That statement stems from a survey of fewer than 200 people. Family Enterprise USA found the survey participants through a network of family offices—businesses that manage the wealth of rich families. Family offices generally have assets of at least $100 million. More than half the survey participants’ businesses had annual revenue of $11 million or more.
Even among that less-than-representative group of business owners, the survey suggests that 80 percent think the estate tax poses no problem for creating jobs. The White House email also cited the survey’s estimate that family business owners spent $74,940 on insurance and $170,800 in planning costs last year because of the estate tax. Those figures were based on responses from fewer than 20 participants.
Richardson, 51, who serves as head of government and shareholder relations at White Castle System in Columbus, Ohio, said the estate tax forces large business owners to spend decades planning for it.
There are some easy ways to avoid it: Give to charity or transfer small amounts of money to the next generation tax-free. Current law allows you to give $14,000 every year to as many different people as you want—and you can also cover anyone’s medical bills and tuition. Many nonprofits worry repeal of the estate tax and other tax changes could reduce the incentives for philanthropy.
For more complicated maneuvers, the rich need the help of professionals, who can recommend trusts, life insurance, and other strategies to minimize estate tax bills. Trusts can serve a double purpose: Shielding assets from the estate tax, while also protecting fortunes from heirs’ divorces, bankruptcies, drug problems, and other issues that can bleed fortunes dry.
The estate tax is due within nine months of death—though there are ways to extend payments over time. Regardless, family-owned businesses worry about coming up with tax payments all at once. Before Root’s mother’s death, the prospect of a large estate tax bill made her afraid to make long-term commitments to charities she cared about, he said.
“If you’re caught unexpectedly by this unfair tax, you likely could lose everything and you would be penalized for a lifetime of hard work,” said the 65-year-old Root, who spends most of his time on the family charitable-giving efforts.
Estate tax opponents say it’s particularly unfair because it taxes wealth twice—once when it’s earned and again when the earner dies.But that’s hardly true. In estates worth more than $100 million, the Federal Reserve estimates, most of the value is in investment gains that have never been taxed. That’s because investors only pay capital-gains taxes when they sell an asset—at a top rate of 23.8 percent for long-term investors. Investors who don’t sell can avoid capital-gains taxes forever.
And beyond that, current law holds that when you die, your unrealized capital gains on assets you never sold are simply wiped away. Your heirs start fresh, a process known as “stepped-up basis.” For that reason, the only tax ever paid on such gains is the estate tax.
If Congress repeals the estate tax, it’s unclear whether it would also change the stepped-up basis rules. Trump suggested such a change during his campaign—but that proposal hasn’t reappeared since he took office. If there’s no change, “that would be a huge benefit to very, very rich estates,” said Hunter Blair, a budget analyst at the left-leaning Economic Policy Institute.