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STATEMENT

of

Congressman Kurt Schrader, Ranking Member

House Committee on Small Business Subcommittee on Economic Growth, Tax and Capital Access

“Planning for the Death Tax: Can Small Businesses Survive?”

Thursday, May 31, 2012

For many, starting a successful business and seeing it grow is the American dream. After all, the goal of many small business owners is passing along the family business to a future generation to carry on the family trade. But for many who have spent their whole lives building up a business, continuing that legacy can be hampered by the estate tax.

For many family businesses, the estate tax is a major hurdle to overcome due to numerous technical complexities. Planning around such intricacies is expensive and time consuming due to navigating laws, valuing the business, and calculating the estate tax. Additionally, small business owners have the added anxiety and financial burdens of constantly updating their plans and attempting to ensure they have liquidity to pay any future estate tax that may be owed.

While the estate tax reforms enacted in 2001 allowed entrepreneurs to focus on growing their ventures, the reforms were only temporary. In 2010, we were able to give them some estate tax relief but for just two years. With existing law expiring at the end of the year, reduced exemption limits will take effect, subjecting many more businesses to the estate tax.

Providing relief for thousands of small firms is critical to continuing the recovery. However we must be cautious as to how that relief is provided due to the fiscal realities our nation currently faces. Repealing the estate tax would come at a cost of close to $1 trillion over a decade. On the other hand, extending current law will impact less than one hundred small business estates while still raising some revenue to reduce the deficit.

As our economy continues to recover we need to do everything we can to help small business job creators. But we can’t do it at the expense of our future generations. We need to have a real debate on tax reform and its long term effects on our economy and the national debt.

In today’s hearing we will assess the implications of the estate tax on small firms and examine what the future of the law holds for them. Some are calling for complete repeal of the estate tax while others have suggested that Congress freeze the estate tax provisions in their current form. Nevertheless, one thing is clear – we need to find a permanent solution.

Small businesses face enough hurdles to succeed even without the estate tax as an obstacle. Protecting the family business so it can flourish into the next generation will also help the communities who depend on these firms for jobs and services. By crafting an estate tax that works for small businesses, entrepreneurs can focus on growing their ventures and creating the jobs.

I would like to take this opportunity to thank all the witnesses for being here and I look forward to your testimony.

Thank you and I yield back.