Open Letter from a Tax Payer
To Whom It May Concern:
My name is Clayton and I have a story to tell. In the 1860’s my great-great grandfather was a cattleman. He had moved from England to Virginia and from Virginia to Texas. He began leasing land from landowners to graze cattle, all the while saving his money. Gradually, as he saved more and more, he began purchasing small tracts from the people he was leasing from and over his lifetime he had purchased several thousand acres through hard work and frugal living, the typical American dream.
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"Families need a permanent, certain fix of Estate Tax"
Wednesday, April 26, 2006 Harry Alford
Why does the National Black Chamber of Commerce support the permanent elimination or the reduction of the estate tax? Because many of our family businesses are first generation businesses, where children work along side their parents, in these businesses. They would like to see their children continue the business for the benefit of their community and the family. They do not want to sell the business to pay the estate tax and eliminate the livelihoods for the next generation in addition to the jobs for those who they employ.
It is a deceptive rationale to represent that "only 1 percent of Americans are affected by the estate tax." That is the percent of decedents whose estates will actually write a check each year to the IRS. The Polling Company has found that "twice as many family businesses sell out early, rather than pay the tax." This often means a loss of jobs and a business in the community. All too often the family business is sold to a larger company who then moves the business and takes the jobs out of the community. Why is it fair to penalize those who worked hard, created jobs, took risks, achieved success and paid substantial taxes during their lifetime with a 47 percent tax at death? Isn't this discrimination? Targeting those who have more, just because they have more is not fair.
Families need certainty in planning for the future of their businesses. Congress has spent the last decade discussing and attempting to alter the estate tax. With the tax bill passed in 2001, it has only made it more difficult and uncertain to plan. One year of repeal in 2010 makes no sense and is not helpful to families. Both parties should sit down in good faith and work out a solution that will help all families, their businesses, and the workers they employ. Congress should stop using the future of family businesses as an election issue or political tool and pass permanent repeal or permanent reduction of the estate tax!
Members of the National Black Chamber of Commerce are anxious to continue to build successful businesses that future generations can enjoy. They have taken risks and employed many people and they deserve to know with certainty that all of their years of hard work will not be lost. It is time for the Senate to act and vote on HR8 and give families certainty.
Harry Alford is president of the National Black Chamber of Commerce.
"A Matter of Fairness"
Tuesday May 16, 2006 Patrick Guerriero,
Life’s only certainties are death
and taxes. Unfortunately, the
government won’t even let
someone die without taxing
them. The current death tax rate
is almost 50 percent. That means
within nine months of death, Uncle
Sam gets 47 percent of the value of
everything you own — including
cars, furniture, personal belongings,
homes, investments, pension
plans, 401(k)s and even your business,
if you own one.
The death tax hurts the economy
by devastating family businesses
such as farms and construction
companies. Since most people don’t
have cash to pay a huge estate tax
bill, families are often forced to sell
or close successful businesses just
to pay Uncle Sam. This hurts our
economy and leads to job losses.
Losing a loved one is difficult
enough. The financial worry caused
by the death tax makes such a loss
even more unbearable, especially
for gay and lesbian couples. Under
current law, married couples
are allowed a “marital deduction”
that shields assets from taxation
when one spouse dies. Gay couples
are prevented from getting
the same benefit As a result, they
are subject to the death tax twice. A
partner’s assets get taxed once and
those same assets get taxed again
at the death of the second partner.
Does this make sense? No, because
the estate tax makes no sense, and
Congress has a chance to fix it this
The public overwhelmingly supports
a repeal of the estate tax.
That’s why Republican and Democratic
political leaders want to reform
this tax. In fact, Congress has
spent the last decade debating the
issue. The 2001 tax bill included
some estate tax reform, but it actually
created even more confusion.
That’s because the
estate tax will be phased
out in 2010, but only for one
year. Without congressional
action, the death tax
will come back to life in
2011. Uncertainty about this issue
makes estate planning more difficult
than ever. Families need certainty
in planning for the future of
Both parties should sit down in
good faith and work out a solution
that helps families, businesses and
workers. Congress should stop using
the future of family businesses
as an election issue or political tool.
It’s time to pass permanent repeal
or permanent reduction of the estate
tax! It’s a matter of fairness.
