Relief from the Estate Tax (Death Tax)

AAHOA URGES CONGRESS TO SUPPORT PERMANENT ESTATE TAX RELIEF

The Issue:

The U.S. Senate may soon consider reinstating the estate tax (also known as the “death tax”) as a permanent solution to former President Bush’s 2001 temporary estate tax repeal. The repeal is effective until the end of 2010. If reinstated, the tax would take effect in 2011, and can levy a significant tax rate on personal estates, which could have costly impacts hotels and small businesses in this difficult economy.

The Impact:

Unlike large businesses and multi-million dollar corporations, small business owners are particularly vulnerable to the estate tax because most owners count the entire value of their businesses in their personal estates.

• If the estate tax is reinstated, the federal government could automatically deduct between 37 to 55 percent in taxes from an estate (including the business) when the owner dies. In many cases the owner’s beneficiaries could be forced to sell the business in order to pay the estate tax. In effect, this could prevent many family-owned businesses like yours from being passed on from one generation to the next. 
• The estate tax would be burdensome in this difficult economy. The uncertainty of the estate tax rates for individual business owners would force them to constantly re-evaluate their estate planning strategies. This can be time consuming and costly once attorneys, accountants and financial planners become involved. A steep estate tax coupled with estate planning and operational costs would certainly be difficult for small business owners to absorb during these tough economic times.
• The estate tax would be an unfair form of double taxation. The federal government automatically collects its fair share of taxes on a businesses’ profits at the time that it is earned.  However, the estate tax would serve as an unfair double tax because it allows the government to collect taxes on the same profits for a second (or perhaps a third time) upon a business owner’s death. While estate taxes allow the government to raise money, double taxation such as this is unfair because it leaves very little chance for many small businesses to survive or to be passed on to heirs. 

The Legislative Solution: