A cynical few are
saying the estate tax hurts African Americans in some disproportionate
way. But theyíre overlooking common-sense wealth planning. Hereís the
deceptive reasoning behind their statement. Itís harder for African
Americans to become millionaires (true), so the estate tax hits black
entrepreneurs especially hard, forcing them to sell family businesses to
pay the tax. Untrue.
The U.S. Small
Business Administration states that the main reasons family businesses
fail are lack of business viability, lack of planning, little desire by
the owner to transfer the firm, and reluctance of offspring to join the
firm. Note that paying the estate tax isnít one of them.
Itís great that there
are more African American millionaires. I count myself fortunate to be
among them. Between 1983 and 2001, the number of black households with
net worth of a million or more dollars increased from 61,000 to 109,000.
Many get their wealth from family businesses (funeral homes, medical
practices, and real estate, construction, and service businesses).
If there are
challenges in passing on the family business, letís not kid ourselves
that itís somehow due to the estate tax. If anything, itís due to a lack
of legacy thinking and estate planning. Thereís an ďIím gonna live
foreverĒ attitude that prevails among my wealthier African American
friends (not all of them, but many). Patriarchs and matriarchs are not
training heirs in business succession.
These wealthy folks
seem to be envisioning a Brinks truck following right behind the coffin.
There are no legal agreements in place to ensure the continuation of
their businesses. Their kids are caught in a cultural trap that makes it
difficult to discuss death and money.
Next thing you know,
along come 18 super-rich families with a vested interest in repealing
the estate tax. They are collectively worth $186 billion. They stand to
gain $72 billion if the estate tax is repealed. Itís worth their while
to exploit family businesses by using them as poster children for
repealing it. But itís all cynical nonsense.
hundreds of millions of dollars to spread deception about the estate
tax. As a result of their efforts, many Americans think they will be
subject to the tax when they die. Not true. Only one-quarter of one
percent of the deceased will pay this year. That means that over 99
percent of us can leave everything to our heirs tax-free.
Since the majority of
African American families have $21,000 or less in net worth, most blacks
wonít even come close to owing the estate tax after they pass away.
Compare the $21,000 black median wealth with the $2 million exemption
from the estate tax, and youíll see that the typical black family has
barely a penny on the dollar of the minimum taxable amount.
People think they
will lose half their estate to the tax (also untrue). The effective rate
on big fortunes is about 20 percent. The idea that the estate tax forces
lots of African Americans to sell their family businesses is just the
latest myth. People this rich have the capacity to do basic financial
planning. We know how to buy the insurance necessary to pay the estate
tax so our heirs wonít be affected.
The reason to care
about keeping an estate tax in place is simple. Wealthy people of all
races have benefited from government investment≠-education,
infrastructure, loans, public contracts≠-to create our fortunes. Itís
only right that we pay something back, so the ladder of opportunity can
be extended to those coming after us.
What could persuade
the rich to give back, if the government didnít mandate it? Human
benevolence alone is not going to cut it.
Make no mistake Ė we
need the $20 billion to $30 billion the estate tax generates each year.
Unemployment ravages the African American community. Medicare will soon
be required to support the baby boomers. Kids are dropping out, with too
little encouragement from government-funded after-school programs. Which
is more important, spending on these needs or a tax break for
multi-millionaire heirs? Repealing the estate tax would help squeeze the
middle class into a permanent underclass. For some of us, there has been
a rich gravy train in this country. So if youíve enjoyed the ride, now
pay the fare.
Darius Ross is a New
York City real estate developer, entrepreneur and fourth-generation
Southern landowner. He is a member of Responsible Wealth
Copyright 2006 MinuteManMedia.org