New York Estate Planning & Elder Law Blog
The White House has come forward and stated that President Barack Obama’s advisers would recommend that he veto pending bill, authored by Republicans, which would repeal the federal estate tax. A veto on the bill could happen as soon as Thursday, although experts believed that it stood little chance of becoming law. Democrats in the federal legislature and other lobbying groups all disagree with the repeal of the federal estate tax because of the damage that it would cause to the federal deficit.
Repealing the Estate Tax
Known by its opponents as a “death tax,” the federal estate tax reaches as high as forty percent on estates valued at more than the federal exemption level, $5.43 million for 2015. The tax is applied to the value of the estate that passes the $5.43 million mark unless it is protected through other estate planning means like trusts, retirement accounts, and the like. Proponents of the bill repealing the federal estate tax claim that it only serves to unduly burden grieving family members. However, the White House has said in a statement that it disagrees.
One of the biggest supporters of repealing the estate tax, Representative Steve Scalise, has gone on record as saying that this bill would help small business owners and family farms that require significant resources to shield their holdings from estate tax. “It takes away from their ability to grow their business to actually create jobs in this country.”
Arguments Against the Bill
According to White House experts, repealing the estate tax is “fiscally irresponsible” that would “endorse the principle that the wealthiest Americans should not have to pay tax on certain forms of income at all.” In addition, the Joint Committee on Taxation reported that if the bill was passed as law it would add a total of $269 billion to the federal deficit over the next ten years.
In regards to the Republicans’ argument for helping small businesses and family farms, reports show that a tiny fraction of Americans actually pay the federal estate tax. Only 0.2% of all American estates, around 5,400 in total, will pass the federal exemption level and be required to pay the federal estate tax this year. This bill does not apply to any state estate or inheritance taxes, which are passed individually by each state and have their own requirements attached to estates.
Democratic Senator Ron Wyden stated that “It’s ironic that my Republican colleagues are calling for a balanced budget and then in the same breath offering up a plan that would cost the government $269 billion in lost revenue over a decade.” The bill has led to more speculation that the Republican legislature is more concerned about protecting their own wealth and less concerned about the well-being of regular American citizens. Pushing for the repeal of the federal estate tax has also alienated wealthy Republicans from the less wealthy in their own political party.