Estate tax repeal: Is it possible?

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Call it what you want to call it – but any time the estate tax, also known as the death tax, comes up in conversation, ears perk up and most in agriculture start paying attention. Well, in the past few days, the topic has started simmering again.

Taxes No, we’re not faced with a situation like we were in in 2011 when we faced a very real potential of estate tax levels reverting back to pre-2001 levels when estates worth $1 million were taxed at a 55 percent rate. At the eleventh hour in 2012, Congress passed the American Taxpayer Relief Act that permanently set the estate tax exemption level at $5 million per individual (or $10 million per couple) and established the top tax rate at 40 percent. This legislation maintained popular provisions like the spousal transfer, the step-up in basis and indexed the estate tax for inflation. By and large, while full repeal was the top priority among agricultural organizations, most in the industry seemed appeased by the permanency under the ATRA.

So, for the past couple of years, except for discussions about how the estate tax fits into overall tax reform efforts, the topic hasn’t received a great deal of attention.

Two things this week, however, brought it back to the surface.

First, U.S. Representative Kevin Brady (R-Texas), who has been one of the strongest voices on Capitol Hill advocating for full repeal of the estate tax over the years, was able to top 218-cosponsors on his Death Tax Repeal Act (H.R. 2429). Reaching 218 cosponsors means more than half of the House of Representatives is on board with a full repeal.

This news caused the American Farm Bureau Federation to say now’s the time to act.

“Although permanent law enacted as part of the American Taxpayer Relief Act of 2012 provided significant estate tax relief, repeal is the best solution to protect all farms and ranches from the estate tax," said AFBF President Bob Stallman.

The bill may be headed to the House floor for a vote. Rep. Brady was recently quoted in Forbes saying he appreciated Ways and Means Chairman Dave Camp’s willingness to help secure a floor vote, and he noted that such a vote hasn’t occurred in nearly a decade.

“Our goal – and we are determined to achieve it – is to bury the death tax once and for all,” said Congressman Brady.

That’s the first thing that happened. The second newsworthy nugget this week involves one of the presumed front-runners in the 2016 Presidential election, Hilary Clinton. Over the years, Hilary and her husband former President Bill Clinton have gone on the record supporting the estate tax. Outside the halls of Congress or the White House, though, the Clintons have done the same thing millions of farmers, ranchers, landowners, and small business owners have done – they’ve worked with estate planners to carefully design their estate so as to avoid being hit with the estate tax.

That’s right – while during her 2008 Presidential run, she supported setting the individual exemption at $3.5 million at a rate of 45 percent, Bloomberg reports, that the Clintons have divided ownership of their New York home into separate 50 percent shares, then placed those shares into trusts, which “could save the Clintons hundreds of thousands in tax avoidance,” Bloomberg says.

First of all, I don’t blame them. The Clintons, by doing responsible estate planning today, are avoiding hitting Chelsea and her family with a massive tax burden and hopefully finding a way to keep those assets in the family. What’s not to appreciate about that?

The problem comes when one’s words don’t reflect one’s actions.

Estate taxes made up just 0.7 percent of total federal revenue in 2013. Less than one percent. Yet, the estate tax has been one of the major causes of the break-up of multi-generational farms, ranches and small businesses across the nation. While agricultural groups were pleased with the action taken in 2012, most, like Farm Bureau, continue to advocate for full and permanent repeal.

So while it’s not uncommon for bills to earn support from a majority yet somehow flounder and for career politicians to say one thing and do another, maybe, just maybe the debate will spark again.

What are your thoughts on the estate tax? Leave a comment below. 

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Wyo  |  June, 19, 2014 at 07:40 PM

It is extremely naive to think the the current administration and current congress will lower or repeal ANY tax. Bet on tax increases with the bunch currently in Washington.

ar  |  June, 20, 2014 at 09:29 AM

Sad to say but I agree it would be great if it were all gone but don't count on it with the current mess that we have. PD

texas  |  June, 20, 2014 at 09:41 AM

If George Bush and a Republican Congress couldn't get this passed - what chance do you give this under an Obama administration?

texas  |  June, 20, 2014 at 09:42 AM

The estate tax at least should include transfers to private foundations, the Gates foundation comes to mind, without paying the capital gains tax on the property transferred. It is the largest loop hole in the current law. If Gates wants to give his to the Africans, so be it. He does so without paying any taxes, income or estate. I want to pass mine to my relatives because I was born poor and have paid taxes through the roof and now the left wing fringe wants to take another 40% from my heirs. Unfair and socialist.

