A family business coalition sent a letter to Congress asking for immediate action on the estate tax before it increases at the end of the year.
“Action is urgently needed to prevent the estate tax from saddling thousands more family-owned businesses and farms with a crippling tax increase,” the letter from the Family Business Estate Tax Coalition (FBETC) says.
Currently, the tax has a $5 million exemption with all estates valued higher than that being taxed at 35 percent. At the end of the year, if no action is taken, the exemption will be reduced to $1 million, with a 55 percent tax on all estates above that threshold.
At minimum, the FBETC would like an extension of the current law, though ideally they favor the repeal of the law altogether.
“If Congress fails to pass legislation extending this current policy, the Joint Committee on Taxation estimates that 15 times more families, 24 times more farms, and 13 times more small businesses will be forced to pay the estate tax,” the letter states, also concluding that lack of action will have a devastating impact on family-owned businesses and farms and could jeopardize as many as 1.2 million jobs.
The estate tax is especially burdensome on family-owned businesses or farms, which tend to be inventory or land rich, but cash poor.
“You can imagine if you are a family business owner, or you are a farmer, and you’re planning for succession of your family farm or family business, you have to plan for a 55 percent tax. And a lot of businesses are cash poor and land or inventory rich,” Schoening Strategies President and Family Business Coalition Chairman Palmer Schoening told The Daily Caller News Foundation.
“So when it comes time to pay the tax … the IRS comes in and says, ‘Well how much equipment do you have, let’s add up your house, everything down to the last penny in your sock drawer.’ It’s really not tough for anyone who employs ten or 50 people to have over a million dollars in total stuff. Then there’s a 55 percent tax on anything above that million. So if you have $2 million, you need to give a 500,000 tax bill,” Schoening continued.
The current tax structure was renewed in 2010 by a bipartisan majority in Congress. FBETC urges that Congress once again act in a bipartisan manner.
“Members of the FBETC strongly oppose efforts which would retreat from the bipartisan agreement,” the letter states.
The FBETC is hoping for a resolution soon.
“As Congress considers proposals to address the fiscal cliff and the impending tax increases scheduled for January 1, 2013, we urge you to support estate tax relief to ensure the survival of thousands of family-owned businesses and farms,” the letter concludes.
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