AGC POSITION: AGC supports federal legislation to eliminate the death tax on family-owned and employee-owned businesses and their employees. Death taxes on family-owned businesses are the most confiscatory of all taxes. They are anti-family, anti-business, and anti-jobs.

HOW IT AFFECTS YOUR BUSINESS: The federal death tax is one of the most onerous obstacles to family business continuity and growth. When the owner of a family business dies, his or her estate is subject to federal and state death taxes. The total value of the death includes the value of the family business along with other assets such as homes, cash, stocks, and bonds. At a minimum, an estate over $650,000 (gradually increased to $1 million by 2006) will be subject to a federal death tax rate of 37% and an estate over $3 million will be taxed at an astronomical federal rate of 55%. This tax is on top of not only the state death tax but also the income, business, and capital gains taxes that have been paid over an individual's lifetime.

Business continuity - the passing of years of hard work to the next generation - is a great concern to family-owned businesses. Unfortunately, the death tax destroys businesses by limiting capital available for business formation, growth, and preservation. More than 70% of family businesses do not succeed to the second generation and 87% do not survive to the third generation. Furthermore, it is estimated that 90% of family businesses that fail shortly after the death of the founder fail because of the death tax burden placed on family members. It is discouraging to learn that only 26% of family business owners surveyed said they had the liquid assets to pay death taxes if their heirs were to inherit the business today.

Those family-owned businesses that do survive have spent thousands, sometimes millions, of dollars on estate planning to minimize their tax burden. Many businesses forego new equipment and other capital accumulation plans to avoid death taxes. Finally, many jobs are lost due to the federal death tax. On average, 46 workers lose their jobs every time a family-owned business closes.

OPPOSITION: Opponents of death tax relief say that it is a tax cut for the wealthy.

AGC RESPONSE: Even the smallest contractor has lifetime capital assets, property and real estate over $650,000. The burden of the federal death tax falls squarely on family-owned construction companies, destroying jobs and devastating the communities that rely on these businesses.

A recent study compiled by the Congressional Joint Economic Committee shows:

• The existence of the death tax has reduced the stock of capital in the economy by approximately $497 billion, or 3.2%;
• The death tax is a leading cause of dissolution for family-run businesses; and,
• The death tax raises very little, if any net revenue for the federal government.