Estate Taxes and the Family-Owned Business
![handle is hein.journals/calr38 and id is 141 raw text is: 1950]
Estate Taxes and the Family-Owned
Business
C. Lowell Harriss*
A MERMA's business leaders have lived to see many big changes in
the structure of our economy. Few of these changes have been
more important than the growth of federal taxes. Men of sixty may
have begun their business careers before there was a federal income
tax and men of fifty-five before the first federal estate tax. It would
be a relatively young executive whose business life had been no longer
than the period in which federal taxes have been, as they are today,
a major factor in business and family decisions. A change such as
this-big, new and closely related to many others-is extremely dif-
ficult to study satisfactorily. Experience and evidence are scanty.
Isolation and measurement of effects are impossible.
A pointed example of a change which is not easily evaluated is
the subject of this article-the effects of death taxes on family-owned
businesses. Yet some business leaders-in striking contrast to their
counterparts of the last generation or their friends who manage giant
corporations-may feel that the problem is one of the most serious
they face in the coming years. Is it, however, just a personal problem
of the prosperous, or are there serious social implications?
ESSENTIALS OF THE PROBLEM1
The essentials of the problem can be outlined simply. The estate
tax is related to capital values rather than to income flows. It is some-
times half or three-quarters of the estate, so high that it cannot be
made painless. It is payable in one chunk and may be much too
* Department of Economics, Columbia University, on leave. This article is part of
a study which the author is making under a grant from the Columbia University Council
for Research in the Social Sciences. The opinions expressed are those of the author and
not necessarily of any organization with which he is associated.
1 Though the literatures of jurisprudence and social philosophy have much to say
about the disposition of property (before and) after death, and though there is con-
siderable literature in economics on death taxes, the author has found little treatment
of the problem which is the subject of this paper. There are doubtless many reasons-
the relative newness of the problem (especially compared with the age-old problem of
division of land at death), the fact that each case is in many important respects unique,
the fact that economists have so often preferred to deal with general problems, etc. After
this article was prepared, however, a privately published booklet, Mergeritis, by W. W.
Vandeveer, appeared; late in the summer of 1949 its contents were summarized in Tras,
Sept. 5, 1949, p. 53, col. 2. Over 100,000 copies had been distributed by October 1.](ViewImageLocal?handle=hein.journals/calr38&div=13&collection=&method=preview&ext=.png&size=3)
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Estate Taxes and the Family-Owned Business
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