Death tax would wreak havoc on a business my dad built up over years

//Death tax would wreak havoc on a business my dad built up over years

Death tax would wreak havoc on a business my dad built up over years

By Karen Medonia

ILLCO was a very small wholesale distributor in suburban Aurora, with only seven employees, when my father purchased it back in 1973.

Since that time, the business has grown tremendously because of my father’s passion for his industry, his commitment to his employees, and his drive to grow his company. Even when interest rates hovered in the high teens during the late 1970’s and early 1980’s and things looked ominous, he persevered.

Forty years later, my father has a business with eight branches and 97 employees.

My sisters and I grew up understanding that if we want to be successful at anything, we have to work hard and stay focused on our goals. Today, we are all proud to work alongside our dad, our uncles and my brother-in-law, and we look forward to making our own mark on the family business.

However, as we look into the future, we are faced with figuring out how to grow the business while also navigating the waters of estate taxes. We want to continue our family’s legacy and grow the business. But to me, and probably to a large portion of the generation behind me, the federal estate tax is a tremendous entrepreneurial disincentive.

It is fundamentally wrong to place a tax on death. If a person accumulates wealth through hard work, and if that person pays his or her fair share of taxes on income as it is earned, I do not understand how the government can justify taking a significant portion of what’s left simply because he or she opted to save and re-invest rather than consume.

In the case of a family business such as ours, they likely have employed people who pay taxes, bought buildings on which they have paid property taxes, and purchased inventory and supplies that their community needs. They have created an opportunity for the community as a whole while creating prosperity for themselves. We all benefit when a small businessperson succeeds.

At ILLCO, we provide vital heating, air conditioning and refrigeration parts and supplies to hospitals, schools, nursing homes and grocery stores. We are active in the communities we serve. We own and impeccably maintain six buildings and operate a fleet of 24 trucks.

After paying our taxes and making an annual profit-sharing contribution to our employees, we put the income that’s left right back into the company so that we can continue to carry an extensive inventory, extend payment terms to our customers and maintain our fleet and our buildings.

If something were to happen to my dad and we were left with a large estate tax bill, we would have to sell parts of the company to pay that bill. That likely would mean shutting down branches, laying off workers or liquidating inventory just to pay a tax incurred only because the owner died.

The estate tax is a problem across our industry. The average HVAC distributor holds $20 million in assets between inventory, accounts receivable, warehouses, trucks and equipment. An estate that includes a $20-million small business can be hit with a nearly $4 million estate tax bill. Very few businesses have the cash on hand to pay a $4 million tax bill; they must sell part of the business or limit future growth for years into the future.

The United States has always been the land of opportunity. Small business owners take tremendous risk at great personal sacrifice, and they truly are the backbone of the American economy. No one is asking for it to be easy. But it shouldn’t be the case that the thing that keeps you up at night is the worry that you may leave your kids with a huge tax burden when you die.

Let’s protect our family businesses and the jobs that are part of the American dream. Republicans have been promising to repeal the death tax for many years. I hope that they deliver in comprehensive tax reform. The future of many American small businesses, and the livelihood of all of their employees, depends on it.

Karen Madonia, of Aurora, is CFO of ILLCO, Inc., a Chicago-area distributor of heating, ventilation, air-conditioning and refrigeration equipment, parts and supplies.

By | 2017-11-17T20:30:11+00:00 November 3rd, 2017|Death Tax|0 Comments

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