INHERITANCE TAX IMPERILS FAMILY BUSINESSES, FARMS
January 18, 1996
Within the Kemp Commission tax reform report is a recommendation to abolish the estate tax. Many economists agree, pointing to its negative consequences 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: Grover G. Norquist (Americans for Tax Reform), "Abolish Estate Tax," USA Today, January 18, 1996.
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