WASHINGTON - Senate Majority Leader Bob Dole, R-Kan., introduced legislation last week that would help banks keep valuable small-business customers by curbing estate taxes.
The Independent Bankers Association of America joined 60 other business and industry groups in supporting the bill that would exclude up to $1.5 million of a family business's net worth from inheritance taxes. It also would cut the maximum tax on the remainder of the estate to 27.5% from 55%.
IBAA president Richard Mount said current estate taxes are forcing some small businesses into liquidation after the owner dies.
"These federal estate taxes are breaking the backs of families," Mr. Mount said. "They are keeping family business from staying in the family."
The law would help primarily small businesses, which make up more than half the loan portfolios for small and medium-size banks.
John Dean, president and chairman of Glenwood State Bank in Glenwood, Iowa, said reducing estate taxes is crucial for his bank and his community.
"A vast majority of my business is small farmers and they can't afford a 55% mortgage to keep their land," Mr. Dean said. "If these farms are sold off, we don't only lose the business but we lose a part of our town."
Mr. Dean added that most family farms would be able to handle the 27.5% tax ceiling laid out in the legislation.
Sen. Dole said the measure will cost the government $5 billion in tax revenue over five years. The bill is receiving bipartisan support and is expected to be folded into the budget reconciliation bill in September.
Mr. Lumetta writes for Medill News Service.
