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  • Video: Estate Tax Increase a Killer for Family-owned Businesses

    The U.S. House of Representatives will vote this week on a bill that would permanently extend the estate tax (known better as the death tax) at its current rate and exemption level. This extension would prevent the death tax from expiring as scheduled on January 1, 2010. As such it would be a significant tax increase.

    Before voting to extend the death tax, Congress should consider the devastating impact it has on family-owned businesses. Reliable Contracting, a family-owned business in Millersville, Maryland, for example, had to pay a death tax liability over a ten year period. During that decade span, the money they had to dedicate to pay the tax greatly weakened the business and it struggled to survive. As the video below shows, if the death tax hit Reliable once more the business might not make it through the ordeal again:

    [youtube]http://www.youtube.com/watch?v=ImxWWLEcMiI[/youtube]

    Increasing the death tax would be a severe blow to Reliable Contracting and other family-owned businesses. Instead of passing a punishing tax increase, now is the time for Congress to repeal the death tax forever. Doing so would lift a tremendous burden from countless family-owned businesses across the U.S. And it would create millions of new jobs. The death tax is an enormous drag on the economy because it discourages hard work, saving and investing. Lifting impediments to these economy growing activities would put millions of unemployed Americans back to work.

    As the debate over the death tax continues, you can view more videos on the tax’s devastating impact on family-owned businesses and read all of the Heritage Foundation’s research on the topic at our new rapid response page www.heritage.org/deathtax.

    Posted in Economics [slideshow_deploy]

    9 Responses to Video: Estate Tax Increase a Killer for Family-owned Businesses

    1. Kevin H, Glen Burnie says:

      I can understand looking at extension of 2009 rates and seeing it as a tax rate. If we continue current law instead of 09 extension, there would be no estate tax in 2010. Huge difference.

      However, under current law, in 2011 the exemption level drops to $1,000,000 as opposed to 3,500,000 if '09 extention is passed. And the rate would be 50% under current law instead of 45% under '09 extention. Very big difference there.

      So you can call '09 extension a big tax increase in 2010, but you will also need to call it a big tax cut in 2011, 2012 and beyond.

      Also, I keep reading on your blog how irresponsible it is to keep building on the debt and deficit, where as repealing the estate tax would add large amounts to the debt and deficit.

      Finally, I've seen several analyses showing that .02% (2 out of every 1,000) estates and small businesses would have to pay any estate tax by extending 2009. Do you have a different number?

      Thanks, Kevin

    2. Pingback: Estate Tax Increase a Killer for Family-owned Businesses | Conservative Principles Now

    3. Ralph Petrillo, Mama says:

      The estate tax should be modified in the following manner. All existing and new foundations, trusts, and any tax exempt estate should pay a one tax of 25%.

      The estate tax for families with dependents should be changed so that the estate tax is lowered to 20% , with a $2 million dollar exemption for each dependent. Anyone should be able to purchase life insurance for the amount of taxation owed above $ 2 million dollars. So a couple with five children would be able to leave $ 10 million and then pay 20% in federal tax and 5% in state tax on any amount above $10 million. For a couple with one child, they would be able to pass on $2 million, and then pay 20% on the amount above $ 2 million and 5% for the state. End of story for it would all be so simplified. Anyone complaining with assets could simply buy life insurance for the taxation due.

    4. Steve Bennett, Houst says:

      As usual, the democrats think it is best to kill the Goose that lays the Golden Eggs. They don’t seem to understand that a thriving economy brings in money more to the Government. The Death Tax is a huge blow to small business, which is the engine on the US economy. They would rather have a smaller struggeling economy which they have control over than a robust thriving economy that they have less control over, even if it means higher US debt.

    5. Shaun F, Madison WI says:

      I don't understand how this estate tax hurts small businesses or the jobs associated with them, or how eliminating the estate tax would create millions of new jobs. As far as I know, corporations, LLC's, etc. are their own entities that are not subject to taxation when the boss dies. What they're talking about in the video is taxation on private property. Please explain how eliminating the estate tax "would create millions of new jobs".

    6. Wayne Jordan Meadows says:

      Shaun, you are correct. LLC's and corporations do not die. In the case of sole proprietorships, though, the heirs will be in for a tax shock. I suspect that that is what happened to Reliable Contracting. The overwhelming majority of family businesses (read: sole proprietorships) have no exit plan. Tax planning issues can be dealt with in an exit plan. Every family business needs an exit plan, and Reliable clearly didn't have one or they wouldn't have been paying back taxes for 10 years.

    7. Ralph Petrillo, Mama says:

      The wealthy escape the estate tax already by setting up trusts and hiring estate attorneys that really offer no benefit to society other then allowing the wealthy to escape their fair contribution to society. So all estates above 7.5 to 10 million should be taxed at 20% federal rate and a 5% state rate with no exceptions allowed for foundations or trusts. That is also including existing trusts and foundations that would try to claim that they are grandfathered from the tax. The President could declare a financial state of emergency and issue new rules regarding grandfathered foundations and estates overnight. Overnight the federal government could raise 1 to 2 trillion dollars.

    8. Ray Browning, Texas says:

      Ralph if what you describe above happened, the President would have to declare a financial state of emergency due to the impact that an act like that would have on the market. Where do you think the money would come from?

    9. Pingback: Death Tax Would Hit Maine Lumber Company Hard | The Foundry: Conservative Policy News.

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