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Dear Senator Bill Frist and Senator Harry Reid:
As you know, earlier this week the House of Representatives voted to permanently abolish the Death Tax. As the legislation moves to the Senate the undersigned organizations and the millions of taxpayers, small business owners, and seniors who make up our membership write to express our vehement opposition to proposed death tax "compromises" – including the undisclosed Schumer compromise.
A recent news article claimed the Schumer proposal will seek to "exempt" family-owned businesses from the death tax. Similar efforts have been tried in the past and they have all failed. A "carve-out" proposal that helps fewer than one in twenty small businesses, creates even more litigation than the current death tax and resurrects the most complex provision of estate tax law is not reform - it's a sham.
• According to the NFIB less than 3% of family businesses qualified for relief under the limited family business exemption in place until 2004. An analysis by estate law firm Sirote & Permutt of Senator Blanche Lincoln's proposal to expand the exemption beyond its 1.3 million dollar cap during the 108th Congress found that out of 200 clients who owned family businesses only eight would have qualified.
• Sirote & Permutt estimated that the average family business would have to spend $10,000 to $15,000 in legal and accounting fees to find out if they qualify for an exemption.
• Family business carve-outs rely on complex and arbitrary standards ripe for litigation. One provision of Senator Lincoln's carve-out proposal would have taxed "excess" capital beyond what is required for "reasonably anticipated business needs" - and would have given the IRS the power to decide what capital was "excess."
• Carve-out provisions drastically restrict the business activities of family firms that hope to qualify. Under Lincoln's old plan family businesses that raised money in the capital markets to hire more workers and raise wages were banned from qualifying.
The "supposed" family-business exemption approach is fatally flawed. Without creating a host of complex and punitive restrictions defining who is and who is not a family business, an exemption law is too full of loopholes to function. However, the restrictions that close those tax loopholes close the door on real relief.
Our organizations oppose family business carve-outs and any other placebo legislation. The House of Representatives sent a strong message this week to the Senate that permanent repeal is the only real solution.
Given his long opposition to Death Tax Repeal DSCC Chairman Schumer will not agree to real Death Tax reform. In fact, we believe he wants a watered-down “compromise” to protect vulnerable liberal obstructionists and keep the death tax alive for another 50 years.
We urge you to reject this false compromise and work to repeal the death tax permanently.
Dick Patten, Executive Director, American Family Business Institute
Grover Norquist, President, Americans for Tax Reform
Daniel Clifton, Executive Director, American Shareholders Association
Karen Kerrigan, Chairman, Small Business and Entrepreneurial Counsel
Matt Kibbe, President, Freedom Works
Pat Toomey, President, Club for Growth
Marianne McInerney, President, American International Automobile Dealers Association
Lew Uhler, President, National Taxpayer Limitation Committee
Tom Schatz, President, Council for Citizens Against Government Waste
Richard Lessner, Executive Director, American Conservative Union
Steve Moore, President, Free Enterprise Fund
Charlie Jarvis, President, USA Next
Jim Martin, President, 60 Plus
John Berthoud, President, National Taxpayers Union
Gary Palmer, President, American Alabama Policy Institute
Patricia Callahan, President, American Association of Small Property Owners
Andrew Quinlan, President, Center for Freedom and Prosperity
Joe Seehusen, President, Libertarian Party
Kerri Houston, Vice President of Policy, Frontiers of Freedom
CC: Members of the United States Senate