The bill increases to $5 million ($10 million for married couples) the amount exempt from the estate tax, effective in 2010. 

For assets up to $25 million, it reduces the tax beginning in 2010, making it equal to the capital gains rate (15% through 2010, 20% thereafter).

For assets valued at $25 million or more, the estate tax is twice the capital gains rate (30% through 2010, 40% thereafter).

Congress enacted a phase-out of the estate tax in 2001, but the bill included a sunset clause which reinstates the tax on January 1, 2011.

“I continue to have serious concerns about Republican tax policies overall and their impact on the deficit,” said Abercrombie. “However, they’re right on this issue.

“The bottom line is the survival of family-owned businesses.  It’s particularly important for Hawaii, where owners bought their business property three generations ago, and rising real estate prices have left their businesses with high valuations but little in the way of cash assets to pay a large estate tax levy. The super-wealthy avoid the tax by using lawyers, accountants and financial planners to exploit the loopholes.  But if you own a coffee shop at a prime location, a car dealership, or a landscaping business, your heirs can get hit with an enormous tax bill. 

“Those firms provide a living for many island families and generate jobs for working men and women.  The estate tax casts a huge shadow over the folks who operate and depend on these businesses. Who wants to see their business liquidated and the employees wind up in the unemployment line?  Reducing the estate tax will give family-owned businesses a chance to survive, grow, and remain in the hands of families who built them.”Abercrombie has received first-hand input on the estate tax in meetings with Hawaii small business owners, who shared their frustrations with the tax:

--Family businesses are often forced to divert resources from core operations in order to pay premiums for life insurance to pay anticipated estate taxes;

--Hawaii’s high real estate values often escalate estate valuations to the point where they are subject to disproportionately high taxes;

--Family business valuations frequently reflect high concentrations of non-cash assets (such as equipment), leaving heirs short of cash to pay estate taxes;

--An owner’s death often throws a family business into turmoil, compounding the difficulties of heirs trying to meet estate tax obligations;

--Estate tax planning frequently compels small business owners to structure their firms in ways that reduce tax liability but also reduce profits.

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