LEXIS-NEXIS® Congressional Universe-Document

Search Terms: estate w/10 tax w/10 repeal, House or Senate or Joint

Document 43 of 54.

MAY 13, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 1986 words

HEADLINE: PREPARED STATEMENT OF
ARLENE KAPLAN
BEFORE THE HOUSE SMALL BUSINESS COMMITTEE
TAX, FINANCE AND EXPORTS SUBCOMMITTEE
AND RURAL ENTERPRISE, BUSINESS OPPORTUNITIES
AND SPECIAL SMALL BUSINESS PROBLEMS SUBCOMMITTEE

BODY:

Good morning, Mr. Chairman and members of the Committee. Thank you for the opportunity to appear before you today to discuss the issue of Estate Taxes and its impact on women owned businesses.
My name is Arlene Kaplan and I am the CEO and Founder of: Heart to Home Inc., Heartland on the Bay and WORKPLACE CPR. in New York on Long Island.
I am on the Board of Directors of the National Association of Women Business Owners.
I am not a tax expert, unless I qualify because I pay lots of taxes- personal income tax, corporate income tax and employment taxes.
I am here before you to ask if I've already paid tax on everything I own while I'm alive, why do I have to pay taxes on these same things when I'm dead? I do not mean to be flip since the topic is very serious, I'm just expressing my frustration with a tax situation that seems to have gone awry.
The Estate or "Death" (as it has become known) Tax was initiated in 1916 to fund World War 1. It was maintained in the tax code through the 20's and 30's to help prevent the concentration of wealth. Since that time, anti-trust laws have eliminated those concerns, but to date, the Estate Tax remains intact.
I'd like to go back before World War I to before the turn of the century so that you know a little better who I am. And I'm sure there are millions more like me. three of four of my grandparents came to America before 1900 and one came just after.
They all came from the area known as the Pale, the area between Russia an Poland.
Their children were born here and all of them got at least a high school education. Two of the children even went to college.Coalition groups have been advocating estate tax reform for several years. They have described the estate transfer tax as a penalty tax on small, family-owned businesses, costing the government almost as much to administer as the revenues it generates. It costs approximately 65 cents for every $1.00 of revenue collected for the collection and compliance of the estate tax. While wealthy taxpayers have the ability to hire tax attorneys to avoid the estate tax, many small businesses must be sold by family heirs to raise funds for the estate tax. Business assets are liquidated to pay taxes rather than passed on to children who in many cases would continue to operate the business.
Small family-owned businesses account for over half of the U.S. gross national product and a majority of wages paid. Many heirs of these businesses are subjected to estate tax rates of 55% and higher, and must use earnings of the business or liquidation of the business to cover the tax bill.
Women business owners account for over 8.5 million businesses in the United States generating over 3.1 Trillion dollars in revenue. We would like to be able to pass our business on to our children and/or our grandchildren and not burden them with having to raise large amounts of capital to hold onto our life's work.
In 1995 White House Conference on Small Business listed repeal of the estate tax as an issue of serious concern to small business owners nationwide. Operating as an excise tax on accumulated assets, which have already been taxed once as income, the estate tax is viewed by many as just another government way of confiscating wealth and redistributing it. It has been described as a massive transfer of wealth from families direct to the U.S. Treasury, and as such, encouraging citizens to spend and consume rather than save and invest.
It's been said that only with the U.S. government are you given a "certificate at birth, a license at marriage and a bill at death."
Many Americans work hard all of their life building a family business paying their fair share of taxes along the way-to save and invest for retirement and for their children and grandchildren's future. But when they die, the federal government can take more than half of all their assets and savings because of the estate tax. This is simply unfair.
When my grandparents died there was some small amount of.money left to the children and grandchildren. The total probably didn't amount to $10,000 and that was from both sides of the family. When my father died he had already distributed his money to his children and grandchildren. The total he gave out was under $100,000 Again nothing of interest to the IRS.
Now we fast forward. A number of years ago I was widowed. I eventually remarried and then came my awakening. I went to do a prenuptial. This meant a lawyer. Now I have nothing against lawyers my companies employs lots of them,, corporate lawyer, a tax attorney, an employment attorney, a regulatory attorney, a real estate attorney and now a death attorney. My feeling is that when I am on my death bed a lawyer will be standing there telling me that I can't die until I finish my government death forms and pay my taxes.
As a result of meeting with an attorney for the pre-nuptial, I told my children the best thing I could do for them was to make sure I left them my house with a big mortgage and outstanding credit card balances.
If they didn't want to be burdened I needed to spend all my money and make sure my companies had relatively little value. Because you see I made it. I am successful. When I die I will leave an estate that is probably going to be more money than my father may have made in his lifetime. After I grew up I understood that as a kid we were poor. We lived in a five story walk-up tenement in upper Manhattan.
I have been in the health care business over forty years. I believe I do good work helping the people in my community. I pay my taxes both personal and corporately, maybe not with a smile but certainly I understand that the country that gave my grandparents and the succeeding generations a chance, needs to tax its citizens to continue to be this country.
My older son is my partner and I really have a hard time with the thought that he might have to sell my life work achievement in order to pay the estate taxes that will be due.More than 70% of family business and farms do not survive through the second generation. 87% do not make it through the third generation. With rates between 37% and 55%, the estate tax punishes life-long habits of savings, discourages entrepreneurship and punishes families.
The generation-skipping tax or GST is a tax on assets that you pass on to your grandchildren at an effective 80% rate, once you have utilized your GST exemption.

