American Family Business Institute

Statement on December 2, 2009 Estate Tax Vote

House Doles Out Big Bucks to Big Business,

Yet Plans to Stiff Minority and Family Businesses with Crippling Estate Tax Bills?

While Congress seems to have no problem throwing billions at big business lately (consider its bailout of GM and select banks), it has done next to nothing to help family- and minority-owned businesses.  In fact, on Wednesday the House of Representatives is scheduled to vote on an estate tax bill that is certain to put additional strain on these businesses by making the crippling 45 percent estate tax rate permanent.

Consider how the estate tax hurts:

1)      SMALL AND FAMILY-OWNED BUSINESSES

These businesses employ significantly more people than big businesses.  In fact, the nation’s 24 million family-owned businesses account for some 62 percent of the U.S. workforce alone.

Unfortunately, they are disproportionately affected by the estate tax.  The Joint Economic Committee found that between 1995 and 2005, 37,000 “closely-held businesses,” 24,000 family farms, 50,000 limited-partnerships and nearly 28,000 “other” non-corporate businesses paid the estate tax.

When a family business cannot afford the estate tax, they are forced to sell.  Consider former family business owner Helen Wisotsky.  Helen's family used to own a business in Phoenix, Arizona, where they provided jobs to 220 workers.  Helen's family had every intention of passing the business on to the next generation and continuing to provide jobs for years to come, until an estate tax liability forced them to sell the business.  The new owners didn't care about the workers and laid them off, choosing to siphon the company's resources out of the local community.

2)      BLACK-OWNED BUSINESSES

Most black-owned businesses are family-owned businesses and the estate tax makes it more difficult for these business owners to pass on their businesses to the next generation, hampering wealth creation in the black community. 

In fact, a study by Boston College professors John Havens and Paul Schervish several years ago estimated that between 2001 and 2055, the first half of this century, the federal estate tax will wipe out between 11 percent and 13 percent of all African-American wealth.  This one tax alone, the BC experts said, would cost African-American households between $192 billion and $257 billion.

3)      JOB GROWTH AND FEDERAL REVENUE COLLECTION

·        JOBS: Repealing the estate tax would add 1.5 million jobs to the national economy, according to a report by former Congressional Budget Office Director Douglas Holtz-Eakin for the American Family Business Foundation (AFBF). 

·        REVENUES: Under repeal, the government would bring in more revenue, as much as $23.3 billion annually, according to an AFBF study by a former Treasury official.

Iowa family business owner Eugene Sukup catches the irony of the estate tax, noting that "while bailing out everybody else, government does the opposite to family businesses: taxing us to death."  Sukup employs 350 workers, most in the small town of Sheffield, IA.  His family faces an estimated $15-20 million estate tax liability - far in excess of his ability to pay.  His family expects to sell the business in the absence of repeal.

The American Family Business Institute is an organization advocating for estate tax repeal and representing family businesses and farms, which are often the hardest hit by estate taxes.   

For more information, please contact: 

Adam Nicholson

Director of Research

American Family Business Institute

O: 202-969-2444 ext. 505

Email: adam.nicholson@nodeathtax.org