The federal estate tax has been the subject of much debate in the United States for many years. Now, the federal government is facing pressure once again to repeal the tax for good—and the effort is generating a great deal of support.
A letter sent March 15 by the Family Business Coalition to Senate Majority Leader Mitch McConnell included the signatures of more than 100 organizations and business groups throughout the country. It calls for the Senate to take action to end the estate tax once and for all.
One of the key points made in the letter is that the House of Representatives already voted last April to repeal the tax, and that similar legislation to the House bill Sen. John Thune of South Dakota proposed has already received substantial support from lawmakers.
The state of the estate tax
Until 2012, estates paid a 35 percent tax if they were valued at more than $5 million. The estate tax, also commonly referred to as the “death tax,” was originally scheduled to revert to 2001 tax law in 2013, which would have meant a $1 million exemption and a 55 percent tax rate. However, the enactment of the American Taxpayer Relief Act of 2012 indexed the $5 million exemption cap for inflation and set tax rates to 40 percent instead.
One of the primary topics of discussion as the House worked through the issue was the burden that estate taxes place on family-run farms and businesses. The coalition argues in its letter that the estate tax is unfair—so much so that permanent repealing of the tax is the only option moving forward to adequately protect business owners.
The coalition is using an emotional argument here, stating that it’s in poor taste to force families who have recently lost a loved one to pay a tax on that person’s assets and savings. In many cases, the coalition claims, this tax is paid by selling off family assets, including business and farms, while in other cases, employees must be paid off and payrolls must be cut to ensure the business is able to continue operating.
Challenges to overcome
Despite the coalition’s urgings and Republican support, there appears to be some significant hurdles in getting the estate tax repealed. For one, repealing the tax is largely opposed by members of the Democratic minority in both houses of Congress. For another, President Barack Obama has already made it known that he would veto the bill if it reached his desk.
All that’s known for sure is that this will continue to be a hotly debated issue in Congress, and the pressure will likely continue to mount from organizations like the Family Business Coalition. Meet with an experienced U.S. Virgin Islands tax and estate planning attorney to learn more about how you can best protect your loved ones, your business and your assets.
Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC. BoltNagi is a highly respected and well-established business and tax planning law firm serving clients throughout the U.S. Virgin Islands.