WASHINGTON, D.C. — Rep. Warren Davidson (R-OH) introduced the Protect Family Farms and Businesses Act to halt the stealth death tax increase, which barring Congressional action could go into effect later this year.
On August 4, the Treasury Department released a proposed rule that would significantly increase the burden of the death tax. Specifically, the rule will hinder the ability of businesses to apply proper valuation discounts for estate, gift, and generation skipping taxes.
For the past 25 years, across Republican and Democratic administrations, valuation discounts have been applied to closely held family businesses that do not have a frequently-traded market. The new IRS rule undermines this settled law and effectively increases the death tax by 30 percent or more on family-owned businesses. One of the industries hardest hit by the estate tax is family owned farms that get passed on from generation to generation – an embodiment of the American Dream.
“The Constitution is very clear: ‘The Congress shall have the power to lay and collect taxes.’ The Obama Administration’s proposed tax increase violates what was clearly spelled out by Congress. This increase on the part of the executive branch violates the separation of powers within the federal government by unilaterally changing well-established tax law and practice and rejecting the clear will of Congress” Davidson said.
“Beyond violating the separation of powers, it’s simply bad policy which will remove billions of dollars invested into our economy. Family businesses are the bedrock of our economy. Instead of undermining this essential part of our economy in his lame duck presidency power grab, President Obama should be working with Congress to strengthen it.” he continued.
In the United States, family businesses generate over 50 percent of the Gross Domestic Product (GPD) and employ 62 percent of the workforce. Of those family businesses that survive, only 30 percent survive to the second generation, many of them citing financial difficulties in transition.
The bill has garnered support from free market and business groups alike: Americans for Tax Reform (ATR), Club for Growth, National Taxpayers Union (NTU), American Commitment, R Street, Campaign for Liberty, Association of Mature American Citizens (AMAC), Heating, Air-Conditioning & Refrigeration Distributors International (HARDI), National Association of Electrical Distributors (NAED), International Franchise Association and Family Business Coalition.
The Family Business Coalition, a coalition of trade associations supporting repeal of the estate tax, supports the Protect Family Farms and Businesses Act, and recently wrote in a letter to the Treasury Department, “The proposed regulations would force even more family business and farms to grapple with the complicated and costly estate tax. Moreover, Treasury’s action does not comport with the will of Congress.”
Original cosponsors include: Rep. Cynthia Lummis (R-WY), Rep. Gregg Harper (R-MS), Rep. Paul Gosar (R-AZ), Rep. Louie Gohmert (R-TX), Rep. Richard Hudson (R-NC), Rep. Ralph Abraham (R-LA), Rep. Dave Brat (R-VA), Rep. Chris Collins (R-NY), Rep. Rodney Davis (R-IL), Rep. Tim Huelskamp (R-KS), Rep. Trent Franks (R-AZ), Rep. Steve Chabot (R-OH), Rep. Andy Harris (R-MD), Rep. Tom Cole (R-OK), Rep. Doug LaMalfa (R-CA), Rep. Randy Weber (R-TX), Rep. Ted Yoho (R-FL), Rep. Pat Tiberi (R-OH) and Rep. Bill Flores (R-TX).