Last week’s Congressional vote to eliminate the so-called death tax has the Independent Insurance Agents of America very pleased, though they are mindful it is the first step down the long road to enactment.
IIAA supports the measure because it will help solidify the future of small businesses instead of possibly forcing families to close business doors following the death of the owner. The House of Representatives voted 270-136 to approve the Death Tax Elimination Act, proposing to phase out estate and gift taxes over the next decade. Under the legislation, current estate and gift tax rates would be reduced by five percent each year until they are completely eliminated.
“The House’s approval of H.R. 8 is great news for thousands of small businesses, like many IIAA member agencies, across the country that are family-owned enterprises,” said Robert A. Rusbuldt, IIAA executive vice president.
“All too often, surviving family members have no choice but to sell the family business after the passing of an owner in order to pay the hefty estate tax bill. H.R. 8 will reverse this alarming trend and simultaneously aid the perpetuation of independent insurance agencies and other family-owned businesses from one generation to another.”
The death tax is levied on monetary assets and property owned by a person at death. The current $675,000 exemption will rise to $1 million by 2006. Even with this exemption, estate taxes still suck up between 37 and 55 percent of the net worth of a family business when an owner dies.
“It’s very easy to understand why nearly a third of family-owned businesses fold following the death of a founding owner,” said Rosbuldt. “These facts provide 100 percent support for the House’s vote to end the unfair death tax.”
Before the repeal proposal can go to President Clinton, it first must be approved by the Senate, which has not acted on any tax-cut legislation in this session of Congress. Meanwhile, President Clinton, in a letter to House Speaker Dennis Hastert, said he would work with Congress to develop a compromise proposal, although he promised a veto of H.R. 8 on the grounds that it is fiscally irresponsible.
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