Tax reform must include 'death tax' repeal
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By the end of summer, the White House is expected to release its final plan for reforming the U.S. tax code. President Trump has tweeted that his proposed tax cut could be “the biggest in our country’s history.”

If the president’s Twitter feed is any indication, America’s small businesses—long encumbered by high taxes and a complex filing process—should rejoice. The National Federation of Independent Business has consistently found that two-thirds of small business owners believe their taxes are too high. Even more (85 percent) agree that the tax code is “too complex and should be overhauled.”

In the $25 billion convenience services industry—the vast majority of which are small businesses—the outdated federal tax code is a matter of great frustration. As the leader of NAMA, the National Automatic Merchandising Association, I am acutely aware of the current tax code’s adverse effect on convenience services operators—men and women who own and operate vending, foodservice, micro market, and office coffee service businesses.

Their frustration is understandable. Roughly three-quarters of small businesses are not considered corporations, so they are taxed at the personal tax rate of the business owners. The top individual tax rate hovers around 40 percent, while the top corporate tax rate is currently 35 percent, forcing many small business owners to pay higher taxes solely because they do not lead major corporations. Additional state and local taxes can increase the small business tax burden by up to 50 percent. The current system, in effect, punishes small businesses for being small.

The estate tax—often called the “death tax”—only makes matters worse. The current federal tax code applies an estate tax to property transferred at death if the value of the property exceeds the estate tax exemption—about $5.5 million this year.

For family-owned businesses, a large portion of a business’ value is tied to assets such as land, buildings and equipment. In some cases, when a business owner dies, the new owner—often a family member of the previous owner—is forced to sell the business or its assets simply to cover the estate tax liability.

This burden can cripple a business, preventing it from operating effectively over future generations. Estate planning costs take money away from capital investment, business expansion, and job creation. The convenience services industry is responsible for 700,000 jobs across the country, many of them at family-owned businesses. According to the Tax Foundation, an estate tax repeal would lead to the creation of nearly 140,000 new jobs, many of them in our industry.

Congress last updated the estate tax code in 2012, when bipartisan reforms lowered the maximum estate tax rate to 40 percent. However, that rate is still one of the highest in the developed world—nearly three times the Organization for Economic Cooperation and Development average of 15 percent. Fortunately, several bills have been introduced in the 115th Congress to repeal the federal estate tax altogether. The Death Tax Repeal Act sponsored by Rep. Mac Thornberry (R-Texas), for example, would free family-owned businesses from the currently onerous tax obligations. Any tax reform package from the White House should repeal the death tax once and for all.

The time to act on tax reform is now. On July 25, NAMA’s annual Fly-In will bring more than 300 industry leaders to Capitol Hill to urge action on tax reform and other issues impacting small businesses. Last year, NAMA Fly-In attendees held more than 200 meetings with members of Congress, including most of the Senate and much of the House—on both sides of the aisle. This year, even more meetings are planned as we work to ensure that the voice of the convenience services industry is heard on Capitol Hill.

Public opinion is clear: 75 percent of Americans want tax reform this year. Congress has a job to do and should act sooner rather than later to protect small businesses across America. The health of our nation’s economy depends on it.

Carla Balakgie is president and CEO of NAMA, the National Automatic Merchandising Association, which represents the $25 billion convenience services industry. 

The views expressed by this author are their own and are not the views of The Hill.