Dealer Jack Fitzgerald wants the estate tax eliminated and replaced with a new method of generating revenue for the U.S. government.
He says his idea is more equitable than the so-called death tax – a long-time bane of auto dealers and other business people – and would put as much money in government coffers.
Over the years, businesses have been sold or disposed of to raise money necessary to pay estate taxes, says Fitzgerald, head of the 12-store Fitzgerald Auto Malls operating in three states and based in Bethesda, MD, “Many jobs are lost forever. Many privately owned businesses cannot afford to pay for the tax-avoidance strategies used by the super rich.”
The estate tax has “devastated” many dealerships, he tells Ward’s.
Congress temporarily repealed the tax for 2010. It is returning in 2011, but not at the former rate of 55% on amounts beyond $3 million.
Instead, the Obama Admin. and Congress agreed on a compromise that exempts estates valued at less than $5 million per person. Assets beyond that amount will be taxed at a 35% rate. The National Automobile Dealers Assn. supports the legislation.
Still, Fitzgerald thinks he has come up with something better.
In that regard, he has teamed again with fellow dealers Tammy Darvish of Maryland and Alan Spitzer of Ohio. Last year, the three formed an advocacy group called the Committee to Restore Dealer Rights to fight nationwide dealership franchise terminations.
They now have launched Americans Standing for the Simplification of the Estate Tax.
Fitzgerald points to government tax histories showing estate and gift taxes have accounted for an annual average of only about 1% of all the revenue the Internal Revenue Service has collected annually in the last 50 years.
The reason the levies only generate that is because the super rich use all sorts of loopholes in the law to avoid paying estate taxes, he says. “They hide money in trusts.”
Fitzgerald’s plan calls for scratching the estate take and enacting an annual 1.77% surcharge on adjusted gross income for the top 1% of the rich.
“It is that simple,” he says. By doing that, “the Internal Revenue Service would receive the same revenue it gets from the estate tax.” Only the collection methodology would change.
“If everyone in the wealthiest 1% of the population paid their fair share, no one would pay more than 1.77% of their adjusted gross income annually,” he says.
Ninety-nine percent of taxpayers would pay no estate tax, and the top 1% would pay little because of the AGI offset, he says.
The tax restructuring would save affluent people millions of dollars on life insurance, legal and other professional fees, as well as eliminate the need for the IRS to spend so much on compliance and collections, he says.
Moreover, it would eliminate the estate tax’s ill-effects, such as job losses, enormous reduction in private capital and trillions of dollars locked away in unproductive trusts rather than in circulation, Fitzgerald says.
“I have a lot of employees,” he says. “Some have been with me 20 years, 30 years, even 40. I want to see it possible to keep my business going. There is no need to dissolve it because I die.”
Fitzgerald has put years of thought into his proposal. “Some people have a hard time with it because it’s so simple.”
He has garnered support among elected federal officials, particularly office holders his home state of Maryland. Those include Rep. Steny Hoyer, Rep. Chris Van Hollen and Senator Ben Cardin. “They have told me they like it.”
His plan may seem like a moot point in light of the newly approved federal tax package. But that legislation is set to retire in two years. The estate tax would then go back to much lower exemption levels and higher tax rates.
That’s why Fitzgerald is carrying on with his cause.