The so-called death tax needs to die — soon.
That was the message Karen Madonia, the chief financial officer for HVAC market wholesaler Illco Inc. brought to Congress March 18 during testimony supporting a bill eliminating the tax on the estates of business owners.
Madonia, whose company is a member of the Heating, Air-Conditioning and Refrigeration Distributors International, said many small or family-owned companies are burdened with a tax of up to 40 percent when a company founder dies. For HVAC construction wholesalers such as Illco, which tie up much of their assets in inventory, such a tax can be devastating, she said.
“I personally find it fundamentally wrong to place a tax on death,” said Madonia, who serves as co-chairwoman of HARDI’s Government Relations Committee. “If a person is able to accumulate wealth through hard work, and if that person pays his fair share of taxes on his income as it is earned, I do not understand how the government can justify taking a significant portion of what he has left simply because he opted to save and reinvest rather than consume.”
Madonia reminded the committee that companies such as Illco regularly pay taxes.
“The United States has already benefited from that person’s success because he has employed people who pay taxes, bought buildings on which he has paid property taxes and bought inventory and supplies from other companies, which can then afford to employ more people who pay taxes,” she said. “In my opinion, it is a fundamentally flawed tax because it is, by definition, double taxation and it discourages entrepreneurship. It should be totally repealed.”
Rep. Erik Paulsen (R-Minn.) said a wholesaler in his state, Johnstone Supply, has a similar problem.
“They’ve been forced to spend about 20 percent of their net income on life insurance to fund their future estate obligations,” Paulsen said. “This is money that could otherwise be reinvested in the company, reinvested in the business, in their community, and put toward growing the company, but that money is locked up. The tax code is literally forcing them, essentially, to consider breaking up the business.”