Why penalize those who work hard,
create jobs, take risks, achieve success
and pay substantial taxes during
their lifetime with a 47 percent
tax at death? It’s time to bury the
death tax once and for all.
Patrick Guerriero is president of the Log Cabin Republicans
"Businesswomen are Discovering Estate Tax’s Dire Consequences"
Wednesday May 17, 2006 Barbara Kasoff,
Many people like to think of the estate tax as a victimless crime.
Sure it is double taxation, they’ll say, but the government needs the money and, besides, few people actually pay. Unfortunately, the estate tax actually contributes very little to the federal budget, and its victims are real and tragic: family farms and small businesses.
It works like this: When small farmers and businesspeople die, their estates must pay a sum equal to 47 percent of the value of their total assets above $2 million, including their farms and businesses. If the heirs cannot pay the tax, they must liquidate.
In all likelihood, this is what will happen to Melanie Meyer’s business. The majority owner of the Versailles Arms apartment complexes, which together constitute one of the largest Section 8 public-assistance housing properties in New Orleans, Ms. Meyer has been an exceptional proprietor and community leader. Her buildings have always been clean and superbly maintained, and she has worked vigorously to promote economic development and empowerment in her predominantly low-income neighborhood.
In 1994, she helped establish in New Orleans the Safe Neighborhood Action Plan (SNAP), a joint effort between the Department of Housing and Urban Development and various community organizations to prevent crime, provide continuing education and promote economic development and homeownership. She has been a leading force in the initiative ever since, and SNAP has its local headquarters at the Versailles Arms Neighborhood Networks Learning Center.
Ms. Meyer is trying to rebuild the Versailles Arms in the wake of Hurricane Katrina. She wants it to be the same positive force for change in the coming decades that it has been in the previous few. This is why she would like to keep the property in the family: to ensure that those who run it are mindful of both the community and the bottom line, and not simply one or the other. But there’s a catch. If Ms. Meyer died today, none of her heirs would be able to afford the estate tax on the property.
The estate tax is patently unfair to Ms. Meyer. She has worked all of her life to build her enterprise, and she has paid taxes on everything she has earned in the process. The government has already taken a generous chunk of the wealth she has generated. When she dies, it will demand half of what is left.
Yet the estate tax is even more unfair to the members of the community who have benefited from the existence of the Versailles Arms. If the tax persists, Ms. Meyer’s properties will expire when she does. Its tenants, who relied on it for safe, sanitary and affordable housing, will have no place to live. Its employees, who relied on it for their jobs, will have no place to work. The local residents, who relied on the learning center for education and financial advice, will be on their own once again.
The estate tax is fundamentally against the interests of the American people because, in effect, it destroys the things individuals create in their lifetimes, things that we would just as soon have around. Think of the family farms that are sold and then parceled up to make way for subdivisions. Think of the small businesses sold and digested into larger corporations, leaving their former premises empty and their former workers unemployed. Think of Ms. Meyer’s housing complex.
The great irony in all of this is that the estate tax does not even generate much income for the federal government. It constitutes only 1-2 percent of federal revenue on paper, and many experts believe that collection and compliance costs approach the amount actually collected. So, in all likelihood, we are jeopardizing our farms and businesses without actually increasing the federal bottom line.
Female business owners are becoming particularly aware of the negative impacts of the estate tax. There are 9.1 million woman-owned businesses in the United States, employing 27 million people, and women are starting businesses at twice the rate of men. But the more they accomplish, the more women recognize that the estate tax hangs like a guillotine over all they have built.
For the sake of the family farms and small businesses across the country, Congress must act to repeal the estate tax permanently. It is not just unfair to business owners and damaging to the American economy, it is an affront to the American dream that so many women are striving to achieve.
Kasoff is president of Women Impacting Public Policy, a national organization of women in business.
Selling Family Farm To Prepare For Estate Tax
I have been very concerned about the outrageous estate tax.
Our family has owned a ranch in Texas since 1959 and when my dad passes we are faced with losing this precious land. There is no way we can come up with that kind of money to pay taxes and keep the ranch. I finally convinced my dad who is now 81 years old that we needed to try and sell this land, so now it is on the market.
It breaks my heart to part with this ranch since my sister and I and then our kids grew up going to this beautiful place in the Texas Hill Country.
