Opponents of the federal estate tax claim it destroys family businesses. Evidence is sparse. Nevertheless, many owners of such businesses do have reason to hate the tax. Federal estate tax doesn't simply deliver a staggering blow once a generation; in practice the cost of the tax turns into an extra, added annual drain on business income. Curtis Dubay, a senior tax policy analyst at The Heritage Foundation, recently offered two examples.
One family business, a Maryland contractor, spent ten years paying off estate tax incurred by the older generation. The other, a wine and spirits shop in New York's Grand Central Station, annually pays premiums on insurance to cover the estate tax when the current generation dies.
Neither business has been killed by the estate tax. Judging from their web sites, both Reliable Contracting and Grand Harvest Wines are doing OK. Rather, their circumstances illustrate how the "death tax" imposes added costs that many family businesses have to live with, year after year after year.