Today’s Wall Street Journal (WSJ) included an article about the owner’s of the Pittsburgh Steelers and their looming estate tax problem. The Steeler’s have been owned by the Rooney family since 1933. The value of the franchise is now estimated to be over $700 million. The five sons of the original owner are now all in or approaching their 70’s. Together they control 80% of the business.
The problem is the 45% federal estate tax that will put them each on the hook with the IRS for tens of millions of dollars at their death. Since the value of their estate is locked up in their business, that simply might be more than they can afford. For instance, let’s assume each brother’s share of the business is worth $100 million. At death each of them would have to have $45 million in cash just to pay the estate tax! In other words, the business has to be sold just to generate the cash to pay the death tax.
This is absurd! Why do we punish those who are successful? Why do we allow the government to enforce taxes that separate families from their businesses? As noted in the WSJ’s article it’s not just the future generations of families that suffer; when families are forced to sell businesses the community often loses out too.
You might be thinking: “Oh, why should I care? I’ll never have a family business worth $700 million to worry about.” Well, maybe not. But, the estate tax threatens more people than you think. In fact, it threatens families all around us. Right here in Northwest Ohio many families have worked hard for generations to acquire land and equipment in order to devleop successful farming enterprises. The estate tax is especially threatening for these families. Such operations may be worth several million dollars when the value of land, livestock, buildings, and equipment are considered. Yet when the owner dies, the next generation often does not have liquid cash to pay the tax bill. As a result, all or part of the family business may be sold to pay the IRS. This doesn’t just happen with farms, but with small businesses everywhere around you.
I agree with Gary Harpst. In his book, Six Disciplines for Excellence, he states that he believes that small business owners truly are heroes. So why do we punish these entrepreneurs who have worked hard to build a business of substantial value? The government taxes us all of our lives and then if we are fortunate enough to have built wealth to pass on to future generations they tax that too! It’s time for politicians to develop solutions that work! The estate tax is a nightmare to the American Dream.
By the way: Take a look at another article in today’s WSJ to see where all this tax money goes. Answer: government bailouts!
For further reading on abolishing the estate tax: