Family-Owned Printing Company Is Portrayed as a Victim of the “Death Tax”

An organization dedicated to fighting what it calls the “death tax” has produced a video about the fate of a Phoenix,

An organization dedicated to fighting what it calls the “death tax” has produced a video about the fate of a Phoenix, AZ, printing business that couldn’t meet its federal estate tax obligations after the death of its founder. A press release promoting the video says that the company, Imperial Lithographics, “grew from a home-based business into one that employed more than 200 people and generously supported the local community. After the owner died of leukemia, the family was forced to sell the company in order to meet their estate tax obligations.” The American Family Business Foundation wants Congress to stop the reimposition of the estate tax, which will be suspended next year but returns in 2011. According to the group, the estate tax must be paid by a business owner’s heirs within nine months of the owner’s death and will, in 2011, amount to 55% of the decedent’s assets in excess of $1 million unless Congress repeals or modifies it. The estate tax burden falls disproportionately upon family firms and other small, closely held businesses, the foundation says. It maintains that eliminating the tax would create up to 1.5 million jobs by letting heirs reinvest capital in their businesses instead of remitting it to government coffers. The foundation’s web site has other videos about businesses brought low by the estate tax. In a blog entry last week at The Huffington Post, the group’s founder, Dick Patten, blasted the life insurance industry for “colluding with Congress” to keep the tax in place. Printing Industries of America opposes the estate tax and says that its full repeal should be made permanent prior to December 31, 2010.

Discussion

By Michael J on Nov 19, 2009

Patrick, Thank you for a thoughtful post. The link to HufPo puts the conversation in a sensible framework. Usually it's about the government is the "enemy." A snippet from HufPo describes how it's just business doing business. No bad guys, in my opinion, just the folks with access getting the distracted folks in DC to pass stupid laws. It's the oldest story in the book. Here's the money snippet: Large life insurance companies see the estate tax as their primary sales point with aging family business owners. This year, alone, the top eight life insurance companies spent more than $18 million lobbying to secure favorable estate tax legislation. Insurance companies have done this purely to pad their own pocketbooks. And they have padded them well. The life insurance industry brought in over $12 billion on second-to-die policies in 2005.

By Dr Joe Webb on Nov 19, 2009

The "Death Tax" is yet another example of how regulation breeds a strange alliance of government and political entrepreneurs. No death tax = clear and quick passage of assets, on which taxes were paid in their accumulation, to heirs and designees. Instead, there is an industry of tax avoidance practitioners that depends on the death tax for their survival. It would be better if the CPAs and tax attorneys skills would be used to help people run their businesses. As having been a beneficiary of a business sale nearly 10 years ago, I was introduced to this industry in an attempt to shield a then young child from estate taxes should their be an untimely demise of me and Mrs. W. It is amazing between the second-to-die policies, life policies and the trust creation process that an industry of financial planning, that should be unnecessary, exists. There are many families that end up creating elaborate gifting strategies, and trusts, that create a highly inefficient use of capital in the economy, as the investments are made solely to be shielded, legally, just as Congress wants, from taxes. It would be better to have no tax, have the investments made normally, and gather tax revenues from the income generated by those investments. The best example is that it's better to tax the fruit than to cut limbs off the tree, and the estate tax prevents the tree from even being planted. Anyone who owns a business, especially if family are employed in it, needs a succession and estate plan, even if that business does not today meet the threshold for paying the tax. Note that the lobbying is never for the elimination of the tax. Anyone who suggests the tax be eliminated is always demonized. Strangely, there would be greater tax collections if it disappeared from investment income that would be exposed to taxation.

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