Estate tax repeal bill introduced by the Senate
Posted on 02/16/2017 at 08:33 AM by David Repp
Twenty-eight Republican Senators, including senators Chuck Grassley and Joni Ernst, introduced a bill to terminate the Federal estate tax. The bill leaves intact the federal gift tax, thus motivating taxpayers not to give any of their money away during life so that they will have more of it to take with them when they die. This makes a lot of sense because Heaven can be very expensive.
Currently, in 2017, any individual can give away, at death or during life, up to $5,490,000 of assets. If married, the couple can give away $10,980,000 of assets by a mechanism known as “portability.” That is a lot of money, and 998 out of 1,000 people don’t have enough assets to even trigger an estate tax.
It didn’t used to be this way. Not too long ago, an individual with only $600,000 of assets would pay an estate or gift tax. Almost everyone had an estate tax problem and it justifiably generated a lot of outrage. It is a sad time to be an estate tax planner today having to tell those formerly outraged clients: “I’m sorry, but you don’t have enough money to trigger a gift or estate tax.” The look of dejection on their faces is hard to bear.
This bill, if enacted, would benefit the two people out of 1,000 that have more than $5,490,000 of assets. The top 400 Americans had net worth of $2 trillion in 2013, which was more than the combined net worth of the bottom 50% of U.S. households. The lower 50% of households held 3% of the wealth in 1989 and 1% in 2013.
Americans are not generally aware of the extent of inequality or recent trends. There is a direct relationship between actual income inequality and the public's views about the need to address the issue in most developed countries, but not in the U.S., where income inequality is worse but the concern is lower. The U.S. was ranked the 6th worst among 173 countries (4th percentile) on income equality measured by the Gini index.
So, maybe the Senate Republicans are concerned that the estate tax kills small business and farms. The nonpartisan Tax Policy Center estimates that only 120 farms and small business, where at least half the assets are in farm or business assets, had to pay the estate tax in 2013 and it is probably the same or less today.
Maybe the reason for the estate tax repeal is just plain old American empathy; empathy for all those formerly outraged, but now dejected souls who go to their estate planner and learn that they don’t have enough assets to have an estate tax problem. If no one paid an estate tax, the bottom 99.8% become happier - and happy people are healthier people. There, we fixed the health care problem too.
The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.
Categories: Trusts & Estates Law, Taxation Law, David Repp
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