For the first time in a decade, the U.S. House of Representatives is scheduled to vote to fully repeal the estate tax, also called the death tax.
The legislation, the Death Tax Repeal Act (H.R. 1105) introduced by Rep. Kevin Brady (R-Texas) and Rep. Sanford Bishop (D-Ga.), passed the House Committee on Ways and Means in late March and is slated to be considered by the full House later this week. The bill would repeal the estate and generation-skipping transfer taxes and makes permanent the maximum 35 percent gift tax rate and lifetime gift tax emption. It also provides for an inflation adjustment to such exemption amount.
“The Death Tax is the wrong tax at the wrong time and hurts the wrong people,” says Rep. Brady. “It’s the number one reason why family-owned businesses aren’t passed down to the next generation. It is Washington’s most immoral and calculated attack on the American Dream.”
At the end of 2012, Congress passed legislation to permanently extend the estate tax exemption level at $5 million per individual and raised the top tax rate to 40 percent. Rep. Bishop says the estate tax “punishes success and traditional American virtues of hard work and thrift.”
“I believe that the estate tax is politically misguided, morally unjustified and downright un-American,” said Congressman Bishop. “It undermines the life work and the life savings of farmers and small- and medium-sized businesses in Georgia and across the nation.”
According to the Tax Foundation, the United States has the fourth highest estate or inheritance tax rate in the world. Additionally, the foundation says repealing the estate tax would lead to the creation of nearly 150,000 jobs and would eventually boost federal revenue by $8 billion per year through higher receipts of individual income taxes, payroll taxes and corporate income taxes. “The estate tax has a narrow base and a high rate, and it falls almost exclusively on the domestic capital stock. The capital stock (accumulated wealth) makes America more prosperous and productive as a whole, so taxes levied on the capital stock have unusually poor effects on economic growth,” according to the foundation.
Farmers and ranchers from across the country were on hand at a recent congressional hearing on this subject. Seventh-generation cattlemen from Texas Bobby McKnight explained to members of Congress that in agriculture many farm and ranch families are “asset rich and cash poor,” with much of the wealth being non-liquid and tied up in land, buildings and equipment.
“When times have been lean, I have had to make sacrifices to keep my business above water, but sometimes you run out of places to cut,” said McKnight. “That is what happened to my family during hard times brought on by the estate tax. I had to let go of seasoned employees that had families of their own and were forced to work elsewhere. The skilled labor that I needed to run my operation was lost.”
Tennessee farmer and American Farm Bureau member Brandon Whitt told the panel his family was forced to sell off land in order to pay estate taxes. That land, he said was lost to development, “never to be received.”
If the legislation passes the House, it will head to the Senate. If it receives a vote and passes out of the upper chamber, it would head to the White House, where it is unlikely to receive support from President Obama. In fact, the President’s budget proposal would revert estate tax levels to 2009 when the exemption level was $3.5 million per person, the lifetime exemption was $1 million and the top tax rate was 45 percent.
That’s not deterring Rep. Brady, who has made estate tax repeal a priority for many years.
“After a family loses a loved one, why should Uncle Sam swoop in and take much of the nest egg they spent a lifetime building? Especially when it forces the survivors to take out loans or sell their land or business just to try to keep some of what they worked so hard to earn,” says Rep. Brady. “I have families in my district that have paid this tax multiple times on the same property. They deserve better.”