Estate taxes create a huge obstacle for small businesses, says Beverly McConaghy, owner of the University Place branch office of Financial Network Investment Corp., especially small businesses operated by women.
McConaghy recently returned from Washington, D.C., where she was part of a delegation from the Tacoma-Pierce County Chamber of Commerce that told the state’s Congressional delegation it had better look after the concerns of women in business.
Nationwide, 9.1 million businesses are owned by women, double the amount in 1987, and politicians have begun treating female voters in a more business-like manner. After years of attracting women voters by focusing on education and health care, lawmakers see estate taxes as a new way of reaching them.
“We’ve reached an era where women’s interests have become as broad as men’s,” says Rep. Jennifer Dunn, “and they’re equally interested in issues like tax reform.” Dunn has made elimination of estate taxes one of her priorities and recently saw the House of Representatives pass a bill that would phase them out over 11 years.
McConaghy considers estate taxes a major issue for all business owners, but especially for single women and widows.
“It’s a big step in doing away with estate taxes,” she says of the House bill. “That will be a boon for estate planning. It will free up money that will be passed on to heirs.”
The first big wave of women business owners in the United States occurred in the 1970s, when it became easier for women to obtain bank loans. Many of these women are nearing retirement age.
“They’re just now beginning to start planning for secession,” says Linda Ladas of the National Association of Women Business Owners. “It is not an issue that has affected many women business owners until now.”
There are several ways to avoid estate taxes. One is to have a trust. Life insurance policies can be structured to help people avoid it as well. “Those two ways are the most common at this time,” McConaghy remarks.
Estates above $675,000 are taxed at rates between 37 and 55 percent. Those levies brought in about $23.1 billion to the coffers of the federal government in 1998, accounting for 1 percent of all federal tax collections.
The bill passed by the House would eliminate this tax in 11 years. It must still be approved by the Senate. McConaghy met with both of Washington’s senators, Patty Murray and Slade Gorton, and says both are very concerned about the issue.
Should the Senate pass the bill, it would go to President Clinton, who has indicated he would veto such a tax cut.
By John Larson, Business Examiner staff