The Next Generation is Counting on Us to Slow Impact of High Taxes
Posted on:
With 85.5% of air conditioning contractor family businesses having majority or sole ownership by family members the questions of who, when, and how a family business is transitioned to the “Next Gen” is a persistent conversation, and a difficult one.
The real goal of a transition is much more than a good hand-off. It’s as much about continuity and prosperity as it is about transition management. It’s about keeping the family business legacy strong, growing, and better for descendants. Maybe there’s a little bit of immortality at stake, too, but the idea of a future existence prospering provides us with a strong reason to do the right thing now.
Do our legislators think like that? Do our legislators today understand they can very easily make life much worse for future generations in the air conditioning contracting industry?
“Why should we even care about what happens to people after we’re gone?”
Philosophers and futurists ask this question from Oxford to Harvard. And maybe some of our elected officials quietly ask themselves this question too since their greatest worry is surviving the next election cycle.
The answer is there is a reciprocity between the present and future. It’s an unspoken conversation with the future. It’s a conversation that we will do the right thing today so these future people, who we don’t even know, can live better, and do the right thing for the next generation. The future is counting on us, and we are counting on them. In effect, there’s mutual dependence between present and future. It goes well beyond mere “transitioning.”
But caring for the future is not easy. If you listen to air conditioning contractor leaders today, they tell us the future killers are taxes, taxes of all types. But personal income taxes are the real killer.
Taxes Are a Big Worry
In our just released Family Enterprise USA Family Business Annual Survey 2024 we surveyed nearly 800 family business leaders, and when we asked, “What is your top tax concern,” 41% said “personal income taxes.” It was not “capital gains” or “estate taxes,” but they focused on the very high personal income rates.
Another big economic worry, the survey found, is the “Federal Budget/Deficit.”
As for a pending “Wealth Tax,” only 5% may be worried about it, up from zero in 2023. And when it comes to the Estate Tax, family business owners, 36% would like to keep the current exemption level at $12.92 million per person through 2025. But 26% want a complete repeal, and 16% want to reduce the rate further.
The real worries are based in the very near future: 2026. These worries carry deep into the soul of the distant future, and into the Next Next Next Gen. Simply, it’s time to prepare for the possibility that taxes will make the future less prosperous.
The 2017 Tax Cuts and Jobs Act lowered individual tax rates, doubled the standard deduction, and shielded many estates from federal estate taxes, but they’re scheduled to expire on December 31, 2025.
The White House supports extending the individual tax cuts for some families but wants to pair the extension with higher taxes, and a new tax on assets, (think “Wealth Tax”), Corporations, and “high income earners” as well as other tax provisions that could impact family businesses and successful individuals.
If Congress and the White House fail to reach an agreement by the end of 2025, tax rates will automatically revert to 2017 levels. This is where the conversation between the present and future breaks down. This is where the future looks like less.
Next Generation Views
To make the future dicier, Generation Z, those between 12 and 27 years old, believe Congress is clueless about their tomorrow.
In a recent Gen Z focus group session, held by researcher and pollster Dr. Frank Luntz, the current Congress received a big thumbs down.
When Luntz asked the randomly selected group, “Does Congress understand my needs?” the answer was a resounding, 100% “No!”
Gen Z retorts ranged from the current capitalistic system “does not support me” to “it’s not a fair system for all” to “democracy is not working.” In addition, during the one-hour session with 19 Gen Z-ers, they said they “do not know who to trust.” They said they don’t trust corporations and they certainly don’t trust legislators.
Change Needed Now
As Congress tackles tax reforms in 2025, it should balance broader budgetary constraints, additional tax simplification, and what it will take to keep the engines of economic growth going down the road for Gens Z, A, B, and C, and for the future of the air conditioning contractor industry.
Many of the tax proposals interact with each other, and reforms proposed will have implications for other parts of the tax code and our national debt that should also be addressed.
Bad decisions today do affect tomorrow, and we can all agree the survival of future generations is in our own best interest.
There is a solution: let’s convince our representatives in Washington, DC, that policies that hurt family businesses, and their employees, not only hurt the present, but are killers for future generations, and we need to speak for the future today because no one else will.
Pat Soldano is president of Policy Taxation Group and Family Enterprise USA; both groups are non-partisan, non-profit organizations advocating for family enterprises of all sizes and are the organizers of the Family Enterprise USA Annual Family Business Survey. ACCA is proud to be a member of Family Enterprise USA.
Posted In: Government, Taxes
