Daniel Inouye: “the estate tax imposes a true hardship on family-owned businesses. When a person dies, the estate tax must be paid…”

“the estate tax imposes a true hardship on family-owned businesses. When a person dies, the estate tax must be paid within 9 months. Current law permits only a small number of business owners to pay the estate tax in installments. The tax for most closely held businesses, however, must be paid shortly after the owners' death. Often, business assets and even the business itself must be sold to raise the cash to pay the tax. Closely held businesses, however, cannot be sold for their true value within so short a time. To avoid such fire sales, elderly owners will often sell their businesses while still living to get a fair price. Congress, as a matter of policy, should encourage the formation of family businesses and also support their continuation. The estate tax measures that the Senate recently voted on do not fully or immediately respond to the problems of closely held, family-owned businesses. Due to revenue constraints, repeal of the estate tax must be slowly phased in. During that phase-in period, whether the tax rate is 45 percent, 35 percent, 25 percent, or 15 percent, many business owners will still need to liquidate their businesses to pay the tax. The alternative proposal to raise the deduction for qualified family-owned business interests to $2 million fails to answer the basic liquidity problem. These families have all their assets tied up in their businesses. They do not have the cash to pay the estate tax right away.”