Legislation to repeal the estate tax has been introduced in both the House and the Senate, a move applauded by multiple representatives and small businesses during a press conference. Among the featured speakers was Karen Madonia, CFO, Illco Inc., Aurora, Ill., and co-chair of HARDI’s government and trade relations committee. The repeal of the estate tax has been one of the top agenda items for the committee, and Madonia spoke at the Capitol Hill press conference to announce and applaud this legislative move. The legislation, introduced by Sen. John Thune, R-S.D., and Rep. Kevin Brady, R-Texas, would fully repeal the estate tax.
“We don’t believe that death ought to be a taxable event,” said Thune. “If you look at what families go through in the grieving process, it’s really ironic that we penalize and punish them through the tax code after they’ve worked very hard over a lifetime to build up some equity and some assets that they hope to be able to pass on to the next generation.”
According to Thune, currently 70 percent of small businesses fail in the second generation and 90 percent fail in the third generation. He cited a Congressional Budget Office (CBO) report released in 2009 that stated one-third of family businesses that owed the estate tax, also known as the death tax, actually owed more in taxes than they had in liquid assets.
“That kind of tells you what families are up against when they get hit with this tax,” said Thune. “Imposing a tax rate as high as 40 percent is not just bad for our economy, but it is unfair to those families who have saved and built literally for generations and at the same time they’re creating jobs.”
Madonia opened her statement describing the modest beginnings her father had in starting a business in the HVACR industry in 1973. As a next generation wholesaler, she went on to tell legislators that the business now has eight branches in three states, with 92 employees and making almost $40 million in revenue.
“To pay an estate tax bill, my family could have to sell parts of the company. That would mean shutting down branches, laying off workers, or liquidating inventory just to be able to pay a tax bill that only occurred because an owner died,” she explained. “Even worse, our company might have to be sold outright.”
Madonia was one of two business owners participating in the press conference which included sponsors Thune and Brady, Senate Minority Leader Mitch McConnell, R-Ky., ranking member of the Senate Finance Committee Orrin Hatch, R-Utah, Rep. Mike McIntyre, D-N.C., Rep. Kristi Noem, R-S.D., and Grover Norquist, president of Americans for Tax Reform.
As she expressed her thanks to Thune and Brady for continuing to push for the full repeal of the estate tax, Madonia noted she thought it was fundamentally wrong to place a tax on death.
“I applaud the efforts of those here today and those working behind the scenes. What the authors and supporters of this bill clearly understand, and what I hope that members of both houses can embrace, is that the estate tax presents a real problem for family owned companies,” she said.
Madonia ended her remarks supporting the preservation of the small businesses of today who she described as the job creators of tomorrow.
A common sentiment throughout the press conference touted the death tax as unfair to the small family business as well as destructive to job creation and economic growth.
“We don’t think that this tax is fair. We think you ought to give small business people, those who work hard to build up that over a lifetime, the opportunity to pass that on to the next generation,” said Thune. “And so getting rid of the death tax once and for all would enable us to do that.”
The repeal of the estate tax remains on HARDI’s governmental affairs list.
“The estate tax continues to place an undue burden on businesses in our industry and small businesses everywhere,” said Talbot Gee, executive vice president and COO of HARDI. “A significant portion of our members are family businesses, and they generate an estimated 80 percent of the dollar value of HVACR products sold through distribution. Repealing the estate tax to help preserve these businesses remains a top priority for our organization, and we are grateful that HARDI has such an able spokesperson on this issue, like Madonia.”