WASHINGTON ? Since 1916, the estate tax has been a thorn in the side of many small businesses. At times, the estate tax has skyrocketed to 77 percent. Today, it?s 35 percent once an individual?s estate reaches $5 million.
But that rate is due to expire at the end of 2012, which has many small businesses scrambling to figure out how best to plan their estates, FoxNews.com reports. ?The business is your savings, your legacy for your kids,? said Dan Danner, president and CEO of the National Federation of Independent Businesses. ?In most cases, it?s everything you own.?
Heirs often have to sell a family-owned business to pay the estate tax. ?In a lot of cases, it means the business gets shut down to be able to pay the estate tax, which we think is a terrible thing,? said Danner.
Some economists, like David Logan with the Tax Foundation, say many small-business owners fear the estate tax. ?There's strong evidence to suggest that higher estate taxes lose jobs ? just to put it bluntly,? he said.
With the temporary fix pulled together in the waning days of 2010 set to expire next year, small business owners have no way of predicting what the new rate will be ? and can?t prepare their estates to cover the cost.
Logan strongly recommends permanently fixing the estate tax in order to allow small businesses to plan to pass along their companies to family members. Such certainly will spur companies to invest in their future. ?These are the things we need to spur economic growth,? he said.
NACS has a fact sheet on the estate tax that outlines why Congress needs to devise a permanent fix.
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