‘Death tax’ rhetoric doesn’t address the facts
By Shane Nicholson
The House of Representatives voted 239-179 Thursday to give the richest 0.2 percent of Americans a tax break totaling more than $246 billion over the next decade.
The Death Tax Repeal Act of 2015 has been a bill strong on talking points but low on substance. While interest groups have touted it as a means to stop the supposedly unfair taxation of heirs the reality is that the estate tax as it currently stands only affects the wealthiest Americans.
“Today’s vote to repeal the estate tax is just the Republican’s last attempt to tilt the U.S. tax code in favor of their ultra wealthy campaign donors,” said Rep. Jim McDermott (D-Wash.).
The so-called death tax is levied on estates worth more than $5.43 million for an individual (or $10.86 million for a married couple) and the rate of taxation only applies to the net difference between the total estate value and that $5.43 million baseline. This means that for every 1,000 persons who pass away just two face taxation under current law, and only on a fixed amount above that $5.43 million.
Basically you have to be very very rich to even begin thinking about how your family is going to deal with the effects of the infamous death tax.
That didn’t stop the GOP rhetoric machine from kicking into overdrive after all but three Republican House members voted in favor of the repeal.
“One-in-five children are on food stamps because of the policies of this administration. Fifty percent of our college students can’t find work or are underemployed because of the policies of this administration,” Rep. Christie Noem (R-N.D.) said.
“We talk about income inequality, and we are seeing it because of those previous policies. This tax is a very unfair tax,” Noem said, without a sense of irony.
“Illinois Farm Bureau applauds the strong House vote in favor of death tax repeal,” said Illinois Farm Bureau President Richard Guebert Jr. “Today’s action puts our members a step closer to eliminating an unfair tax that jeopardizes the transfer of hard earned assets to the next generation.
“Roughly 90 percent of the value of family-owned farms in Illinois is tied to land, buildings and equipment that can’t easily be converted to cash, leaving some farm families unable to cover their enormous tax bill after the death of a family member. Death tax repeal would allow farm families to pass farms to the next generation without having to sell off assets to settle tax liabilities.”
Of course such statements don’t stack up to the realities of the current estate tax code, one which, despite the protestations of Rep. Noem and others, is possibly the most progressive tax in the country. While the top statutory rate is currently set at 40 percent, the average effective tax rate for 2013 fell at 16.6 percent.
And a vast chunk of the moneys collected come from unrealized capital gains which have never been taxed, something which the framers of the estate tax took into account all the way back in 1916: to ensure those who have prospered the most from the economic climate presented to them still pay their fair share back.
Granted the former estate tax code did have an impact on small farms; the threshold was set at just $650,000 for an individual, not necessarily a substantial amount of wealth for one to leave behind upon their death and one which a family farm could easily gather over generations.
However the current $5.43 million figure has placed such concerns out of mind for the overwhelming majority of small business and farm owners as less than two dozen such entities owed any estate tax in 2013, according to the Independent Tax Policy Center.
Reached for comment, the Illinois Farm Bureau pointed out current land values in central Illinois of roughly $16,000 per acre. This overlooks the fact that the estate tax would require such land to be held by a private individual upon their death for the tax to apply, not in a holding company acting as the managing body of a farm estate.
The fact is the estate tax, even in its current weakened form, ensures that those who have benefited the most still have to contribute to the society that allowed them such a life in the first place.
Funds set to be lost from a repeal over the next 10 years total more than the Federal budgets for the FDA, EPA and CDC combined, bodies there to provide crucial services to the vast majority of Americans, not just the 0.2 percent affected by the current estate tax.
“The man of great wealth owes a particular obligation to the State,” said President Theodore Roosevelt, “because he derives special advantages from the mere existence of government.”
One hopes the truth and common sense buried in this statement from 1906 drowns out the rhetoric surrounding the estate tax debate as it moves on to the Senate.