Bills Reintroduced To Repeal US Estate Tax
Legislation reintroduced in both the Senate and the House of Representatives calls for the repeal of the estate tax, or “death tax” as it is commonly known in the United States.
Until 2012, estates paid a 35 percent tax above a USD5m cap. The tax was scheduled to revert in 2013 to 2001 tax law, with a USD1m exemption and a 55 percent tax rate, but the enactment of the American Taxpayer Relief Act indexed its USD5m exemption (USD10m for married couples) and set a 40 percent tax rate.
The burden that the tax places on family businesses and farms has been the subject of much discussion in the US Congress.
The Death Tax Repeal Act was reintroduced on January 24 in the Senate by John Thune (R – South Dakota), a Finance Committee member, and in the House by Kristi Noem (R – South Dakota), a Ways and Means Committee member, and Sanford Bishop (D – Georgia), an Appropriations Committee member.
“In an environment where it’s frequently too difficult and costly for family owned farms to be passed from one generation to the next, we should be knocking down hurdles to find ways to incentivize families to retain these multi-generation businesses,” said Thune. “Repealing the death tax would be a big step in the right direction.”
A previous version of Thune’s bill was adopted as part of the non-binding fiscal year 2016 budget resolution, and death tax repeal is a provision in the tax reform frameworks proposed by both President Donald Trump and the Republican party.
On January 25, a letter in support of their bill was sent to Thune and Noem by more than 100 organizations and business groups in the United States. The letter emphasized that the tax is “unfair” and its negative effects “make permanent repeal the only solution.”
“It makes no sense to require grieving families to pay a confiscatory tax on their loved one’s lifetime savings,” it added. “Often this tax is paid by selling family assets like farms and businesses.”
“Many studies have quantified the potential job growth that would result from estate tax repeal,” the letter continued. “Last year the Tax Foundation found that the US could create over 150,000 jobs by repealing the estate tax. A 2012 study by the House Joint Economic Committee found that the death tax has destroyed over USD1.1 trillion of capital in the US economy – loss of small business capital means fewer jobs and lower wages.”
It also pointed out that the death tax “currently accounts for less than one percent of federal revenue, … [and] there is a good argument that not collecting the estate tax would create more economic growth and lead to an increase in federal revenue from other taxes. A 2016 Tax Foundation analysis found repeal of the death tax would increase federal income taxes by USD145bn over 10 years,” on a dynamic growth-inclusive basis.
Finally, the letter noted that “the death tax forces family businesses to waste money on expensive insurance policies and estate planning. These burdensome compliance costs make it even harder for business owners to expand their businesses and create more jobs.”
