Ninth District Congressman Adam Smith will introduce legislation today that will exempt family-owned businesses and farms from the estate tax.
“In my two short years in Congress, I’ve already witnessed family-owned businesses, the most prominent being Frank Russell Company of Tacoma, not being passed down to the next generation because of the onerous estate tax,” Smith said. “My legislation will exempt family-owned businesses and farms from the estate tax so that they can stay in the family and survive.”
More than 70 percent of all family businesses and farms do not survive through the second generation, and 87 percent do not make it through the third generation. Smith says that the high estate tax is at least partly to blame.
“Under current law, only the first $675,000 of a decedent’s estate is exempt from estate taxes. Beyond that, the value of the estate is taxed at rate ranging from 18 to 55 percent. This is extremely burdensome to family-owned businesses and farms, because while a business or farm may hold assets greater than $675,000, rare is the company or farm that has the kind of liquid cash necessary to pay the high tax bill,” Smith explained. “Therefore, too many family farms and businesses are sold before they can be passed to the next generation or must be dismantled, mortgaged, or liquidated in order to pay the tax bill. That estate tax policy is morally and economically wrong.”
Smith argues that estate tax relief should be focused on businesses and farms that are family-owned and stay in the family. The legislation requires that the business or farm stay in the family in order to be exempt from the estate tax.
“Not only do family-owned businesses account for about 60 percent of our gross domestic product, but they are a critical part of America’s culture and heritage,” Smith said. “All throughout my district, I see family-owned businesses — whether it’s the Redondo Community Store or Woodworth & Co. in Tacoma. I want to make sure those businesses are passed on to their children and grandchildren.”