IT'S TIME TO KILL OFF THE DEATH TAX

IN THE EARLY 20TH CENTURY, A STUPID CONGRESsional law created a new industry. The law was the Volstead Act, the industry was bootlegging. It made trafficking in liquor enticing and "slap-on-the-wrist" illegal. It created thousands of jobs in the underworld and millions of dollars in tax-exempt revenue.

Ultimately, Congress repealed this dumb law, and overnight the trafficking in liquor brought hundreds of millions of legal dollars into the U.S. Government coffers.

What has stupid estate tax legislation got to do with the 21st century, and what is all the brouhaha about creating a new industry? There are virtually hundreds of thousands of accountants, tax attorneys and life insurance salespeople earning big bucks looking to beat the government out of as much of this death tax as legally possible.

The levy is the inheritance tax. The industry is selling millions of dollars in life insurance on the owner's life so that valuable business assets would not have to be sold to pay this death tax.

During my career as a car dealer, I have received such tax advice from life insurance salesmen, which clearly demonstrates how flawed the system is. I felt I was paying blackmail in order to preserve the business for my heirs.

My expensive accounting and legal firms' highest priority has been to lighten whatever estate tax burden threatened me and my business. In recent years the IRS has relieved the time demands on when the inheritance tax must be paid.

Nevertheless, this tax burden has bankrupted many small businesses, and in the process, destroying the dreams of family business entrepreneurs who hoped to perpetuate the family business.

Why is the inheritance tax such an oppressive burden for small family businesses? Successful businesses constantly utilize available cash for assets that will produce the highest rate of profitable return. When Uncle Sam comes calling for his inheritance taxes he wants cash, not profitable assets. A highly profitable new-vehicle dealership does not carry a large bank balance, rather the net worth of the business is comprised of vehicles, parts and equipment inventories, all of which generate the highest measure of profit. Most available cash is invested in profitable activities for running the business.

When the death of a family business owner occurs, if the owner, while living, had not already transferred the assets of the business to his heirs, then big problems arise. That's because the IRS is not interested in accepting used cars or parts or equipment (unless at an auction sale) to pay the inheritance tax. They want cash payment and often the business does not have the cash available.

There is something askew in a system that penalizes successful business operations and forces them to provide "protection money" to pay this regressive tax. Is it far removed from the criminal who forces legit businesses to save themselves from extinction by paying a fee to thwart mayhem to their continued operation at the hands of thugs and criminals?

Personally, I have purchased seven-figure life insurance protection with premiums that matches the monthly rent for the entire dealership. And subsequently I've disposed of my entire estate to my children in order to avoid the voracious appetite of the IRS if I were to die prematurely.

Some "bleeding hearts" have been extremely vocal opposing the repeal of the estate tax, claiming it is tax relief for the rich and powerful. Perhaps this is conceptually true. But it is these "rich and powerful" taxpayers who are pillars of accomplishment and leadership in their respective communities, and provide jobs and civic improvements for the entire populace. People like auto dealers.

Similar to many laws which were passed in times of dire need, the estate tax was passed when regular income tax was not as much as it is today.

There are many less damaging ways for Uncle Sam to collect his "pound of flesh" without causing family businesses to fail for lack of cash in order to pay this tax. Lord knows, there is enough pressure on family business successors to succeed without this additional burden.