June, 20, 2014 at 10:21 AM

Creating laws that congress can find a loophole for themselves is a black art....what needs to be done is all Americans call their congressman and demand a repeal of the death tax. Since most of them are lawyers they like nothing better than to secure themselves from obsolescence by crafting laws that would force someone to hire an attorney needlessly. That asset was already taxed and taxed again & there is absolutely no reason or justification for a death tax except PURE GREED

Robert Achenbach    
WA  |  June, 20, 2014 at 12:13 PM

Whenever farm organizations or politicians argue that they are "protecting family farms" by repeal of the estate tax, you know you have someone in the 1% pockets. No family farm (and I am not talking about the Gallo family) has ever been lost due to the estate tax unless they had a lousy estate tax plan and attorney. Get the facts, get a good attorney and start planning now. You kids will get a farm and a stepped-up basis. If the ET is repealed the kids will get a farm and TONS of capital gains tax.

iowa  |  June, 20, 2014 at 04:17 PM

Wrong. Plenty of family farms have been lost in the past until the death tax was repealed. Now that it is reinstituted expect more of the same. Our family farm is worth about 9 million in land and another 1 million in cattle. So we are OK. However my grandparents family farm was lost because of taxes years ago.

south dakota  |  June, 20, 2014 at 06:08 PM

My parents went in last week and with their trust set the way it is now, we would owe about $9 million. If we change it to a LLC we would owe around $3 million, and we work with some of the best estate planners and accountants in the state. Over the last 125 years my family has bought and paid taxes on this ground the entire time. Why when one generation dies do we have to pay more tax? Didn't seem like a big issue until land went from $1500/ac to $5000/ac. The exempt status could surely be raised to around $10-20 million per individual I would think.

Michigan  |  June, 20, 2014 at 07:32 PM

It is time to tax only money wealth after it has passed beyond the first generation. Homes and family farms should never have been taxed. It was the opening Monsanto used to start getting all their farm land. As completely usual, when it comes to politicians, it is always "Do as I say, Not as I do". We should have a simple law that says ALL acts of politicians are good for everyone. And, if it's good for the citizens, politicians have to do it too. EQUAL treatment. That biggie of the leftists.

SD  |  June, 21, 2014 at 05:01 PM

We most definitely will keep on working to repeal this most unfail of taxes! Surely there is more productive work in which the 'tax industries' could work without the death tax! We have worked at least the past 50 years to improve the position of ALL who pay death taxes, most especially those whose family businesses are the most weakened by paying those taxes. It death taxes seem mostly designed to keep small family businesses from becoming big buisnesses, no matter the size of the family, imo. Judging by some of the comments here, many of you are going to be quite surprised when doing your taxes next go-round to see how many 'new' and 'increased' taxes you will be paying, already put in place by the Obama Admin. decrees. And so little is being used either to strengthen our nation, or our citizens.

Ruel Barker    
Provo, Utah  |  June, 23, 2014 at 10:40 AM

I am in favor of a complete repeal of the estate tax! It is a devastating financial threat to nearly everyone in Agriculture. If Congress wants to help the "hand that feeds them" they will repeal this tax as soon as possible.

J Baldwin    
Hunt, Texas  |  June, 23, 2014 at 01:57 PM

Are we thinking far enough ahead? The trade-off seems to involve giving up the step up in basis, leaving the possibility of an even heavier tax burden in the future if the property is sold. There are a number of ways to plan for the event as the Clintons did. Plus, if the estate's agricultural value is sufficiently large (currently 35% of the estate), a pretty good payout program is available at low interest. That, plus the step up may turn out to the best option for saving taxes.

Craig A. Moore    
Billings, MT  |  June, 24, 2014 at 10:04 AM

I believe the estate tax should be all or none. If giving property that has been purchased with money taxes were already paid on, then you should be able to decide what to do with it. Why should you be able to give it to charities and they pay nothing yet if you give it to your kids you are levied crippling taxes? And really, who really "owns" property? In actuality we just have a long term lease from the government for our property. Don't pay your property taxes some year and you will find out who "really owns" that property.

June, 24, 2014 at 06:19 PM

Estate tax is here to stay. Perhaps relief is better found in lobbying for provisions that reasonably address business continuity and liquidity issues arising from estate tax burden. In essence, rules could make the estate tax go away, if business circumstances justify such relief.

June, 24, 2014 at 06:20 PM

Estate tax is here to stay. Perhaps relief is better found in lobbying for provisions that reasonably address business continuity and liquidity issues arising from estate tax burden. In essence, rules could make the estate tax go away, if business circumstances justify such relief.

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