Brace yourselves, owners: Hillary Clinton‘s plans to raise the estate tax could be a huge hit to small businesses and farmers.
The Democratic presidential candidate has proposed an increase to a top rate of 65 percent, a number that small business owners and farmers fear could put them out of business, according to CNBC.
“Clinton wants to cut the exemption for the ‘death tax’ from $5 million today to $3.5 million, with a 45 percent tax on amounts between that and $10 million. She’d set a 50 percent rate on assets over $10 million, 55 percent over $50 million and 65 percent on amounts exceeding $500 million for an individual, $1 billion for married couples,” CNBC reported.
The estate tax increase would generate $75 billion over the next decade, according to the Committee for a Responsible Federal Budget. There are approximately 2.5 million small businesses and 90,000 farms worth more than $5 million in the United States, according to NFIB, so this tax increase would have a great impact on many businesses and farms.
Tax lawyer David Hryck, a partner at Reed Smith in New York City, believes Clinton’s tax increase “is only going to affect the super-rich … a very small percentage of our population.” But opponents of the proposal disagree, arguing “farmers and business owners incur heavy costs preparing for estate taxes with strategies like buying large life insurance policies or setting up trusts,” according to CNBC.
“Small businesses and farms are illiquid; they lack access to a public market to readily convert ownership into liquid capital, especially fractional ownership,” explained asset-valuation expert Dan Doran, founder of Quantive Business Valuations in McLean, Virginia.
“To levy a 65 percent tax means that the only way to pay it is to liquidate the asset—the entire asset.”
Ultimately, small business owners and farmers will have to do a lot of costly research with lawyers and accountants to try and figure out ways to protect their businesses after their deaths.
*Note: This news coverage does not equate to an endorsement of any candidate by NFIB.
Disclaimer: Articles featured on Oregon Report are the creation, responsibility and opinion of the authoring individual or organization which is featured at the top of every article.