This is an explanation of how the estate "death" tax affects small/family businesses, as I understand it. I don't know if it's 100% accurate, but I know that it's fairly close and the issues are accurate. Am I biased? Yes, obviously...but who will stand up? The following is accurate to the best of my knowledge...I have only argued my case, I have not attempted to "spin."
The average worth of a family business is 17mil, several millions less for Wisconsin. With an exemption on the first 1.5mil, that leaves 15.5 of taxable assets (ie company stock). So with a 55%(!) tax rate on the transfer of assets, that leaves $8.475mil worth of the 17mil company. In addition, Wisconsin also takes an additional hefty bite out of the estate, with only $675,000 exempt. Wisconsin estate tax is due 9 months after death or when the federal tax is due, whichever comes first, leaving little or no time to raise money to pay this insanely huge, multimillion-dollar tax. So, the family is forced to sell the business just to pay off the estate taxes. They get 8,475,000 minus the WI tax, but they lose the business. If the company stayed in the family's hands however, then the family would see little profit as all money would be tied up in the business. This hurts mainly people who reinvest in their family businesses and therefore don't have 8.5mil in cash on hand (public companies generally pay dividends, while many families typically profit only from their salary and instead give dividends back to the company, called "patient capital"). It trashes family businesses, who are the backbone of the US economy, and causes major internal organizational shifts when the businesses are sold which can harm employees (in other words, ALL Americans). In addition, public perception is that family businesses have higher quality and much less corruption. From what I know, I have to agree with both sentiments. So selling the company, in my opinion, hurts the integrity, quality, and committment to customers and employees that the founding family had.
This isn't a huge concern of fatcats who own large portions of public companies...Bill Gates for example, who opposes the repeal (and if he loses half of his money, he's still one of the richest men in the world). Those people lose just money, and can usually afford to pay it without harming the business...the business shares just go back out into the pool if they are sold. Huge public companies can also afford to buy the stock back usually, so that controlling interests are not lost. In the case of private companies though, the stock is held by one or just a few people, so that the business will almost always need to be sold upon their death.
Liberal or not, is it really fair to punish ONLY point-zero-whatever percent of the population...a few fatcats, but mostly semi-successful citizens, farm-owners, and entreprenuers? Nevermind the effect on employees of those companies...if I recall correctly, about 50% of the workforce. Democrats argue it only affects the "richest of the rich," and that they don't need a tax cut. When considering family and closely held small businesses however, this blanket statement is ignorant and shortsighted; it just doesn't hold water. The so-called "richest of the rich" may have interests in a large and expensive asset, a business, but they may only be living on $80,000/year salary. This is not a Paris Hilton, it's the upper end of people who are, by all other measures, just middle class people. And how many middle class people can get together 8 million dollars in 9 months?
So my fellow Democrats, you can say that the tax is fair, but it's just discrimination against the American dream.
