What income inequality? House rewards the 0.2%
Q. What is the Republican-led House poised to do today to help the estimated 150 million American taxpayers who struggled with the nation’s absurdly complicated tax code to file their returns by Wednesday’s deadline?
A. Vote to repeal the estate tax, which affects an estimated 5,400 well-off Americans every year.
We say “well off ” because you need to leave your heirs at least $5.4 million ($10.8 million for a couple) to have to pay any federal estate taxes at all.
Of the nearly 3 million Americans who die every year, only about two-tenths of 1% have enough assets to qualify. It’s a rather exclusive group.
This isn’t to disparage people who worked hard enough (or, in some cases, were lucky enough) to have estates that big. It’s just that, at a time when income inequality is one of the nation’s most vexing problems, the 0.2% hardly need extra help from Congress.
The House and Senate haven’t made a serious move since 1986 to simplify the insanely complex tax code. But both chambers are finding time to vote on repealing the estate tax, a cause championed by a small but wealthy group of people who’ve showered lawmakers with campaign contributions.
If repeal makes it to President Obama’s desk, he’s expected to veto it, as well he should.
Despite all the rhetoric about the “death tax,” dead people don’t pay taxes. They are dead. Repealing the tax would be a huge windfall for their heirs. The average tax break per estate would be an estimated $3 million in 2016, and the 318 largest estates would get an average tax cut of $20 million.
Critics loudly and repeatedly claim the estate tax forces heirs to sell family-owned farms and businesses to pay the tax. That would be a powerful argument — if it were true. The Center on Budget and Policy Priorities notes that in 2013, only about 20 farm and small-business estates owed any estate tax.
The claims about farms being sold off are especially bogus. Besides exempting nearly $11 million of the value of a family-owned farm passed on by a couple, the law bends over backward to make it possible for heirs to keep it. Among the ways: Land that will continue to be farmed can be assessed at its value as farm land, not the much higher amount it would be worth if sold for subdivision or oil and gas development. And heirs can stretch any tax they do owe over at least 14 years.
Neil Harl, a professor of agriculture and economics at Iowa State University who has been involved in this area since 1958, says he has never seen a farm sold off to pay inheritance taxes. Often, it turns out heirs didn’t want the tough life of a farmer, or decided to sell for other reasons when they could easily have paid the tax and kept the farm.
The roughly $22 billion a year the tax pulls in is less than 1% of all federal revenue. But here’s another way to look at that: It’s almost enough to pay the combined annual budgets of the FBI, the Coast Guard and the Centers for Disease Control and Prevention.
More important, think of it this way: Repealing the estate tax would mean that other, far less affluent taxpayers would have to take up the slack. And that’s unfair, no matter how you look at it.