"W e're not Rockefellers,'' said Brad Eiffert, the man who someday will inherit Boone County Lumber in Columbia, Mo. Why then, is Brad's family so concerned about the penalty of estate taxes that will come when his father dies?
Why is this middle-class, middle-America family spending $36,000 of their business income every year on a life insurance policy—a policy that will be used for the sole purpose of paying this tax meant for rich people?
The estate tax, levied by the federal government when any money or property is passed on from one generation to another, is a misnomer for what is really the most unfair tax of all: It is a tax on death.
This death tax was established in 1916 to redistribute wealth and prevent certain families, like the Rockefellers, from amassing the majority of the nation's riches.
But, as is the case with most tax schemes aimed at the rich, the extremely wealthy have found a way to stay wealthy in spite of the tax and the small-business owners, like the Eifferts, and their employees, are the ones to struggle.
Although the income threshold for the federal estate tax was increased from $600,000 to $1 million in 1997, the amount considered high enough to be taxable under this law is still unrealistically low for today's family farms and businesses.
Plenty of business owners and farmers, like the Eifferts, are by no means millionaires in liquid assets. However, the value of their property—including land, equipment and inventory—is easily high enough to be considered a taxable estate.
Brad Eiffert said Boone County Lumber would much rather use the $36,000 they pay annually in life insurance to hire another full-time employee. That amount would provide a very good salary for any hard-working resident of Columbia.
But if the Eifferts did not spend that money on the life insurance policy for their dad, Howard Eiffert, his eventual death would mean the demise of their family business.
``We would just have to liquidate,'' Brad Eiffert said. ``If we aren't prepared, the death tax penalty will put an end to a business that my dad started in 1965 with very little capital.
``This one-time tax would kill 30 full-time jobs, not to mention the dreams my brother and I have of carrying on our dad's legacy.''
He also pointed out that the end of Boone County Lumber would mean the end of future tax revenues for the state, local and federal governments.
``Our business, like any business, is a tax machine!'' he said. ``We generate corporate taxes, sales taxes, payroll taxes, personal taxes, property taxes....I can't believe the government would give up all that for this one-shot tax at the time of death. It's absurd.''
Perhaps Howard Eiffert himself put it best: ``It's a huge penalty for trying to be successful. It's very unfair that I need to pay this much to protect something I've worked for my whole life.''
Today, there are efforts in Congress to scale back, and eventually eliminate, this punishing and outdated tax. But total relief, and total repeal, cannot come soon enough for the Eifferts and millions of family farms and businesses.
Howard Eiffert should not have to protect his family business from his own government—not in America.
Mr. Faris is president of the National Federation of Independent Business in Washington, D.C.