WASHINGTON — Heating, Air-conditioning and Refrigeration Distributors International (HARDI) member Karen Madonia, chief financial officer of ILLCO Inc., joined two others representing small businesses and farms to testify before a House Ways and Means Committee hearing and urge Congress to pass the Death Tax Repeal Act of 2015 (H. R. 173).
Many of HARDI’s member companies, including ILLCO, are small or family-owned businesses that are greatly impacted by the estate and gift tax. When a family member dies and passes their assets on, the recipients are burdened with up to a 40 percent tax. For wholesalers who, by nature, must tie up much of their assets in inventory and accounts receivable, that tax can be crippling.
“I personally find it fundamentally wrong to place a tax on death,” said Madonia, who serves as co-chair of HARDI’s Government Relations Committee. “If a person is able to accumulate wealth through hard work, and if that person pays his fair share of taxes on his income as it is earned, I do not understand how the government can justify taking a significant portion of what he has left simply because he opted to save and reinvest rather than consume.”
Madonia also emphasized how these businesses already pay taxes while helping to grow the economy and provide jobs. “The United States has already benefited from that person’s success because he has employed people who pay taxes, bought buildings on which he has paid property taxes, and bought inventory and supplies from other companies, which can then afford to employ more people who pay taxes,” she said.
“In my opinion, it is a fundamentally flawed tax because it is, by definition, double taxation and it discourages entrepreneurship. It should be totally repealed.”
During the hearing, Rep. Erik Paulsen likened ILLCO’s situation to Johnstone Supply of Bloomington, Minnesota, which has had to become “highly leveraged.” Paulsen said, “They’ve been forced to spend about 20 percent of their net income on life insurance to fund their future estate obligations. This is money that could otherwise be reinvested in the company, reinvested in the business, in their community, and put toward growing the company, but that money is locked up.” He added, “The tax code is literally forcing them, essentially, to consider breaking up the business.”
The House Ways and Means Committee is expected to vote on the bill shortly.
Publication date: 3/23/2015