---

Inheritance Tax Imperils Family Businesses, Farms

excerpted from the National Center for Policy Analysis' Daily Policy Digest

Most flat tax proposals would abolish the estate tax. Many economists point to the negative consequences of this tax for family-owned farms and businesses.

• More than 70 percent of all family businesses do not survive through the second generation; with 87 percent not making it to the third generation.

• Experts say that 90 percent of these businesses that fail do so because the inheritance tax burden falls at a difficult transition period.

• The present federal inheritance tax ranges from 37 percent to 55 percent of estates worth more than $600,000.

• Since the $600,000 exemption, passed in 1981, was not indexed for inflation it is now worth only $377,000 in 1981 dollars.

At a time when the savings rate of Americans is declining, this tax -- which raises only 1 percent of federal revenues -- consumes 8 percent of each year's savings. Proponents of abolishing the inheritance tax say it would increase the country's capital stock by $639 billion over the next seven years and eliminate 82 pages from the IRS code, as well as 289 pages of IRS regulations.

Source: Adapted from Grover G. Norquist (Americans for Tax Reform), "Abolish Estate Tax," USA Today, January 18, 1996.