Estate tax and family businesses

David Joulfaian (U.S. Dept. of Treas.) has recently posted on SSRN his article entitled The Estate Tax and the Demise of the Family Business: A Comment.

A recent paper by Brunetti (2006) examines whether the US estate tax forces heirs with insufficient liquid assets to sell inherited businesses in order to pay the estate tax. It concludes that the estate tax has a positive effect on such sales. This note highlights features of the estate tax and succession planning by entrepreneurs that have been overlooked which could explain the observed pattern of business sales. These omissions, along with measurement errors, cast doubt on the reported findings.