Tim Keller

Owner
Institutional Jobbers Company
626 Simmons Road
Knoxville, TN 37932

Statement for the Record
U.S. Senate Finance Committee
Federal Estate Tax: Uncertainty in Planning Under the Current Law
November 14, 2007

Chairman Baucus, Ranking Member Grassley, and members of the Committee:

Death taxes (Estate Taxes) put more family businesses “out of business” than even Wal-Mart.  Death Taxes are the greatest threat to the continued growth of our family owned business.  My father founded our foodservice distribution business in 1946.  For 58 years he plowed back 98% of the profits into growing the business, creating over 1000 jobs that support some 5000 employee family members.

Even though we have implemented all known estate planning techniques (at a very high cost), my father’s death and the resulting death tax liability have resulted in a millstone being tied to the expansion of our business.  After a long legal battle, the IRS finally accepted the valuations of our estate by our valuation firms, estate attorneys, and tax accountants.  Now, our family must pay this onerous tax.  The financial effect on our family business is going to be devastating to the point of endangering its on going existence.  We previously had plans for considerable expansion within both the state of Tennessee and the southeast region generally, but the death tax has placed these plans in serious jeopardy and debilitated management decision making.

It is important to note that large corporate entities do not face a death tax, thereby putting family-owned businesses at a very unfair disadvantage.  Moreover, it is family-owned businesses, such as my fathers, which are responsible for the majority of new jobs.  One of the best ways Congress could support long-term job growth is to get rid of this obstacle to growth and prosperity of family-owned businesses.

Death taxes are double taxation that penalizes those thrifty Americans that choose to save and invest as opposed to those that choose to spend and not invest in our economy.  Isn’t there something ironic – and sad – in the fact that if my father had gambled away his wealth, he would have had no death tax liability?  Instead, a man who worked hard and lived frugally throughout his entire life is punished for wanting to pass on his business to his children.  I believe it should be the policy of the US Congress to promote savings by instituting laws friendly to capital employed in local economies.

All of us who are familiar with the calamitous effect of the death tax have heard much - maybe all of the above.  The worst part of the death tax is there is no way to really prepare for it.  Why?  Because as a business becomes more successful, the tax becomes increasingly onerous and more threatening to the company’s future survival.  Even though I believe our tax burden is excessive, I would much rather pay additional annual income tax that try to pay the death tax.

Family businesses deserve better.  I encourage the members of the Senate Finance Committee to pass legislation permanently repealing the death tax.