Virginia's death tax is unfair

Northern Virginia Journal

Virginia is home to an entrepreneurial spirit, an eagerness to create family-owned businesses and create a better life for our loved ones and our communities.

But according to the Center for the Study of Taxation, 70 percent of family-owned businesses in the nation fail to survive to the second generation. Their research shows 87 percent fail to survive to the third generation, with women- and minority-owned businesses often hit the hardest.

State Sen. Thomas Norment, R-Williamsburg, and Delegates Bob Tata, R-Virginia Beach, and Bob McDonnell, R-Virginia Beach, have introduced common sense legislation to create a more fair tax system by calling for the end of Virginia's death tax.
It has bipartisan support from urban, suburban and rural legislators. A majority of the House and Senate Finance Committees have endorsed their approach by co-patroning the legislation.

The National Federation for Independent Businesses, which is part of a 50-member coalition encouraging an end to the death tax in Virginia, supports these efforts. We hope their colleagues hear this bipartisan appeal and support repeal of this unfair tax.
The family business is a cornerstone of our economy and our communities, from Danville to the Cumberland Gap, Fairfax to Virginia Beach. Small businesses, which are often family-run and make up more than 80 percent of all business enterprises in North America (according to the Virginia Family Business Forum at Virginia Commonwealth University), are passed on from generation to generation, providing continuity in commerce and family stability.

However, these businesses are threatened by the death tax, which taxes assets multiple times, forcing working-class and middle-class families to sell their equipment, lay off employees, and end operations of family-owned businesses.
The death tax - the most unfair tax on the books - is being repealed by the federal government and most every other state in the nation. It is an inequitable tax, which can be nearly 16 percent of all business assets, including real property, land, equipment and inventory, not just cash.

Most small businesses do not have idle money lying around waiting to pay this tax, but would rather use it to create jobs or pay for new equipment or technology.
When these family businesses have to sell their property to pay the death tax, it is not just relatives who suffer. It is destructive and unfair to employees who have spent their lives at the company, only to find out that the business is closing and they are out of work.

Even when a small business does not have to be sold to pay the death tax, the transfer of large amounts of cash often deals a crippling blow to the health of the business. The tax hampers the ability of a business to increase or even maintain the number of jobs it provides to Virginia citizens.
Virginia remains one of the few states in this great nation that continues to penalize the hard work and savings of its citizens just for existing within its boundaries.
Repealing the death tax will make Virginia more attractive for economic development. If the tax is not repealed, many of those that can will pack up and leave for neighboring states such as West Virginia, Tennessee or even Florida, which realize the death tax is wrong.

Of course, the tax man will continue to come after the heirs of those who are not wealthy enough to just pick up and move, leaving the working class and middle class to foot the bill.

The greatest part of America's wealth lies with family-owned small businesses. Failure to nurture them and help them grow will only lead to their extinction. Virginia should be attracting businesses and jobs: as long as the death tax is on the books, we will continue to threaten them.

While the tax is already being phased out at the federal level, why is Virginia still lagging behind?

A comprehensive study conducted last year by the bipartisan Joint Subcommittee to Study and Revise Virginia's Tax Code recommended repealing the tax. Co-chaired by Del. McDonnell, the legislative group heard from dozens of concerned business, professional and preservation groups, including the NFIB, at public hearings in the fall.

Virginia should follow suit with the more than 30 other states that conform to the federal law, and do not collect unfair death taxes from family farms and businesses.

There is a broad, bipartisan nationwide and statewide consensus that death taxes are unfair and harmful to economic growth. Virginia risks losing much more than the money it tries to generate with this unfair tax.

GORDON DIXON
Virginia State Director
National Federation
of Independent Business