WASHINGTON DC – The drafters of the proposed Tax Reform Act missed the opportunity to resolve the significant inefficiencies and economic dislocation associated with the estate tax. While the tax reform proposal may have much to offer small businesses, I am amazed that the House Ways and Means Committee’s executive summary states that it “maintains current law on the estate tax, ensuring that family businesses can continue to be passed on to future generations.” This statement turns logic on its head.
As an owner of small businesses, I know firsthand that current estate tax law ties companies in knots and the collection mechanism unduly burdens families, small business owners, farmers, and ranchers. Fear of the estate tax leads many small business owners to liquidate at fire sales before or immediately after the owner’s death and encourages them to over purchase life insurance in order to satisfy the future tax burdens.
Congress should include in tax reform legislation our ASSET legislative proposal, an entirely voluntary, revenue neutral, less economically destructive tax system that replaces the current estate tax with a tax on gains upon the sale of estate assets. Death would not trigger a taxable event under the ASSET proposal – the tax on gains would occur only when and if assets are sold. Taxpayers who opt in under the ASSET plan would pay a small 1 percent surcharge on annual income while they are alive and no estate tax would be owed upon their death.
Farms, ranches, and businesses could continue operating and employees would not lose their jobs when the owner dies. Economic growth would be generated because wealthy taxpayers will no longer hide assets in trusts to avoid estate and gift taxes and they could use these assets far more productively throughout their lifetimes.
Replacement of the existing estate tax is one of the most pro-growth policies Congress could embrace. The ASSET proposal should be part of any tax reform that aspires to grow the economy faster.
While we commend Chairman Camp and his colleagues for starting the Congressional process toward a fairer, more efficient tax code, we hope they will recognize their oversight and will consider adding the ASSET plan to the legislation when it is the subject of committee action.
For more information about the ASSET proposal click here.
ASSET is a coalition of more than 11,000 individuals, private businesses, family farms and ranches, and their employees, founded in order to change the collection method for the Estate Tax. Jack Fitzgerald is the chairman of Fitzgerald Auto Malls a collection of small businesses.