Chuck Collins, a researcher for a progressive Washington, D.C., think tank, recently wrote a ringing endorsement of a proposed 2020 ballot measure that would impose a state-level estate tax to pay for free college for all Californians (“One way to offer free college: Restore the state estate tax,” Viewpoints, June 13).
Collins apparently doesn’t realize, or doesn’t care, that this $4 billion-a-year proposal would create financial hardships for family businesses and farms that often result in liquidation and loss of jobs.
Family businesses are the bedrock of their communities and the economy. A recent study showed that the state’s 1.4 million family businesses employ 7 million people. They tend to pay their employees more, train them better and provide more generous benefits than non-family companies. They’re also less likely to significantly downsize during tough economic times.
Because families are in it for the long term, they focus not just on the next fiscal quarter but the next quarter-century. And because they’re based in their communities, they donate time and money for local organizations and projects.
But keeping businesses family-owned is a struggle. Only about 30 percent survive into the second generation, about 12 percent into the third generation and just 3 percent operate in the fourth generation and beyond.
To help family businesses pass from one generation to the next, four states have repealed their estate taxes since 2010. Fortunately, two initiatives passed by voters in 1982 prohibit an estate tax in California, and that can only be changed by the voters.
The Family Business Association of California vigorously opposes a “death tax” for California and leads a coalition of 40 associations against the flawed concept. To quote Nobel Prize-winning economist Milton
Friedman in a letter that’s been signed by more than 700 other economists: “It is a bad message and a bad tax. Death shouldn’t be a taxable event.”
Robert Rivinius is executive director of the Family Business Association of California. He can be contacted at Robert@mybfa.org.