U.S. Senator Joni Ernst (R-Iowa), along with Senators Tom Cotton (R-Ark.) and John Boozman (R-Ark.), introduced the Estate Tax Reduction Act, legislation to reduce the estate tax to 20 percent—half of the current top rate of 40 percent. This bipartisan, bicameral legislation was also introduced by Representatives Jodey Arrington (R-Texas) and Henry Cuellar (D-Texas) in the House of Representatives.
“Iowa’s dedicated farmers and small business owners take tremendous pride in their work, and they look forward to passing their ventures on to the next generation. These folks shouldn’t be prevented from safeguarding the legacy of their businesses due to the punitive estate tax. That’s why I’m proud to support this bipartisan, bicameral bill that would cut the estate tax in half and help remove the unfair burden this mandate creates,” said Senator Ernst, a member of the Senate Small Business Committee and Senate Agriculture Committee.
“Families shouldn’t have to sell major portions of their businesses or farms after the death of a parent just to afford the 40 percent estate tax. Breaking apart a family’s livelihood is neither fair or good for the economy, especially since families are often forced to sell to large corporations. My legislation would cut that rate in half, bringing the rate in line with the current capital gains rate and making it much easier to preserve a family’s legacy and way of life,” said Senator Tom Cotton.
“Arkansas’s family farmers and small business owners shouldn’t be punished for passing what they’ve established, grown and maintained onto the next generation. Our bill reduces this burden and gives these entrepreneurs and job creators more assurance that their years of hard work and investment can be carried on by their children and grandchildren instead of being forfeited to the federal government,” said Senator John Boozman.
Earlier this year, Ernst joined an effort to permanently repeal the federal estate tax, more commonly known as the death tax. The Death Tax Repeal Act of 2021 would finally end this purely punitive tax that has the potential to hit Iowa’s family-run farms, ranches, and businesses as the result of the owner’s death.
The United States currently has the 4th highest estate and inheritance tax among developed countries, just behind France. Much of the value in family-owned businesses are in hard assets and must be sold when the owner passes away, thus endangering the ability of a family business to survive between generations.
Only 30% of family-owned businesses survive the transition from first to second-generation ownership, 12% survive from second to third-generation ownership, and just 13% of family businesses remain in the family for more than 60 years.