What can we do to help abolish or make estate taxes fair, where families like ours don't have to lose something that means so much to us?
“I have been so scared since my mother-in-law died last week that I am having daily anxiety attacks worrying about how I can save the farm.
My husband died in 2000 and I
am now the only heir to my mother-in-law's farm. After my husband died, I planted the majority of the farm in trees; saving some acreage for cows and other
crops. So much of the land around me is being developed for house trailers and housing developments. I want so much to save the land for future farm use. There
are about 60 acres of this land that remains as it was hundreds of years ago....as my husband used to say, "never touched by human hands." This land was bought,
paid for, loved, and improved on. I should not have this terrible fear of not being able to buy it again from the government, (in the form of the death tax), in order to
save it. Not only that.....my future security will be wiped out. I have worked so hard all my life, and this just doesn't seem fair.
My luck has always
followed the "day late and dollar short" saying so I do not look for any miracles to save me. I just hope the death tax is abolished so it will help others
enjoy the fruit of their labors.
Thank you so much for trying to help.”
Live Oak, Florida
“My name is Abby Jensen. My father, Roger Jensen, died June 30th. He was only 54. I am only 19 years and starting college. My brother is only 24. My parents were divorced when
I was 8 years old and I have lived with and depended on my father completely. I am concerned with the death tax, it sounds so unfair. On top of all the grief, this is added to
our list of problems. My father was a very smart man and he would of put his life insurance in bonds to avoid adding it to the estate, but he just recently raised his
insurance to $500,000 and didn’t have time to. He was very healthy and in two short weeks, a shocking dignosise of brain cancer killed him. He was just about to enjoy the
fruits of his labor, he wanted to go to Great Britain, he was starting to finally buy things he enjoyed. As long as I have grown up he has been tight with the wallet, what
good did that do. The government wants to take what sounds like a lot of his savings and hard work. My dad bought land that would pay out when I would go to college and now
the government wants to tax it again. I am a dependent, my dad worked hard because he had a dream to send me and my brother to a good college of our choice. I was going to go
to a private school but now I don’t know if I can afford it. It sounds like my dad had a lot of money, lot of investments, and the life insurance and retirement money on top
of that will put it over a million. My dad was just about to take a loan out for 2.8 million dollars (with a partner) for what sounds like a very great opportunity investment.
If the bank still borrows the money, we want to continue on all my dads work. There are tons of bills coming in the mail that me and my brother never had to deal with, its
very overwelming. Then the death tax, court fee, lawyer fee on top of that. I want to learn more about the death tax, I don’t think it is fair. Thank you for your time.
"Boy do I have a horror story for you! My father passed away 10/90. His estate for tax
purposes was assessed at 7.7 million dollars when it was re-evaluated. After six months it had not changed much so approximately 3.8 million was owed in death and estate
taxes. Most of my father's estate was in real estate and shortly after the six month period after his death, real estate took a dive. And every piece of property we sold
to pay taxes sold at about 40% of what it was appraised at time of death.
Well it has been ten years since my father's passing and we have
still not seen any money. If and I do mean if we are lucky, then maybe at the end of this year after we pay the last $350,000 to federal and pay the state, my mother, sister
and I may have all of $200,000 to split between us. Great."
"I am 77 years old. My history of work, thrifts and efforts to save money is
unbelievable. Here is my reward! All of my social security (plus more) goes for income tax. I live off my teacher's pension as I do not want to cash my
investments. If I died today, I'd pay about $200,000 in death tax. I am helping a great niece to go to college. I have two great nephews coming up. All
are bright children. I would like to help them - not the IRS.
I had a newspaper route in college. I worked for 50¢ an hour doing office work under the
program set up by President Roosevelt. I have lost money in investments. I went to work when I had a death sentence with lung cancer in 1967. I didn't miss a
day when I was told I could only live three months at the most. I am still working. I have a tenant and I tutor ESL students. I do almost all my own work and
cooking. I have never had a bill I didn't pay on time.
The way things are now what the nursing home doesn't get (if I'm that unfortunate) the IRS
will! What did I make all this effort for? Our laws need to be changed but I have no clout!”
Ida Prichard - Seattle, WA
This is a true story about Ray. Ray is dead now. He died earlier this year.
