The Need for Death Tax Reform NFIB considers death tax reform to be crucial to the continued survival of the small American family business. Current death tax rates cripple a small business passed on to heirs, and often force them to liquidate a business they have worked in their whole lives. Because all assets are included in determining death taxes, such as the decedent's home and other personal assets, many productive businesses worth far less than the current exemption level become victims of the death tax. Because so many small businesses operate on cash flow, often with extremely small or negative profit margins, current law allowing small businesses to spread their tax liability over fourteen years does not provide adequate relief. The 1995 White House Conference on Small Business voted death taxes as the fourth greatest problem to small business needing reform.
Small businesses are also particularly vulnerable to the intricacies of death tax law.
Although some owners can ensure a successful transfer to heirs by purchasing life insurance and through other methods, many cannot afford this kind of planning or do not have the time to meet with estate planners because most of their energies are directed toward keeping the business running. Unfortunately, unlike a publicly traded corporation, which continues operation regardless of how shareholders plan for their death, a closely held business, unless there has been careful planning, is usually devastated by the death of an owner. Impact on Small Business Current death tax rates range from 37 to 55 percent. Especially in later years of the business owner's life, large capital expenditures for long term growth make little sense when the family will soon be forced to sell or liquidate the business. This disincentive to growth means lost opportunities, lower productivity, and lost jobs.