Family Business Coalition letter on tax reform

Family businesses and farms are often inventory and land rich but cash poor. Too often, family businesses lack the cash on hand to pay the 40 percent death tax and are forced into selling off machinery, firing workers or closing down entire businesses to pay the death tax.  As it stands, more than 70 percent of family businesses do not survive to the second generation, and a full 90 percent of family businesses do not survive to the third.  The current tax code puts family businesses, America’s main job-creating engines, at a competitive disadvantage to publicly owned corporations that are not forced into paying death taxes with the passing of each generation. Eliminating the death tax will correct this incongruence in the tax code and remove a costly barrier to passing on a family business.

Support for eliminating the death tax is strong in Congress and with the American public. Earlier this year, 80 senators voted for a budget amendment (Senate Roll Call Vote 66) for the “repeal or reduction of the estate tax” and Congressman Brady’s Death Tax Repeal Permanency Act, which was recently reintroduced in the 113^th Congress, amassed over 222 bi-partisan cosponsors in the 112^th Congress.  An even larger proportion of the American public believes the death tax should be repealed; several public opinion polls show 60-70 percent of voters favor repeal. Including full repeal of the estate tax within a comprehensive tax reform package is the next logical step to moving the country towards full repeal of the estate tax.

Most countries including Russia, Sweden, China, Canada, Mexico, and Israel do not have a death tax. Among nations that do have a death tax, the average rate is 24 percent, (far lower than the current 40 percent top rate in the US). In a competitive global economy, Congress should be enacting policies which keep businesses in the United States and encourage job growth. The death tax accounts for less than 1% of federal revenues each year and many studies show that more tax revenue will be collected if Congress eliminated the death tax entirely.

Eliminating the death tax will provide a boost the U.S. economy. Douglas Holtz-Eakin, former director of the non-partisan Congressional Budget Office, found repeal will create nearly one million small business jobs.  This new job creation will also help increase overall tax revenues; former Under Secretary of the Treasury Steve Entin found that death tax repeal will increase tax revenues by $89 billion compared to current tax receipts. A 2012 Joint Economic Committee report found that the death tax has prevented nearly $1.3 trillion in capital formation; this capital could have been reinvested in businesses to expand and hire more workers instead of wasted on compliance costs.  Indeed, Alicia Munnell, a member of former President Clinton’s Council on Economic Advisors, found businesses spend more in compliance costs than the government receives from the estate tax in revenue.

In addition to being economically destructive, the death tax is morally unfair. It makes no sense to require grieving families to pay a confiscatory tax on their loved one’s nest egg. The threat of losing a lifetime of hard work to the government is a constant financial and emotional burden to our member business owners. Comprehensive tax reform presents an opportunity to end the burden of the death tax once and for all.

We look forward to working with you to move the country toward a common sense tax structure that promotes family business expansion and job growth.

Signed,

Jim Martin, chairman, 60 Plus Association

Jay Perron, vice president of government relations and public policy, International Franchise Association

Dan Hilton, director of government relations,  American Supply Association

Harry Alford, president and CEO, National Black Chamber of Commerce

Douglas K. Woods, president, AMT – The Association for Manufacturing Technology

Liam Donovan,  director of legislative affairs, Associated Builders and Contractors Inc.

Christian A. Klein, vice president of government affairs and Washington counsel, Associated Equipment Distributors

Paul Fiore, director of government affairs, Automotive Aftermarket Industry Association

Mario H. Lopez, president, Hispanic Leadership Fund

Kirk McCauley, Service Station Dealers of America and Allied Trades (SSDA-­‐AT)

Ben Gann, director of legislative affairs & grassroots activities, National Lumber and Building Material Dealers Association

Jonathan Melchi, director of government affairs, Heating, Air-Conditioning & Refrigeration Distributors International (HARDI)

Will Brown,  government relations manager, National Utility Contractors Association

Ed Orlet, vice president of government affairs, National Association of Electrical Distributors

Daniel Fisher, vice president of legislative affairs, Aeronautical Repair Station Association

Marta Gates, director of operations, WMDA Service Station & Automotive Repair Association

Dana Lee Cole, executive director, Hardwood Federation

Scott Jones, CEO, Forest Landowners Association

J. Barry Epperson, general counsel, Associated Wire Rope Fabricators

Roy Littlefield, executive vice president, The Tire Industry Association

Kristen Gowan, director of government affairs, National Electrical Contractors Association

Frank Stewart, executive director, Forest Landowners Tax Council

Danny Dructor, executive director, American Loggers Council

Taniel Koushakjian, editor, Florida Armenians

Grover Norquist, president, Americans for Tax Reform

Tim Phillips, president, Americans for Prosperity

Brandon Arnold, vice president of government affairs, National Taxpayers Union

Tom Schatz, president, Council for Citizens Against Government Waste

Andrew Quinlan, president, Center for Freedom and Prosperity

Andrew Moylan, senior fellow, R Street Institute

Phil Kerpen, president, American Commitment

Dick Patten, president, Family Business Defense Council

Lew Uhler, president, National Tax Limitation Committee

John Tate, president, Campaign for Liberty

Seton Motley, president, Less Government

Palmer Schoening, executive director, Family Business Coalition