Restaurant industry officials voiced support for a proposal introduced this week in the U.S. Senate that would permanently reform the federal estate, or "death," tax.
The measure — introduced by Sens. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz. — would establish the estate tax at a permanent rate of 35 percent with a $5 million exemption amount phased in over the next decade and indexed for inflation.
If Congress does not act on the measure before the end of the year, the tax reverts to an earlier form on Jan. 1, 2011, which means estates of $1 million or more would be subject to full taxation. The rate of taxation can climb as high as 55 percent.
The heirs of a deceased individual who inherit a family business, such as a restaurant, are required to pay an estate tax on all assets such as land, buildings and equipment.
The restaurant industry has been urging Congress to the repeal the tax permanently for many years.
“The National Restaurant Association has long fought for a permanent repeal of the death tax,” said Mike Donohue, vice president of Media Relations for the National Restaurant Association in Washington. “Now, with the threat of Congressional inaction, entrepreneurs who inherit family businesses will be required to pay up to 55 percent in federal estate taxes starting January 1 of next year.
“Family businesses need permanent reform of this destructive tax now, and the clock is ticking. The Lincoln-Kyl proposal is an outstanding effort to enact a sensible compromise on this important issue,” Donohue added.
David French, vice president government relations for the International Franchise Association in Washington, said: “It would be unconscionable for Congress to allow pre-estate reform rates to go back into effect. In an economy where economic uncertainty and government policy are slowing job creation and growth, it would be a fatal mistake to leave these crushing estate rates in place.”
And while French acknowledged the IFA “would love to see complete repeal of the estate tax, we can’t hold our breath if there are not enough votes in Congress to make it happen.
“This is a constructive solution to the immediate problem.”
Congress had passed a tax reform bill in 2001 to phase out the estate tax gradually until it had been fully eliminated. However, the Senate insisted that following the decade-long phase-out the tax return to pre-2001 levels at the end of 2010.
Late last year, Rep. Early Pomeroy, D-N.D., introduced a measure in the U.S. House of Representatives favored by President Obama that would permanently establish the estate tax rate at 45 percent with a $3.5 million exemption amount.
Restaurants are not the only businesses impacted by the tax. The National Cattlemen’s Beef Association also urged Congress to take quick action on estate tax reform.
“If Congress does nothing, they’re in essence handing down a death sentence to family-owned farming and ranching operations,” said NCBA president Steve Foglesong. “Taxing family farmers and ranchers out of business will have serious impacts on all Americans, not just in our rural communities.”
Contact Paul Frumkin at [email protected].