The Small Business and Entrepreneurship Council (SBE Council) has declared that the best thing for small business when it comes to the estate tax (or death tax) is to have no such tax at all.
Under current law, the death tax is scheduled for elimination in 2010. But it would return in 2011 with a top tax rate of 55% (60% for some estates) and an exemption level of $1 million. Various news reports indicate that Congress will not be able to reach an agreement on extending the death tax in some way before the end of this year, so the tax will be eliminated, at least for some period of time, in 2010.
Karen Kerrigan, SBE Council president and CEO, said: "It's time to end the death tax, forever. Eliminating the tax would be good news for small business owners and our economy. However, the threat of it returning to the burdensome levels that existed before the 2001 tax package began a phase out is a clear negative, and an unwarranted uncertainty. While entrepreneurs do not like uncertainty when it comes to tax policy, they certainly do not want to see the death tax resurrected. Congress should eliminate the uncertainty and help our economy by simply repealing it."
Raymond J. Keating, chief economist for SBE Council, added: "No sound economic reasons exist for a death tax. It discourages investment. It diverts resources to nonproductive tax planning and tax avoidance measures. It forces some family businesses to be sold or even closed. This destroys jobs. And after a lifetime of paying seemingly countless taxes and fees, it is grossly unfair. For good measure, once all of the costs are factored into the equation, it has been estimated by the Joint Economic Committee of Congress that the death tax generates no net revenue for the federal government. Quite simply, this tax is destructive - it is a waste."
Keating also pointed out: "Some members of Congress have expressed concerns about the non-stepped-up basis of assets that would apply for capital gains tax purposes once heirs sell inherited assets when the death tax is eliminated for 2010. If those concerns are real, then why not permanently repeal the death tax and provide for a stepped-up basis for assets up to, for example, $10 million? That way everyone is better off."
Kerrigan concluded: "In the end, small businesses, investors and the economy would benefit if the death tax did not exist. Around the globe, governments are repealing their death taxes because they know these taxes hurt their competitiveness and destroy jobs. U.S. lawmakers need to get with this modern mindset and repeal this wasteful tax. "