WASHINGTON—Estate taxes established to fund U.S. participation in World War I are costing small-business persons their livelihoods more than 80 years later, proponents of estate tax repeal are telling Congress and the public. ``It's hard to imagine a more onerous or unfair tax,'' said Tim Hammonds, president and CEO of the Food Marketing Institute, at a June 15 press conference of the Americans Against Unfair Family Taxation, a business coalition devoted to repeal of the estate tax.
The AAUFT press conference came the day before the House Ways and Means Committee heard testimony from members of the U.S. Chamber of Commerce, the National Federation of Independent Business, the National Association of Manufacturers and other groups backing the inclusion of estate tax repeal in a tax reform package the committee plans to unveil in mid-July.
Currently, the estate tax levies a death duty on all business assets over $600,000, with a top rate of 55 percent for assets above $3 million. Because small businesses' worth is measured in property, equipment, inventory etc. rather than cash, most inheritors of small businesses have to sell the business simply to pay the tax, its opponents say.
The business coalition supports the House bill sponsored by Reps. Jennifer Dunn, R-Wash., and John Tanner, D-Tenn., which would reduce the tax by 5 percent annually until it disappears altogether in 2010.
A witness testifying before the Ways and Means Committee on behalf of the NAM, however, championed a bill by Sen. Jon Kyl, R-Ariz., that would repeal the estate tax outright but allow taxation of inherited assets on a carryover basis, meaning that no inherited property is taxed until it is sold.
Furthermore, the top tax rate under the Kyl legislation would not exceed the top effective income tax rate of 39.6 percent, and more often would be the top capital gains tax rate of 20 percent.
``Under the (Kyl) bill, death would no longer be a taxable event,'' said Ronald P. Sandmeyer Jr., president of Sandmeyer Steel Co. in Philadelphia. ``The new Kyl bill is so simple and fundamentally sound that I find it hard to believe someone hasn't introduced the concept sooner.''