Among those in Congress who will fight for tax reform, there’s one measure that is likely to find unanimous support: the repeal of the federal estate tax—what some call “the death tax.” In fact, House Ways and Means Committee Chairman Kevin Brady calls it "un-American."
"You work your whole life to build up a nest egg or a family-owned business or family farm. Then you pass away ... Uncle Sam can swoop in and take over 40% of everything you've earned over a certain amount. It's just wrong," said Brady at an event promoting tax reform.
However, there are a few important details about the estate tax that should not be overlooked, specifically that the Congressional Budget Office projects the tax will raise between $25 billion and $34 billion a year over the next decade.
The tax currently only affects 0.2% of all estates. Only those estates worth more than $5.49 million this year ($10.98 million for married couples) are required to file estate tax returns and only half of those will be taxable after deductions and credits. The Tax Policy Center estimates that just over 11,000 estates will have to file a return in 2017, and only half will owe any federal tax.
In addition, there are very few family farms and businesses that are affected. The Tax Policy Center estimates about 80 family-owned businesses and farms will need to pay any estate tax in 2017. The Congressional Research Service projects a higher number for any given year (about 159) but notes they represent fewer than 3% of taxable estates. In addition, there are estate tax law options that allow owners to significantly lower the value of a family business or farm for estate tax purposes.
Critics complain that the estate tax is a way to take a second or even third tax bite out of the apple: you made the money, paid income or investment tax on it while you were alive and then it's counted as part of your taxable estate to be taxed again.
Reference: CNN Money (August 23, 2017) “Will Republicans kill the estate tax?”