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Horowitz: It’s Time to Revive the “Death” Tax

Tuesday, November 21, 2017


“No Taxation without Respiration”, the long-time rallying cry of conservatives and Republicans who have made it their mission to do away with the estate tax, is one of the most effective political slogans ever devised. These anti-estate tax proponents cleverly renamed the estate tax the death tax and have largely succeeded in exempting all but a very small percentage of Americans from paying it.

The tax cut legislation that passed the House of Representatives last week does away with the federal estate tax completely and the Senate version, which details have yet to all be made public, reportedly takes another big bite out of it.

This is despite the fact that, according to the Joint Commission on Taxation, in 2017, only 2 out of 1,000 estates will pay any estate taxes. This is due to the fact that the current exemption is $5.49 million per person and nearly $11 million per couple-- a dramatic increase from the $650,000 that was exempted in 2001.  Once the estate tax is completely phased-out, it would cost the Federal Treasury $269 billion over 10 years, either increasing the federal debt, forcing cuts in vital programs, or triggering future tax increases.

The fact that we continue to go down this path when only a small sliver of the richest Americans now pay the estate tax is a tribute to the effectiveness of the long-term campaign run against it. As public policy, however, when the current Republican tax cut legislation explodes the deficit and is by all objective analysis conducted highly tilted to the rich, it makes little or no sense.

In fact, the so-called ‘death tax’ is not a tax on dead people; it’s a tax on inheritances. As more precisely defined by the Center on Budget and Policy Priorities, “the federal estate tax is a tax on property (cash, real estate, stock, or other assets) transferred from deceased persons to their heirs.” The Center notes that contrary to the claims of double-taxation by proponents of doing away with the estate tax, most of the income and assets people inherit have yet to be taxed.

The nation’s second richest man, Warren Buffett, called eliminating the estate tax, ‘a terrible mistake’ during an interview on CNBC last week. As he has done many times over the years, Buffet pointed out that the estate tax contributes to the idea of the United States as a meritocracy and provides at least some brakes to advancement based on accidents of birth.  Buffett told CNBC, "I don't think we should have our 'Olympic team' 20 years from now be the eldest sons of the 'Olympic team' currently."

Given that we need to raise a certain amount of revenue to fund the federal government, the estate tax is one of the more sensible ways to do it.  Instead of doing away with it, we should return to a lower exemption of about $1 million or so.  This would still only impact a small percentage of the richest Americans whom despite some taxes taken out will still inherit robust sums.

There is no prospect, of course, of an estate tax expansion happening in the short-term. For now, the best we can hope for is that Congress ends up rejecting the ill-advised effort to do away with it completely.

Rob Horowitz is a strategic and communications consultant who provides general consulting, public relations, direct mail services and polling for national and state issue organizations, various non-profits and elected officials and candidates. He is an Adjunct Professor of Political Science at the University of Rhode Island .


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