Tax Justice Digest stories about Estate Tax

New CTJ Report: House Budget Plan Deals with Tax Policy More Responsibly than the Senate Plan

March 21, 2008 4:52 PM |
Citizens for Tax Justice has released a new report explaining that the budget resolution approved by the House of Representatives last week deals with tax policy in a more responsible way than the version approved by the Senate. The differences between the two resolutions must be ironed out by a House-Senate conference committee that will negotiate a final version to be approved by both chambers.
 
The resolution approved by the House offers more responsible tax provisions in a number of areas.
 
First, the House budget plan uses “reconciliation instructions” that would make it easier to pass a bill to provide relief from the Alternative Minimum Tax (AMT) without increasing the deficit. Any further increase in the national debt is likely to be borne, in the long-run, by the middle-class, so it would be unfair to take on debt to provide AMT relief, which mostly benefits families that are relatively wealthy. The Senate plan, unfortunately, does not use this approach because the Senate assumes that an AMT patch will be deficit-financed.
 
Second, the House plan does not emphasize cutting the estate tax the way the Senate plan does. CTJ’s data shows that the estate tax now affects fewer than 1 percent of estates. The Senate decided, however, to cut the estate tax for these few, wealthy families and to finance this tax cut with surpluses that may never materialize.
 
Third, the House plan would not cut taxes on better-off Social Security recipients. Such a tax cut, which the Senate plan includes, would only benefit those seniors who are well-off.
 
The House-Senate conference committee that takes up the budget resolutions should reject the choices that the Senate has made with regard to taxes and choose the more responsible path set by the House of Representatives.

CTJ Releases Most Recent State-by-State Data on the Estate Tax

March 7, 2008 5:13 PM |
A new report from Citizens for Tax Justice shows that the federal estate tax continues to reach less than one percent of estates, despite the complaints of anti-tax activists that middle-class people are crushed by the so-called "death tax." In most of the states that are home to Senators who want to abolish the estate tax, the percentage of estates affected is particularly low.
 
Under the Bush tax cuts, the estate tax is scheduled to change to allow even more estates to escape federal taxation. In 2004 and 2005 estates worth up to $1.5 million (or $3 million for estates owned by a married couple) were exempt from the estate tax. (Most of the estates listed in the new report were subject to that exemption.) Since then, the exemption has increased to $2 million ($4 million for married couples) and in 2009 the exemption will increase to $3.5 million ($7 million for married couples). In 2010 the estate tax will disappear entirely. After 2010 all the Bush tax breaks expire, including this generous treatment of estates.
 
Some lawmakers want to make permanent the complete repeal of the estate tax, which would cost over a trillion dollars over a decade. As this data makes clear, that would benefit very few families with the biggest estates.

House Finally Gets It Right on Estate Tax, But Trouble Is Brewing in the Senate

October 12, 2007 6:33 PM |

Before the House passed the bill ending the private debt collection program, Republican members used procedural rules to force a vote on a complete, unpaid for repeal of the estate tax. The measure was defeated 212-196, a major setback for the handful of super-rich families that have been funding a repeal campaign for several years. The House has voted several times during the Bush years to repeal the estate tax. According to a statement from Republican Whip Roy Blunt (R-MO) 42 Democrats voted to repeal the estate tax the last time it came up for a vote while this time only ten did, indicating that several have decided for the first time to stand up to the extreme anti-tax rhetoric used by opponents of the estate tax.

Supporters of a fair estate tax needed this news after developments in the Senate last week. As the Senate Finance Committee marked up its tax package for the agriculture bill reported on last week, Senator Jon Kyl (R-AZ) offered an amendment to significantly reduce the estate tax without paying for it. Senator Kyl only withdrew his amendment after Senate Finance Chairman Baucus agreed to hold a hearing on the estate tax sometime this year and mark up a bill in the spring.

Fewer Than One Percent of Estates Subject to Tax

The most recent data released from CTJ show that the percentage of estates subject to the tax was less than 1 percent in most states in 2005. Even fewer estates are likely to be taxable this year because the exemption is larger ($2 million for a single taxpayer vs. $1.5 million in 2005). Under the estate tax cut enacted by the Bush and the Republican-led Congress, the estate tax is gradually reduced until it disappears in 2010, but then returns in 2011.

Some lawmakers want to compromise and essentially freeze in place the estate tax rules that will be in effect in 2009, including a $3.5 million exemption for single taxpayers and a 45 percent rate. The budget resolution Congress adopted for fiscal year 2008 assumes that this compromise will be enacted. The amendment offered by Kyl last week would have gone much farther because it would increase the exemption to $5 million, tax the value of the estate between $5 million and $25 million at 15 percent and then tax the rest at 30 percent.

In Search of the Elusive Family Farm Threatened by the Estate Tax

Much of the rhetoric used by estate tax opponents revolves around family-owned small businesses, especially farms, that they claim are endangered because of the estate tax. Contrary to what the anti-tax advocates claim, very few farms or small businesses, if any, would ever have to be sold because of estate taxes.

According to the Congressional Budget Office, there were only 1,659 farm estates that were taxable in 2000 (when the estate tax was steeper because the exemptions were smaller and the rate was a little higher) and of these, only 138 did not have enough liquid assets to pay their estate taxes immediately, meaning some part of the estate could conceivably be sold in order to pay the tax. The CBO also found that if the exemption level was as high as it is today only 15 farm estates would have been both taxable and lacking the liquid assets to pay the tax. 

Those 15 farm estates would likely weather the estate tax just fine. This CTJ paper describes the extra breaks that family farms get from the estate tax (in addition to the exemptions all estates get) including a provision that allows the tax to be paid off over a period of 14 years. The American Farm Bureau Federation famously admitted to the New York Times in 2001 that they could not cite a single example of a farm that had to be sold due to the estate tax.

Democratic Congressmen Propose Estate Tax Break for Farms

April 27, 2007 9:33 AM |

Last week U.S. Representatives John Salazar and Tim Mahoney introduced the "Save the Family Farm and Ranch Act of 2007," which would exempt family farms that provide 50 percent or more of a family's income. This seems unnecessary. The American Farm Bureau Federation famously admitted to the New York Times in 2001 that they could not cite a single example of a farm that was lost due to the estate tax. Moreover, as a Citizens for Tax Justice paper explained last summer, family farms receive several additional breaks (beyond the $2 million dollar exemption in effect this year) from the estate tax and can pay off estate taxes over a period of 14 years.

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