Hancock Lumber company has been around for 180 years, was started before more than half the states joined the Union, survived the Civil War and two World Wars, but now faces one of its greatest challenges: paying the death tax.
Owner Kevin Hancock counts himself among the six generations of his family who have worked for the Maine-based company that provides lumber to contractors and home builders. Hancock explains that once the estate tax (otherwise known as the “death tax”) hits, Hancock Lumber will have to sell some or all of its 15,000 acres of open timberland for development in order to pay the tax bill. And that is pristine, open-access land that the public now uses for hiking and hunting.
The death tax, which is assessed on the transfer of an estate from the deceased to their heirs, has been set to be phased-out and abolished for close to a decade now. The 2001 tax cut began an eight-year phase out of the death tax, lowered the rate from 55% in 2000 to 45% in 2009, and increased the untaxed portion of estates from $1 million to $3.5 million. This year, the tax is completely abolished, but it comes back to life in 2011 at a 55% rate and $1 million exemption.
It’s because of problems faced by companies like Hancock Lumber that the tax should be permanently eliminated.
The death tax makes it difficult for Hancock Lumber to grow and create new jobs. Since death tax obligations increase with the whims of Congress, there is a great degree of unpredictability for a company when it looks to plan ahead. In Hancock Lumber’s case, any business decisions must take into consideration the unknown tax obligations it will face down the road.
That’s particularly troublesome for Hancock’s company because of the incredible, long-term investments it must make due to the nature of the lumber business. It takes 80 years to grow pine trees, and in the company’s history, it has only seen two complete crop cycles. Hancock Lumber is growing trees today for a generation that isn’t even born. The death tax’s uncertainty discourages family-owned businesses from growing and adding new jobs, especially when the nature of the business requires such long-term investment.
As Heritage’s Curtis DuBay writes, it’s high time to end the death tax, eliminate this uncertainty, and allow companies to grow and create new jobs:
Instead of passing a punishing tax increase, now is the time for Congress to repeal the death tax forever. Doing so would lift a tremendous burden from countless family-owned businesses across the U.S. that fear a death tax liability could wipe out their businesses.
Full repeal of the death tax would have an enormous positive effect on the economy in addition to the relief felt by family-owned businesses. It would create millions of new jobs because the death tax is an enormous drag on the economy. It discourages hard work, saving and investing. Lifting impediments to these economy growing activities would put millions of unemployed Americans back to work.
Learn more about the death tax at heritage.org/deathtax.
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