He owned a service station on a corner. He had this service station for 27 years. During that 27 years, other service stations were built on the other
three corners, the intersection grew busy, the roads forming that intersection were expanded to four lanes. So it was a good place for his business. He had two
service bays plus a car wash. He had some old pumps and old equipment. He cleared about $70 thousand a year - not wealthy, but it was a good living. His wife
handled the books for the business. His grown son worked there and was eventually going to take over the business.
When Ray died he had a $50 thousand term
insurance policy, $60 thousand in municipal bonds (which were income tax free, of course), $174 thousand in his retirement plan, and, of course, the service station.
A few months after he died, his wife also died. Upon the death of his parents, the son discovered that the land on which the service station sat had appreciated over
the years and was now worth $1.7 million. The service station and equipment was worth $158,000. He also learned that his father's retirement plan was funded on a
before tax basis, so not only would he have to pay estate taxes, but income taxes would be due on the retirement.
The son was now in quite a situation, and he
began looking for a way to pay taxes on the almost $2 million estate. The son said "If I can run this as well as my father has, or even better, I can make maybe $70
thousand a year, but I am going to have to have someone to keep the books, so maybe 70 is a little tight." He had no proven track record, so the only thing he could
do was to borrow against the land and equipment to pay the estate taxes; however, he could not cover the interest on the loan.
Ray's son will have to sell this
business. He has gone from a situation where he looks wealthy, to a situation where he will have to sell the very thing that was his livelihood.
A Story About Ray
QUOTES FROM NAWBO SURVEY
Question 7: Congress is trying to determine if the Federal Estate Tax is
truly a problem for family businesses. In your own words, please describe how this tax either has or would affect your business and family.
"Being a single person, I have no way to protect any of my
assets. So my daughter who works with me could very possibly have to sell the business or close it." Penny Hall - Doraville, GA
"Buy/sell insurance is being purchased to hopefully make sure
this business will not have to be sold because we have three children very active and interested in its continuation for their livelihood.
This taxation is double taxation because we are already paying tax on the money used to start the business and provide income for 30 families and
provide great tax income for cities, states and Feds. Estate tax is a sweat tax on family business owners - the more we sweat the more we
pay. If a business could be passed on to the next generation tax free - it would continue to produce jobs and a tax base instead of becoming
a dead issue." Inez R. White - Louisville, KY
"My family has recently experienced a triple tax. My
grandfather paid income taxes on his income when he earned it. When he passed away two years ago it was taxed again. My mother then
suddenly passed away this past spring and we were taxed again. Effectively an 88% tax rate." Lynn Marie Hoopingarner - West
"The private business world could never get away making its
clients pay twice for the same goods and services. Estate taxes equate to this. It is unconscionable!!!" Barbara Jane Moores
- Lexington, KY
"We currently must spend over $100,000 a year on life
insurance to cover future death tax concerns. These monies could be spent more wisely within a business on growth programs." Karen
B. Caplan - Los Alamitos, CA
"We just recently learned that we would not have the cash to
pay estate taxes if we were to die. The company would be liquidated. Life insurance will cost $15,000-$45,000 for a year. For
$2,000,000 in coverage - which would still not cover all estate taxes. We're in limbo on what to do. Attorneys are currently advising
us." Karen Oman - Minneapolis, MN
"Responding to advice from both attorney and accountants, we
purchased life insurance to try to plan for estate taxes. To date, over $400,000 in premiums that could have been invested in our
business!!" Suzanne Sykes - Waldwick, NJ
"Over the generations, much time and money has been spent in
attorney advice and life insurance to keep the business from being forced to be sold at the death of the owner." Karen Wilson - Romulus,
"We have spent a good part of the last 12 years working on
this - some days we wonder if it is really worth the trouble. Our company and our family has already paid taxes to the Government on this
money - why do we have to pay again?" Lauraetta Edgar - Little Rock, AR
"The business would be sold and all jobs would be lost." Bonnie Holland - Albuquerque, NM
"My business would substantially suffer, if not destroyed
completely after principal's death." Kathleen Colellar - Farmingdale, NY
"It is patently ridiculous to pay tax twice - we have already
paid on both our corporate and personal incomes. Why do we have to pay for our sweat equity? (Spent increasing the value of our
businesses, usually at the expense of our health and our families, who won't be able to afford to inherit it)." Lisa Hickey - Lakeland,
