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  • "Timber!" Look Out for Falling Trees - and Companies - if the Death Tax Hits

    Hancock Lumber company has been around for 180 years, was started before more than half the states joined the Union, survived the Civil War and two World Wars, but now faces one of its greatest challenges: paying the death tax.

    Owner Kevin Hancock counts himself among the six generations of his family who have worked for the Maine-based company that provides lumber to contractors and home builders. Hancock explains that once the estate tax (otherwise known as the “death tax”) hits, Hancock Lumber will have to sell some or all of its 15,000 acres of open timberland for development in order to pay the tax bill. And that is pristine, open-access land that the public now uses for hiking and hunting.

    The death tax, which is assessed on the transfer of an estate from the deceased to their heirs, has been set to be phased-out and abolished for close to a decade now. The 2001 tax cut began an eight-year phase out of the death tax, lowered the rate from 55% in 2000 to 45% in 2009, and increased the untaxed portion of estates from $1 million to $3.5 million. This year, the tax is completely abolished, but it comes back to life in 2011 at a 55% rate and $1 million exemption.

    It’s because of problems faced by companies like Hancock Lumber that the tax should be permanently eliminated.

    The death tax makes it difficult for Hancock Lumber to grow and create new jobs. Since death tax obligations increase with the whims of Congress, there is a great degree of unpredictability for a company when it looks to plan ahead. In Hancock Lumber’s case, any business decisions must take into consideration the unknown tax obligations it will face down the road.

    That’s particularly troublesome for Hancock’s company because of the incredible, long-term investments it must make due to the nature of the lumber business. It takes 80 years to grow pine trees, and in the company’s history, it has only seen two complete crop cycles. Hancock Lumber is growing trees today for a generation that isn’t even born. The death tax’s uncertainty discourages family-owned businesses from growing and adding new jobs, especially when the nature of the business requires such long-term investment.

    As Heritage’s Curtis DuBay writes, it’s high time to end the death tax, eliminate this uncertainty, and allow companies to grow and create new jobs:

    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. that fear a death tax liability could wipe out their businesses.

    Full repeal of the death tax would have an enormous positive effect on the economy in addition to the relief felt by family-owned businesses. It would create millions of new jobs because the death tax is an enormous drag on the economy. It discourages hard work, saving and investing. Lifting impediments to these economy growing activities would put millions of unemployed Americans back to work.

    There are more real-life stories of companies struggling to grow under the yoke of the death tax. Watch the stories of Reliable Contracting and Grande Harvest Wines.

    Learn more about the death tax at heritage.org/deathtax.

    Do you have a comment or your own story to share? Leave a comment below and join the conversation.

    Posted in Economics [slideshow_deploy]

    15 Responses to "Timber!" Look Out for Falling Trees - and Companies - if the Death Tax Hits

    1. gary gale says:

      This has got to stop. My ancestors came here to get away from taxation. Our government is ruining our country by way of taxes.

      The whole concept of Americanism WAS NOT NOR WILL IT EVER succeed on the idea of tax. Our country needs to be restored to its Founding Beliefs.

      The Government continues to stab us in the back. The Government is going to find out just how strong we can be when faced with ZERO choices.

    2. Jude Richardson says:

      Repeal this unconstitutional taking of property. Or…and I am just pulling this off the top of my head: What would be the consequence of going public, with the family retaining majority interest? I do not know the answer and would like to be enlightened.

    3. Lori - Arizona says:

      I agree with this business owner 100%. How backwards it is at death for your decendants to sell off your business for the sake of paying a huge tax to the Gov't. The jobs lost, the capital assets gone in order to maintain and build a business all dissolved in order to pay a tax by the Gov't which stops growth, creates hardships and hard feelings. It's a crime.

      Joe Robbie Stadium in Florida come to mind.

    4. Joel says:

      They should let all of their employees what voting liberal has done to their employer and how taxing the 'rich' taxes them.

    5. Charles N.Y. says:

      TAX,TAX,TAX the goverments answer to everything. If we continue to let OUR government steal our private companies profits (in the form of taxes) and steal up to 35% – 40% of our hard earned income this country is doomed. It is long overdue for a complete revision of our current tax system and the corrupt IRS. Why can't we move towards a progressive layered tax system or a fair tax system. There must be a way to stop the IRS and our government from stealing our money. In the private sector this practice is known as extortion and is punishible by imprisonment.How does our government get away with this?

    6. John, in Mesa, Arizo says:

      This is the problem wit big government. The United States of America was founded on small and limited government. We need to get back to this so private companies can continue to grow and keep the American entrepreneurial spirit alive. (sent 1-31-2010 at 1629 MST)

    7. Patriot, NYS says:

      The Government never met a tax it didn't like.

      I seem to remember we fought a war over unfair taxation.

      I do believe that we long ago reached the point where our own Government unfairly taxed the people of this great land.

      Is it not time for us to rise up and with every fiber of our being, say ENOUGH! We will not pay these unfair taxes and you can put us all in jail if you think there are enough jails to hold us ALL!!!!

      Stop voting for Progressives, no matter what party they are from and stop looking for handouts from the Government. They are just handing out our money to begin with.

    8. Peter Asher, Oregon says:

      As bad as is the act of taxing wealth that has been already taxed on in its creation, it might be more doable to break estates down to two catagories, those that are family businesses with hands-on family members running them and estates composed of paper assets.

      Taxing the later is wealth redistibution but at least it does not destroy jobs or transfer their managment to bottom-lining bean counters who will layoff and fire on the slightest financial setback.

    9. Drew Page, IL says:

      You can count on the fact that Democrats will vote not only to restore the death tax, but to increase it. Anything that they can do to get their hands on more taxes they will do. They will always have some rationale for more taxes, always to make life better for somebody and they will always be ready to villify any one who disagrees with them. Makes you wonder how the heck anybody survived in the UNited States before Democrats.

    10. Art Pauly, Roseville says:

      The death tax is a voluntary tax. You chose to pay it by not planning for it. Congress should repeal the tax permanently but we all know that is not going to happen. With proper planning the tax can be minimized and liquid tax free assets can be created to pay the tax without having to sell the company assets. Seek out a qualified Estate Planning Attorney to work with Financial Professionals.

    11. Jeanne Stotler,Woodb says:

      This amounts to double taxation, actually triple, it's unconstitutional, The first tea party in Boston was anti taxation, while somw taxation is necessary as laid out in the Constitution, this administration is out of control, spend spend spend, only thing it's creating no jobs, causing jobs to be lost and without PEOPLE working and paying taxes we can not continue, it's a slippery slope toward bankruptcy and BHO is leading the slide.

    12. Perry, OK says:

      WOW! Can you believe the mess we have made for ourselves? It is a small wonder we are still a free united states of america, land of the FREE, OVER TAXED and Hopefully under rated. How much longer shall we the free be oppressed by ourselves or our representative. To be sold out by our elected offals, our futures traded like the pawns we have become. By the banker and wall street lawyer.

      We the people have yet to stand and show our strength. We need a REAL change in Washington. All new blood as the rapture of greed has closed its grasp on those there. With every tax dollar we send to washington, they look with envy at all they can't have, until we die and can no longer defend ourselves.

      It is with great sorrow as I watch our great nation fall to its knees. Brought there not by another country, but by greed of our leaders and the laziness of our own people.

    13. Bobbie Jay says:

      Gosh, I can't help it, but please don't blame "us" unless you voted for this mess, Otherwise it is all the account of wreckless. irresponsibilities and irreconcilable differences of the American government and the people. The American government refuses to listen while they continue to destroy this country, individual freedoms, rights, liberties and taking away any ability to pursue happiness.

      Obama looks everywhere there is money. Then he conjures up a crisis to steal it.

    14. Tim Az says:

      It seems to me that lawyers became politicians in order to set up confiscatory taxing that drives clients to them in order to avoid paying the tax. They call it job security. One should never vote for a representative that is or has been a lawyer. The temptation to serve their own interests is far too strong. And too easily achieved. The common man is far more dependable then any graduate of an ivey league school. The common people survive on their intelect. The educated elits substitute aducation of a given subject for intelect. Intelect allows one to make good decisions in most instances based on the facts at hand rather than relying on politically correct group think taught in higher education facilities.

    15. looselystrung,PA says:

      Kick 'em when theyre up, kick 'em when they're down, kick 'em all around….this tax like many others is pure crap.It's like adding insult to injury.You die..the family pays to bury you arse..then government steps in and robs them of half the estate…nice eh? Too many money grubbing maggots in our government and it has gotten way out of control…my 2cents.

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