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Indirectly, small business owners (the major producers of most new jobs) are forced to hire fewer workers than they desire because of the high capital costs associated with death taxes. Likewise, with the death of a small business owner, many employees lose their jobs when relatives of the deceased owner are forced to liquidate the business to pay the death taxes. This occurrence is not rare: 70 percent of all businesses never make it past the first generation,3 while 87 percent do not make it to the third generation. For the fourth-generation transfer, less than 1 percent make it.4 One of the major reasons for this phenomenon appears to be the death tax. Indeed, a recent survey conducted by Prince & Associates demonstrated that 90 percent of successors to family-owned businesses that were forced to liquidate within three years of the original owner’s death, claim that paying death taxes was one of the major culprits of the company’s demise. One-third of small business owners today will have to sell or liquidate part of their business to pay estate taxes. Half of those who liquidate to pay death taxes will have to eliminate 30 or more jobs.5 Think the death tax is complicated? Consider this: The transfer tax provisions alone take up nearly 100 pages of the Internal Revenue Code and almost 300 pages of regulations issued by the IRS. Sources: 3. The Center for the Study of Taxation, “Federal Estate and Gift Taxes: Are They Worth the Cost,” p. 2. 4. National Federation of Independent Businesses (NFIB) 5. NFIB. |
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