By Tom Click
Senate Republicans have decided not to include death tax repeal in their tax reform bill. This is an issue of immense debate on both sides of the aisle. Those who favor the tax typically don’t understand its ramifications and characterize it as another loophole for business owners to circumvent their responsibilities. For me, and others with businesses like my own, that is simply not the case.
There are 5.75 million privately held employer firms in the country. A huge number of these employers spend money every year simply to mitigate the effects of the estate tax. This takes money away from growing businesses and creating jobs. My manufacturing business employs 60 people — it is by definition a small business, despite all my employees and the benefits we provide for our staff. For every dollar of investment in my business today, I have to set aside an extra 40 cents in some way simply to prepare for the estate tax. Using life insurance as a measure, my current monthly premium is equivalent to and prevents me from hiring 1.5 new employees.
I offer my situation to note that this tax is preventing my small Virginia business from hiring more employees. Take this into account nationwide, while also keeping in mind that these small businesses have been paying taxes annually all along while building the estate, only to be taxed yet again at the end of their race.
When you look at the facts, the estate tax is a tax on female surviving spouses and the family. The SBA Office of Advocacy released a report on May 31, 2017, detailing that male-owned businesses generate 73 percent of the revenue, 79 percent of the jobs, and 78 percent of payroll of U.S. small businesses. In light of the fact that more than two-thirds of business owners are married, it isn’t difficult to imagine the impact on women.
Destroying jobs by targeting America’s main economic engine — small (and often family-owned) businesses — is bad economically. According to the Tax Foundation, small businesses as a whole have been responsible for 60 percent to 80 percent of all net new jobs in the past decade. The repeal of the death tax would create nearly 160,000 jobs by allowing more capital to be invested in the economy.
Our local Virginia businesses will continue to suffer if this tax persists. We have seen evidence of that across the country. Businesses that have sustained local communities for generations must now re-evaluate their futures and alter their perspectives. Oftentimes, the cost of staying in business is too high, and many communities small and large, lose out.
Sen. Chuck Schumer has noted, about the estate tax: “A business is an ongoing organism. It employs sometimes 10 people and sometimes 10,000 people. To have to break that business up to pay any tax, to me, is counterproductive.” The idea that such a small percentage of our population is susceptible to this tax is conceptually wrong. Those who are truly affected are our labor force and their families, who depend on these jobs.
Since 1995, more than 103,000 closely held businesses and roughly 36,000 farms have been forced to pay the estate tax simply because someone has died. This has a compound effect and is exponentially hurting our economy and job growth, while simultaneously pushing Americans further apart from one another.
Death by itself should not be taxable. The estate tax should be repealed to protect our small businesses and their positive impact on employment and the economy.
Tom Click is the owner of Patriot Aluminum Products, in Louisa, Va., and may be contacted at email@example.com.