The Las Vegas Review-Journal — the leading newspaper in a state with the unfortunate distinction of having the nation’s highest unemployment rate — today looks into the effects of planned tax hikes.
While Treasury Secretary Tim Geithner has tried to assure Americans that increasing taxes won’t hurt the economy, taxpaying families and businesses fear otherwise. And it looks like they’re right to be so concerned. Below is an excerpt from the editorial highlighting the impact of one tax hike (the estate – or so-called “death” – tax) on a family-owned business:
Up in Seattle there’s a high-tech business called GM Nameplate — no relation to General Motors. The CEO, Donald Root, bought controlling interest in this manufacturer of graphic overlays, touch screens, brand identity nameplates and other machined components from the founding families in 1977. Under his leadership, GM Nameplate added plants around the United States as well as in Singapore and China, and grew to $80 million in annual revenue.
But Don Root is now 70, and he has Parkinson’s disease. He’d like to turn over the business to his four sons, all of whom are involved in the company in some way.
Problem is, unless the elder Mr. Root takes things into his own hands and arranges to die by Dec. 31, the expiration of the Bush tax cuts will increase the federal death tax from today’s “zero” rate to 55 percent, effective Jan. 1. Should Don Root die and leave his company to his children in 2011 or 2012, they estimate they’ll owe $25 million in taxes on a business purchased and grown with after-tax income.
To get that amount of money, they’d almost certainly have to sell the company at a fire sale price.
Instead, according to Dick Patten, who runs the American Family Business Institute, lobbying against the death tax on behalf of America’s millions of owners of small businesses and family farms, the Root family is now in discussions with a buyer who’d like to purchase GM Nameplate right now, at a market price. The only catch? The buyer wants to move the entire company — with all its machine tools and all its jobs — to Indonesia.
Secretary Geithner suggests that tax increases are necessary to show the world that the U.S. is committed to reducing the deficit. But Washington might think about sending that message another way: cut your own unsustainable spending instead of taking even more from American families and businesses.
Tags: deficit, Las Vegas Review Journal, tax increase, taxes, Treasury Secretary Timothy Geithner
