new jobs. In this sense, long-term the death tax is a shortsighted approach to creating a prosperous economy and could be particularly detrimental during the economic recovery. The DC Post
The Legacy
More on the small family businesses that continue to suffer. Patricia Baldwin of Reliable Contracting Company, Inc. discusses the crushing impact of a death tax on her family businesses now beginning its fourth generation. In some cases, Baldwin says, some families employed by the company are already in their third generation meaning the business is also providing support for many others in a tough economy. The death tax and the struggle to pay have tied up precious cash flow that might have been used to invest and grow the business further. Madison Niche Marketing
The Fight
Sixty-six percent of Independent voters oppose the death tax. From a political standpoint, a huge deciding factor in many modern elections, the independent voter, may be trending toward opposition to return of the estate tax. Read more about the breakdown of a poll that shows where most voters may stand on the issue. NoDeathTax.org
The death tax: A recent history Changes in the estate tax, also called “the death tax”, have been fast and furious over the past decade. Though the tax was repealed at the beginning of this year, it will return at a higher rate than when it departed in 2011 unless the legislature acts. For a better understanding of how we got to this point, what it all means and most importantly, in these tough economic times, what it could mean to small business, check out the brief timeline to get up to date. NoDeathTax.org
The Plea
Death tax doesn’t affect the super rich. This op-ed looks at the impact of the death tax not upon wealthy Americans but upon small businesses including family farms that next year could face taxation of 55 percent on the estates of the deceased including, in many cases, the assets of many family business operations. Worse yet, the authors claim, if not stopped the tax rate could eventually go even higher. Charlotte Observer
Destructive impact of the death tax. Our focus is generally small business here at Small Business Trends, but with a focus today on the death tax and its impact, it can be important to share, from a broader perspective, some of the other impacts the return of this taxation may have. In this detailed “backgrounder,” Patrick Fagan, Ph.D. argues the tax, which may return in the beginning of 2011, could also have other dire consequences. The Heritage Foundation
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As someone who had dedicated a fair amount of time to studying the estate tax, I am disheartened by a number of the claims made in this article. To refer to the estate tax as a ‘death tax’ is an antiquated tribute to conservative anti-tax propaganda invented by the Bush administration. Furthermore, the notion that the estate tax, ” … can be particularly injurious to family owned small businesses if Washington does nothing to stop it”, neglects the fact that less than one percent of American’s will owe the federal estate tax on their estates. While Bush’s idea to phase out the estate tax until 2011 when it would be reinstated at full force, was nonsensical at best, it does not devalue the role the estate tax plays at our nation’s most progressive tax. We should be urging congress not to eliminate the estate tax, but rather draft estate tax legislation that utilizes and capitalizes on its progressive nature.
United for a Fair Economy is an organization that shares my views. They demand a strong estate tax for the benefit of all Americans. Check them out.
The estate tax is a vitally important tax. It affects only the very wealthy. more than 98% of estates in 2011 won’t owe a penny of estate tax.
The vast majority of small businesses will be unaffected. This is a tax reserved for the wealthy, plain and simple.
We need the revenue, and the wealthy should be the ones footing the bill.
If this renewal of this tax ins inevitable, i say Thank you and I applaud the common sense. in regards to the rest of the “article” i say:
What load of bogus propaganda.
This article is alarmist, incorrect and so Pro Big business and anti small business that I cannot understand how it even found publication on this site.
Publishing this kind of political /lobbyist pr drivel really undermines the credibility of Small Business trends.
” Small family farms” huh?, those have been gobbled up by big megacorporations years ago. Generational family businesses need only invest a little into estate planning for over 99% of these businesses to be unaffected.
the Real Job making businesses in our communities will benefit from this tax and the ones parasitizing our communities, outsourcing our jobs and golden parachuting the funds in our parents retirement accounts will be the ones who have to pay what they should.
Is this article being published as a “small business” article the result we see of big businesses and the national chamber of commerce promise to buy pr, corrupt the media and buy our elections since the Citizens united ruling?
Please do a little more due diligence before wasting any more column space or more of my time publishing such anti small business junk like this.
Thanks for telling us how you feel.
However, the NFIB (National Federation of Independent Businesses) which represents hundreds of thousands of small businesses, has raised relief from estate tax as a key vote issue. And they are just one of several small business organizations that are against the death tax. So I am puzzled as to why wanting to eliminate the death tax is somehow “anti-small-business” when organizations representing small businesses take that position.
I can understand that others may have differing viewpoints. But being against the death tax is not anti-small business. The death tax may not affect all small businesses, but then few issues affect ALL small businesses.