Federal Budget Negotiations will Determine Extent of Estate Tax Reform

The Washington Newspaper, May 1997

Small and family-owned businesses have much at stake in the federal budget talks. Estate tax reform is once again on the agenda and it has bi-partisan support.

Several bills have surfaced to give small businesses relief from the heavy-handed tax that can amount to as much as 55 percent of the estate, according to Paul Boyle, director/government affairs for the Newspaper Association of America.

The actual tax relief, according to Boyle, depends on Congress' spending outline and tax packages and whether the Republican-controlled Congress and Clinton can agree on the package. "It seems like now is the time for estate tax relief," Boyle said. "All of the proposals look to raise the exemption and exclude business assets from qualified family-owned businesses."

One bill, The American Family Tax Relief Act, introduced by Senator Majority Leader Trent Lott (R-miss), will raise the exemption from $600,00 to $1 million over eight years, with the full increase available in 2004. Lott's bill also excludes $1.5 million in value and 50 percent of the remaining value of a family business from estate taxes.

Frank Blethen, The Seattle Times publisher and advocate for estate tax reform, said reform is necessary because the tax, commonly called the death tax, often bankrupts businesses and doesn't add much to federal revenue.

"There has been a lot of analysis that shows conservatively 65 percent of the money collected from this tax goes right back to the IRS for tax collection support," Boyle said. "Less than 30 percent makes a contribution to the federal government."

According to the National Federation of Independent Business, the estate and gift tax contributes less than 1.1 percent of total federal revenues.

Boyle said the impact of death taxes on family-owned businesses is detrimental to the overall economy.

"It would be more valuable to let businesses put that money back into the business and grow and create jobs," he said.

Both NAA and the National Newspaper Association are working on this issue.

Please e-mail us with your comments, death tax horror stories and suggestions on-line at feedback@deathtax.com.

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