"We are labor intensive. We do not make big profits in
a service industry to pay for expensive life insurance, as I am 73. It is very difficult to be sold to pay this situation, as my house would
have to be sold. Everything that I have worked for all of my life would be taken from my heirs to pay the estate tax on the business so that
my loyal staff could continue to work and have jobs." Mary Rife - Miami, FL
"Kern County Farm Equipment Business Sold Due to Death Tax"
In 1950, the Milner family started their farm equipment business and grew it to 10 locations by the year 1979. They employed 250-300 employees ranging from
mechanics, sales agents, and administrative people, among others. In 1979, the business did very well and grew
in size such that Mr. Milner hired estate planners to do their normal estate planning for the Milner's including the tax
projections on the death tax due if Mr. Milner died. Mr. Milner realized his best alternative was to sell out early and pay the 20+% capital gains tax instead of a
55% death tax on the full value of the assets at his death. His decision meant that the family would no
longer have a family business and the children would not have an opportunity to work in the family
business. In addition, the buyer was a large foreign public company who shortly after the purchase
changed operations. The 20-year veterans, the president, treasurer, and sales people had their jobs
terminated to avoid redundancy with the new foreign owners. Properties that took 30-years to
accumulate were sold and employees were let go at those locations. Mr. Milner also signed a non
-compete clause contract forbidding him and his family to re-enter the same business over the next 15
-years. The company that existed under the Milner family's ownership does not exist today, the people
employed by the Milner family are no longer employed, and there is no family business to pass on to the next generation.
This is not an unusual story. Numerous family businesses sell out early to pay a capital gains tax
rather than concern themselves with the possibility of paying a 55% tax on the full value of the assets
due at a death. By paying the capital gains tax, these family businesses not only pay less of a tax -
but they also have time for a more orderly and marketable sale of the business than when forced to sell
the business when a family member dies and knowing that the tax payment is due within nine months
after the date of death. But this means that the family loses the business and often times the livelihood
of the family. Repeatedly, jobs are lost in the community as large public companies are not subject to
the death tax and can buy up the small and medium sized family businesses.
Is this the future we want for family businesses? If not, then it is imperative that the estate, gift and
generation-skipping tax (or the "Death Tax") be eliminated.
"The Death Tax Strikes Again"
Jennylynne and her family live in Lone Jack, Missouri and this is an account of a true story. Jennylynne's parents had been in the electrical construction business
for over 20 years and Jennylynne learned the business working with her parents. When her parents starting talking about retirement and turning the business
over to Jennylynne, the family became aware of the gift tax that they would have to pay or the estate tax
that would be paid at their death. The family considered borrowing against the assets to pay the tax but
the business could not support the debt at the interest rates that would have to be paid. After 20 years
in the business, the company's assets were sold to outsiders and ten employees were terminated.
Sadly, the sale of the assets so devastated Jennylynne's father, he died 14 months after the assets
were sold. Her father could not understand why he could not pass his business to his daughter who had worked by his side for years.
Jennylynne had to start from scratch to build a new electrical construction business and, fortunately,
was able to hire some of the former employees of the family business. In all of this, Jennylynne is now
facing a similar situation; she will be unable to pass her business to her children as a result of a tax law
, which is permitted to exist that destroys a family's life work.
Her husband's family has also experienced the devastating effects of the death tax. Her husband's
family owns a 80-acre farm in Northern Missouri. Jennylynne's sister-in-law had to purchase the family
farm to avoid the death tax and has been paying on that debt for 20 years.
This story can be told over and over again. Our legislators need to understand that family businesses
are not statistics; they are real people, taking risks, creating jobs and investing their capital. Why after
a lifetime of work should they have to pay another tax on assets that have already been taxed at least
twice before at a 55% rate - the highest rate in our tax system? Jennylynne and her family are not the
exception - they are like so many other families that are not recorded in government statistics of which
whom is affected by the death tax. Legislators should endeavor to help families keep their businesses alive and not penalize those that invest in the building of America.
Articles by Patricia M. Soldano, President of Policy and Taxation Group
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