ARLINGTON, Va. — Food Marketing Institute here is supporting a compromise proposal on the estate tax that would reduce the rate from its current levels but would not eliminate it.
The tax — sometimes called the “death tax” by businesses — is levied on inherited wealth, and it is of concern to many business owners who seek to pass their companies on to the next generation. The inherited wealth is currently taxed at a rate of 45%, but the tax was scheduled to be eliminated altogether in 2010 and then be reinstated at a rate of 55% in 2011.
The compromise, as being prepared by Sen. Blanche Lincoln, D-Ark., and Sen. Jon Kyl, R-Ariz., would cut the tax to 35% next year.
“We definitely are in favor of full repeal, but we also see that people need some kind of certainty to make business decisions,” Jennifer Hatcher, group vice president of government relations, told SN last week.
According to reports, President Barack Obama has suggested making the 2009 estate tax rates permanent, effective next year, and Congress is also considering extending the current tax rate for a year, Hatcher said.
Often such tax-extension decisions are made at the very end of the year, she explained, so “it could be Christmas Eve or the day before Christmas Eve before the real discussion happens and anything can get accomplished.”
FMI has been actively involved with various other business groups in supporting a full repeal of the tax, and last week was one of a group of 46 business associations to sign a letter of support for a compromise that would make the 35% rate permanent.
“Family businesses cannot afford mixed messages from Congress on this critical issue, and a mere one-year extension of existing law will only add to the planning burdens on businesses that are already facing difficult economic times,” the letter stated.
The compromise they support also calls for increasing the threshold at which estates can begin to be taxed to $5 million per person, or $10 million per couple, as opposed to the current $3.5 million per-person exemption, and $7 million for couples.
“When you look at the tea leaves and the writing on the wall, the last thing we want to do is to go in the opposite direction, and be stuck with a 55% rate or even 45%, which is where we are right now,” Hatcher said, explaining FMI's support for a compromise. “Everyone wants full repeal, but people recognize that this current congressional leadership is just not going to go there, so in the short term we have to do the best we can do, and elect candidates who fully support full repeal, and get it done as soon as we can get it done.”
She said no other proposals seem to be forthcoming. “There's nothing that has any legs, and that's the problem.”
Former President George W. Bush in 2001 had put in place a graduated reduction in the estate tax that would have eliminated it next year.
Tom Wenning, executive vice president, National Grocers Association, also based here, said NGA also supports a compromise and was also signatory to the letter.
“This is a position that NGA has supported since early in the year,” he told SN. “It doesn't appear evident that there is enough support for outright appeal, with the budget the way it is, and important as the relief of repeal would be, our members have concerns about planning. Next year the repeal goes away, and then there's the uncertainty of what happens in 2011 that they need to plan for.”