Don Root

Don Root

Chairman and CEO

GM Nameplate

2040 14th Avenue West

Seattle, WA 98119

Statement for the Record:

 

U.S. Senate

Committee on Finance

Washington, DC 20510

 

November 14, 2007

 

Federal Estate Tax:  Uncertainty in Planning Under the Current Law

 

Chairman Baucus, Ranking Member Grassley, and members of the Committee:  It is my honor to share my experience with the death tax, and reasons for repeal.


Undoubtedly, you have heard from many well-intentioned individuals, such as Warren Buffett, who have told you that the death tax does not pose a real threat to family-owned, private businesses.  Mr. Buffett and other billionaires claim that private businesses can pay the tax without needing to sell assets.  They do not see the difference in their highly liquid, billion dollar assets based in publicly-traded stock, and the thousands to millions in fixed, non-liquid assets, owned by family-businesses of various sizes.  While I wish this was the case, the facts of my story and countless others in Washington State and every other state prove otherwise.  Let me share some background about our company, which will shed light on why the death tax is such an ominous event.

 

As I want you to see first hand what the assets look like in a fairly large family business, I am enclosing the audited balance sheet and income statement from our company, GM Nameplate.  I hope your committee will look at these documents and ask any questions that come to mind.  If you would like to look at other family-owned business financial statements, I would be glad to take on the task of obtaining the information for you through organizations that understand the problems the death tax creates (National Association of Manufacturers, National Federation of Independent Business, U.S. Chamber and the American Family Business Institute, to mention just a few).

 

            If you look, you will see that the typical family-owned business has no way to pay a death tax with cash on hand and no way to borrow enough to pay a tax and still stay competitive.  The tax has to be eliminated if you care at all about family-owned businesses.  All inherited assets should be taxed when sold just like any other capital gain with no pressure from a death forcing a sale.  When a family intends to continue to operate the business or farm, no tax should be due except on the profit from the business.

 

GM Nameplate celebrated its 52nd anniversary this year.  I was the 14th employee of GM Nameplate right out of college in 1962.  In 1977 the owners and original founders were ready to retire and wanted to sell the business.  Four of us scraped together a down payment and convinced a bank to loan us the rest of the money needed for the purchase.  At the time, the company employed 60.

         

We have been fortunate.  By a lot of hard work, constant reinventing, and reinvesting all we made in the good years, we have built the company to one that can and does provide employment to over 850 fellow Americans.  These employees produce nearly $90,000,000 in nameplates, labels, electronic control panels, and flexible circuits used in aircraft, medical devices, automobiles, consumer appliances and computer devices and systems.

 

            Today, 30 percent of the company is owned by non-family member employees and 70 percent is owned by our family.  All four of our sons have worked for the company from the time they reached working age.

 

In a typical year, our payroll and payroll taxes total $39,000,000.  Medical insurance provided to all employees and their families cost us $2,300,000 and will increase another 20 percent next year we are told.  We have contributed millions of dollars to our employees 401k/profit sharing retirement plan and will contribute millions more as long as we can stay in business and make a profit.

 

It has taken 52 years to build a business that can accomplish this.  How can it make any sense to have a tax that works to tear down what has been accomplished?

 

Eliminating the death tax is really about JOBS.  Just the largest 150 privately owned businesses in Washington State provide more jobs than two of the state‚Äôs largest public companies together, Boeing and Microsoft.  Would it make any sense to have a tax that would kill them or set them back 25 years if their Chairman or President died?  Obviously not!!!  The same concern should exist for family-owned and privately-owned businesses.

 

Then, there is the argument that the Death Tax is needed to redistribute the wealth.  That argument is seriously flawed, unless the intention is to redistribute the wealth to billionaires and huge corporations.  Under the present system, they are the only ones who have the resources to quickly buy out heirs or to buy companies whose owners are attempting to solve estate tax problems before they die.

 

Taxes are essential to run this great country we all live in but they must be collected on earnings and profits.  There is no profit in death.  I ask that you think of the employees, their families, the communities, and the on-going tax revenues that are all dependant on companies like GM Nameplate remaining in business, and permanently eliminate the tax based on death.

 

Sincerely yours,

 

            Donald Root

            Chairman and CEO

            GM Nameplate