WASHINGTON, DC – Companion bills to eliminate the estate tax have been re-introduced in Congress.
Senator John Thune of South Dakota is leading the Senate effort. Missouri Congressman Jason Smith is leading the effort in the House.
The Death Tax Repeal Act of 2021 would permanently repeal the federal estate tax that affects only a small number of the wealthiest households. There’s strong support among major ag groups including American Farm Bureau and National Cattlemen’s Beef Association
The Republican tax law passed in 2017 already dramatically weakened the estate tax, exempting all estates worth less than $11.2 million and allowing couples with $22 million to pass on their estates without facing the tax.
In 2018, following the GOP tax law, only 5,000 taxpayers were expected to file estate tax returns, according to projections by the American College of Trust and Estate Counsel, an organization of estate attorneys, based on Internal Revenue Service data. About 1,700 families are expected to actually pay the tax annually, said Howard Gleckman, a tax expert with the Tax Policy Center, a nonpartisan think tank.
According to the Brookings Institute, the impact of the estate tax on family-held businesses and farms and ranches has taken on a hugely disproportionate role in public policy debates. “There is virtually no reliable evidence suggesting that the impact of estate taxes on businesses and farms is significant. Businesses and farms already receive substantial subsidies under the existing estate tax, not to mention subsidies under the income tax.”
The number of ranchers and farmers subject to the estate tax has been dramatically reduced as have the total number of estates. South Dakota is the state with the fewest taxable estates in the entire country, roughly 15 a year.
In 2017, then U.S. House of Representative Kristi Noem (now South Dakota’s Governor) became the national face for estate tax appeal. Using her life experience as a backdrop, Noem claimed that following the death of her father, her family was forced to either sell land or take out a loan to pay the estate tax owed and save the family farm. She cited it as a main reason for her decision to get into politics.
She would ultimately be criticized for mischaracterizing the family’s circumstances. The estate tax has a 100% marital deduction, meaning with her mother still living, there could have been no estate tax owed. In addition, the law at the time allowed for any estate taxes owing to be deferred for up to five years. And the IRS has flexible installment plans at an interest rate lower than any lender. There are also other financial estate planning options available to ranches and farms and other small business to protect assets from becoming taxable under an estate tax scenario.
