“Small Businesses and the Estate Tax: Identifying Reforms to

11/4/09

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Washington, Nov 4, 2009 | Angela Landers ((202) 226-1581) | comments

Opening Statement
Ranking Member Sam Graves
House Committee on Small Business
Hearing: “Small Businesses and the Estate Tax: Identifying Reforms to
Meet the Needs of Small Firms and Family Farms”
November 4, 2009

 

Madam Chairwoman, thank you for calling this hearing on the very important topic of the estate tax.  Special thanks to our witnesses who have taken time from their busy schedules to be here today. Entrepreneurs are struggling.  They are responding to our difficult economy by working to expand and create jobs at a time of high unemployment.  Now they are threatened with additional regulations, mandates, and tax increases to pay for health care and additional government spending. The last thing they need is the possibility of losing their businesses.

Yet if Congress fails to act before 2011, family businesses and entrepreneurs may find their companies at risk.  Current law, which would phase out the estate tax for those who die in 2010 only, is scheduled to sunset on January 1, 2011.  If Congress does nothing, a top marginal estate tax rate of 55%, and an exemption of just $1 million, would again take effect in 2011.  Small businesses and farms are often operated by families, and transferred from one family member to the next.  These entrepreneurs frequently return any savings right back to their business by purchasing valuable equipment or land needed to operate the company. 

In the case of a small company or farm, although the assets transferred after a decedent’s death may be valuable, the heir’s net worth or liquidity may not be high.  The heir, facing a 50% estate tax bill, may be forced to sell vital equipment or land to pay the tax, rendering the business inoperable.  The net effect is reduced capital formation, productivity and business expansion. Before current law sunsets at the end of 2010, Congress must act.  I support a full repeal of the estate tax, and I have introduced legislation, H.R. 664, to make the 2001 and 2003 tax relief, including the estate tax phase out, permanent.

If Congress does not repeal the tax, it should, at a minimum, reduce the estate tax rate and increase the exemption.  The fact that there is uncertainty in the law makes it difficult for small business owners and farmers to plan.  We cannot allow these entrepreneurs to risk the future of their companies. 

Madam Chairwoman, thank you for recognizing the need to hold a hearing on this absolutely critical issue.  I look forward to the testimony.



 

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Tags: Taxes