The estate tax really is a "death tax" for many small, family-owned businesses and farms.
That's the assessment of U.S. Representative Kevin Brady (TX-8) in an appearance on NFIB's Small Business Matters.
"This is the number one reason family-owned busineses and farms aren't passed down to the next generation," Brady said.
Brady is the primary sponsor of HR 1259, the Death Tax Repeal Permanency Act of 2011.
Much of the cost of the estate tax occurs before it is levied. The threat of the tax forces families to pay for expensive estate planning to ensure their business stays with the family. For many small business owners, the value of their “estate” is in the physical assets of the business, meaning to pay the tax they have to sell the actual parts of the business.
Brady cited the example of a family-owned nursery in his Texas district. The children of the owners showed him how the survival of their family business depended on whether they could collect enough life insurance upon their parents' deaths and secure bank loans to stay in business.
"If they borrowed money, if they made money off their parents' death, they could keep their own company," Brady said. "It seems crazy."
While Brady and the NFIB-backed Family Business Estate Tax Coalition are working for permanent repeal, their number one goal at the moment is to head off an increase in the tax on January 1. On that date, the tax rate could go up to 55%.
"Our first goal is to make sure the death tax does not come back fully to life in its worst form on January 1," Brady said. "We want to extend the current rate of $10 million per couple and the 35% tax rate for as long as possible with the ultimate goal of repealing it permanently."
NFIB is the nation’s leading small business association, with offices in Washington, D.C., and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small and independent business owners a voice in shaping the public policy issues that affect their business. NFIB’s powerful network of grassroots activists send their views directly to state and federal lawmakers through a unique member-only ballot, thus playing a critical role in supporting America’s free enterprise system. NFIB’s mission is to promote and protect the right of members to own, operate and grow their businesses. For more information visit NFIB online.