Within the definition that the family controls the business either by stock or through management, 91% of all businesses in America are family owned.
- Death should not be a taxable event! (You must pay the tax nine months after the date of death in cash.)
- Families should not be punished for saving (the more they save...the more tax is paid at death.)
- Taxes should not have to be paid on assets that have been taxed as many as two, three or more times before (e.g., income, capital gains, payroll, etc.)
- A death tax rate of 55% cannot be justified when the highest income tax rate is 39.6%; nor can a tax of 80% on gifts to grandchildren.
- The estate tax produces less that 1% of the revenue and it could be phased out over time with a reduction in the rate of tax each year.
Woman statistically out live men and therefore they are the one's that have to pay the estate tax.
Public companies don't die so they do not pay the tax. Only families pay the estate tax. Public companies have grown by acquiring the smaller family businesses that have had to be sold to pay the 55% death tax.
Eliminating the estate tax will not cost the U.S. Treasury money. Personally I could very easily do without another STEALTH bomber or Aircraft Carrier. The tax makes up less than 1 percent of all annual federal revenues. The individual income tax alone raised more revenue in 1998 than the tax has raised during the entire 20th century.89% of all taxable estates filed in 1995 were $2.5 million or less in size.
54% of all estate taxes paid in 1995 came from net taxable estates of $5 million or less.
Japan has an inheritance tax of 70%, but after credits and exemption it is an effective tax rate of 30.3%. The United States has the highest rate of estate tax in the world at the rate of 55% and an effective rate of 44%.
In a study done by The Tax Foundation it was found that to match the disincentive effect of the estate tax, income taxes would have to be raised up to roughly 70% or almost twice the top marginal income tax rate of 39.6%
NAWBO's position is to repeal the Estate Tax in its entirety. The so called death tax creates a disincentive to expand a business, create jobs, and often, literally taxes the family business right out of the family. Many business owners would add more jobs over the coming years if death taxes were eliminated. We know that right now this is Utopian position therefore we are proposing:
Congress should amend the estate and gift-tax code to:
1 Increase the exemption to $760,000 and index it thereafter to allow a family-owned business to be passed on to family members free of estate and gift taxes. Surely we can get to the $1,000,000.00 exemption level before 2006.
2 Tax trusts on their taxable income at the same rate brackets as for a single individual
3 Make retirement plan assets of up to $1.5 million dollars per person exempt from estate tax since all such amounts are also subject to income tax: and reinstate the $ I million exemption per descendent for generation skipping tax purposes.
Fifteen states have repealed inheritance taxes. Four states (Connecticut, Iowa, Louisiana and New York) most recently in 1997 In a study done by The Center for the Study of Taxation. it was determined that if gift, estate and generation- skipping taxes had been repealed in 1971, by the year 1991 there would have been 262,000 more jobs, $46.3 billion more in GDP and $398.6 billion more in capital.
90 trade and industry organizations have formed the Family Business Estate Tax Coalition, whose sole purpose is to repeal the "Death Tax".
"The Grandchildren's Tax"
Did you know that if you want to give a gift to your grandchildren you could pay an 80% tax to do so! What if your grandchild has worked hard to get through college and needs a car to start his or her new job, and you want to help him purchase that car. You can only contribute $10,000 toward the purchase of that car and not have gifted him or her anything else that year, or else you may pay 80% more for the tax. You can only gift a maximum of $10,000 a year, in assets, cash or services to your grandchildren without incurring the grandchildren's tax. Is it fair that you spend years saving your assets, paying payroll, income and capital gains tax, and now when a family member needs help, you cannot do so without paying an additional tax on assets you have already paid taxes on before; at least twice before? This tax is designed to discourage you from passing on assets to your grandchildren, skipping the level of tax that would be paid by your children. The grandchildren's tax, referred to in the tax code as generation skipping tax, makes sure that assets get taxed again and again at each generation. How does that encourage people to save? The tax code provides for a $1 million lifetime exemption, but you need to plan your estate properly to take full advantage of this. Shouldn't a tax law encourage families to save assets and help each other? The generation skipping tax creates an incentive for families to spend their earnings or to give to strangers rather than encourage them to help their own family members.
I appreciate the Committee considering these issues and the suggestions I have offered. Please know that the leadership of NAWBO and its members look forward to hearing from you and working with you. NAWBO will assist your efforts in any way that we can. Thank you very much for the time you have given me.
END

LOAD-DATE: May 14, 1999

Document 43 of 54.


Search Terms: estate w/10 tax w/10 repeal, House or Senate or Joint
To narrow your search, please enter a word or phrase: