Benjamin Franklin noted over 200 years ago that “in this world nothing can be said to be certain, except death and taxes.” Unfortunately, the merging of these two events can cause a great deal of additional heartache and loss, especially
Benjamin Franklin noted over 200 years ago that “in this world nothing can
be said to be certain, except death and taxes.”
Unfortunately, the merging
of these two events can cause a great deal of additional heartache and loss,
especially in the case of the death tax.
The death, or estate tax, has been
a thorn in the sides of family-owned businesses off and on since a death stamp
tax was established in 1797. It is simply a tax imposed on wealth transfers
made at the holder’s death. The death tax as we know it today was adopted by
Congress in 1916 and continues to thwart the small-business growth on which
this country thrives.
In fact, one third of small food distributors,
manufacturers, processors and farmers today are forced to sell or liquidate
part of their businesses to pay death taxes. Seventy percent of family
businesses do not survive the second generation, and 87 percent do not survive
the third.
Any day now, President Clinton will be faced with the
opportunity to eliminate this dreadful tax burden when the Death Tax
Elimination Act reaches his huge desk in the Oval Office. Certainly, this
document will be one of many requiring his utmost attention-among healthcare
issues, the federal budget and other hot topics of the day.
But this single
document, which would phase out estate and gift taxes over a 10-year period,
holds a lot of weight for America’s small businesses. The bill has successfully
made its way through the House and the Senate, gaining support of a bipartisan
majority of lawmakers who understand the ill effects of the estate tax. Now all
eyes turn to the president, who has threatened to veto any such bill that comes
his way.
I can’t imagine why. Did you know that the federal government has
projected it will collect more than $4 million in surplus taxes over the next
10 years? There simply is no excuse for our government to continue penalizing
its citizens for their hard work by taxing – especially so heavily – assets for
which they’ve already been taxed.
According to a recent Wall Street Journal
article, the projected $220 billion budget surplus for this year alone is
nearly 10 times larger than the total death tax collection for 1998.
The
majority of Americans support passage of this bill for obvious reasons. It
embraces entrepreneurialism by easing the financial burdens on the children
left to take over the family business when the owner dies. Under the current
tax system, it is cheaper to sell the family-owned business before death than
pass the business on to one’s children. Few growing businesses can remain
competitive in a tax regime that imposes rates as high as 55 percent upon the
deathh of the founder/owner.
On behalf of America’s hard-working business
owners, let’s hope the president can put politics aside and sign the tax repeal
into law. Many trade associations and pro-business organizations have been
working for years to see the death tax eliminated. It’s a shame we have to
spend so much time and effort fighting such an unfair tax policy.
A 1998
study (“The Economics of the Estate Tax”) by the House Joint Economic Committee
supports this position. The study found:
* The estate tax in the United
States has reduced the stock of capital in the economy by about $497 billion,
or 3.2 percent.
* The tax is “extremely punitive,” with marginal tax rates
ranging from 37 percen tto nearly 80 percent in some circumstances.
* The
estate tax “violates the basic principles of a good tax system; it is
complicated, unfair and inefficient.”
Those are just a few of the
committee’s findings. Go to www.house.gov to check out the report yourself.
It’s a thorough analysis with vivid arguments against any known or believed
benefits of the death tax.
While we’re on the topic of unfair taxes, how
about ending the marriage penalty? About 21 million couples pay this penalty,
which averages about $1,400 per couple. Basically, this represents the extra
taxes a couple must pay simply because they are married rather than
single.
The Senate recently voted to abolish the marriage penalty, defying
an almost certain White House veto. Mr. Clinton, let’s stand up for fairness.
Let’s put a halt to the unfair estate tax and the marriage penalty.
It’s
time to stand up for ourselves and our fellow Americans.
John R.
Block, president of Food Distributors International and host of the nationwide
“John Block Reports” radio show, is a former U.S. Secretary of
Agriculture.
