April 16, 2001

Association-backed legislation would phase out the estate tax over 10 years

In a significant victory for the National Restaurant Association, the House of Representatives April 4 passed a repeal of the estate tax—the third portion of President Bush’s tax package—by a vote of 274-154. The Association designated final passage of the bill as a “key vote” for its members.

“This issue is a priority of ours, as family-owned businesses are the hallmark of our industry,” says Association Chairman Denise Marie Fugo (Sammy’s in Cleveland, Ohio). “Restaurants, like other small businesses, are made from blood, sweat and tears, and this unfair tax threatens each parent or grandparent who has the dream of having a family member continue to own, operate and grow the business that was built from the ground up.”

The Death Tax Elimination Act of 2001(H.R. 8), introduced by Reps. Jennifer Dunn (R-Wash.) and John Tanner (D-Tenn.), would phase out the estate tax to its ultimate demise in 2011. Similar legislation offered by Dunn and Tanner last year passed both houses of Congress by substantial bipartisan majorities, but died when it was vetoed by former President Clinton.

Currently, those inheriting a restaurant or other small business must pay the government up to 55 percent in taxes on all assets, including land, buildings, and equipment for every dollar above the exemption, among other assets. Because the estate taxes are unreasonably high, many heirs who cannot afford to pay them are forced to sell their businesses, or liquidate their assets.

“When our restaurant, which has been in our family since 1935, is passed on to me, I will be forced to take out substantial loans to keep the business in the family,” says Association Board of Directors member Richard Kubach (Melrose Diner, Philadelphia, Pa.).

“What I worry about the most is that when something happens to me, after I inherit the business, my children, who are working in the business, will look at paying these taxes once again. Their future, along with the jobs of our employees, some of whom have worked here for 40 and 50 years, could be in jeopardy if the business is unable to maintain the burden of all this debt.”

Senate consideration of the president’s tax package, including the estate-tax repeal provision, is much more tenuous. Just days after the House approved the legislation, the Senate voted to scale back the budget for the president’s tax package. Originally set at $1.6 trillion, the Senate approved an allocation of $1.2 trillion. “If the size of the final tax package is scaled back, both the estate tax and the cut in the highest marginal rates could be left out,” says Association Director of Tax Policy Kathleen O’Leary.

Association members are strongly urged to contact their senators and ask them support the president’s tax-relief package. For up-to-the-minute information on this and other issues, log on to the Association’s Web site at www.restaurant.org/government.

Source: Washington Weekly-NRA