As the old saying goes, you can count on two things in life: death and taxes. Since 1916, the federal government has combined the two, with sometimes devastating results.
The 'death tax' requires heirs to pay up to 55 percent of the value of an inherited estate in cash to the government within nine months of the loss of a loved one. For family owned businesses, such as mine and those of many other automobile dealers, the unfair death tax can mean a death sentence.
That is why the American International Automobile Dealers Association is urging Congress to pass legislation to eliminate it.
I know personally the threat this harmful tax can pose. I have been an automobile dealer for nearly 30 years. I'm proud to say that Burns-Kull Automotive Group represents 11 franchises at six locations in southern New Jersey. My four sons and two sons-in-law are active in company management, and ours is truly a family business.
But because of the fear that my children will be forced to sell the business to pay the death tax, I have had to divert significant time, energy and financial resources to estate planning. Those resources would be better spent hiring additional employees, buying new equipment and expanding my business.
Few assets to sell
It is fundamentally unfair that entrepreneurs who have taken the risk and responsibility to establish a small business and have worked hard to achieve the American dream are punished by this tax. And it is wrong that death should trigger such an enormous levy on a business that already has paid its due to the federal government.
Some of the wealthiest people in this country recently have argued that the death tax should stay. But, unlike those individuals, most dealership heirs do not have the option of selling off assets to pay the tax.
The average dealership easily could be valued in millions of dollars. But many dealerships fall into the 'asset rich, cash poor' category, some with as much as 90 percent of the dealership tied up in nonliquid assets, such as inventory and property. For those who inherit a dealership - which in all likelihood would be taxed at the maximum 55 percent rate - few assets of significant value can be sold without adversely affecting the dealership as a whole.
At the same time, paying the estate tax by selling off dealership assets is no guarantee that the business can continue to operate. You can't sell your parts inventory or your service operation to pay the tax and maintain your new-car business.
We must help our legislators understand those important points.
Repeal won't hurt charities
I also find it ironic that some critics think death tax repeal would be harmful to charitable giving. Some of the strongest supporters of local causes are small businesses such as automobile dealerships that contribute substantial time and money, not to avoid a tax but to give back to their communities. Those are the businesses that are threatened with extinction by the death tax.
Unfortunately, efforts by Congress in 1997 to provide some relief to family owned small businesses have had little effect. It is impossible to duplicate in tax law the complex family relationships that exist in the real world. That is why repeal is the only guarantee that we will avoid this onerous tax.
As Congress considers legislation addressing this issue, you will hear more from the American International Automobile Dealers Association about how you can get involved, as we leverage our grass-roots strength to put an end to the tax.
The American entrepreneurial spirit shown by dealers and other small business owners should be encouraged, not penalized.
I urge each of you to make it a personal priority to take action on this issue.
As chairman of AIADA, I pledge that we will not stop fighting until the death tax is killed.