The estate tax ceased to exist at the end of 2009, but it is scheduled to return in 2011 at the old rate of 55% on everything after the first $1 million, unless Congress takes action, and action is the last thing Congress is taking at the moment. It has coasted to a full stop for the August recess, which will be followed by a virtual stop prior to the November elections.
Much hangs in the balance that has the potential to impact businesses in the trucking industry, including the much-debated estate tax. Most recently, Sen. Jim DeMint (R-SC) introduced a measure that forced a vote on repealing the estate tax, but the repeal was rejected by a vote of 59–39. Then Senators Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) offered a compromise that would create a 35% estate tax rate with a $5 million exemption. Senate Majority Leader Harry Reid (D-NV) has publicly indicated he favors a 45% tax and $3.5 million exemption. Whether or not the final outcome will matter to your privately-held fleet, your manufacturing company or your service business depends upon whom you trust and in what you believe.
In a July 22 article on CNN money.com, for example, Robert Rubin, who served as Treasury Secretary during the Clinton administration and more recently as chairman of Citigroup, noted that “Our country is on an unsustainable fiscal path. [Revenue from an estate tax can] fund deficit reduction, additional public investment, or added assistance to those affected by the economic crisis. Moreover, our nation has always held itself out as a meritocracy and a land of opportunity, and an estate tax helps avoid accumulation of inherited economic and political power that is antithetical to this historical vision of our society.”
Jim Amaral, owner of Maine’s Borealis Breads, said in an Aug. 13 edition of the Baxter Bulletin that, “Most small-business owners’ annual incomes are too little to accumulate enough wealth to pay the estate tax. In 2009, individuals earning less than $82,000 declared 95% of all small-business income, according to the Congressional Research Service.”
Eugene Sukup, 81, founder and owner of Sukup Manufacturing Co., doesn’t buy it, however, according to a July article in Globegazette.com “It will put the company out of business,” he said. “That means the government is going to end up with about 60% of the company. They can’t afford to pay that when I pass away.”
If the company goes, so do 500 jobs. “You take a little town like Sheffield that has 1,000 people in it and then you’ve got 500 people looking for work?” Sukup said. “It’s going to be a terrible blow if the company would fold.” He noted that it is also unfair because his two sons are really the ones who have expanded the company in recent years. “I’ve got two sons in the business that [sic] have grown the company 500% in the last 10 years,” he said.
According to tax advisors, there are things private business owners can do to help protect their companies after they are gone, estate tax or no. It may be time to begin exploring those “things.”