Thune leads colleagues in reintroducing a permanent repeal to the estate tax
WASHINGTON, D.C. — Sen. John Thune announced he is leading an effort to repeal the federal estate tax this week.
The federal estate tax, also called the death tax by some, is a tax on property that’s transferred from a deceased person to their heirs. That property includes both physical and financial assets, such as cash, land, real estate, stocks, bonds and mutual funds.
Thune’s bill, the Death Tax Repeal Act of 2019, has been backed by many of his Republican colleagues, who argue that it can be devastating for farmers, ranchers and family-owned businesses.
“Oftentimes, family-owned farms and ranches bear the brunt of this tax, which threatens families’ agricultural legacies and makes it difficult and costly to pass these businesses down to future generations,” Thune said in a statement.
Gov. Kristi Noem has also been a critic of the federal estate tax, often reiterating the story of how her family almost lost their farm as a result of the tax following her father’s unexpected death.
Noem, along with other lawmakers, have also said they oppose the estate tax because they believe it’s a double tax.
According to Senate Majority Leader Mitch McConnell, “The estate tax doesn’t serve any purpose except forcing family farms and family-run businesses to waste precious capital on costly tax planning and in too many cases, paying taxes on income or property that have already been taxed once.”
The purpose of the estate tax is to provide a backup to the capital gains tax. Normally, the wealth that accumulates on an asset over time is eventually taxed when it’s sold. The estate tax is designed to tax property that’s accumulated wealth, but won’t be taxed until it’s passed down.
The estate tax has been reduced considerably since the Tax Cuts and Jobs Act was passed in 2017. Under the new law, less than 0.1 percent of estates are required to pay the estate tax, and 90 percent of taxable estates are owned by the top 10 percent of income earners.
Married couples are exempt from the tax if their assets are worth less than $22.4 million, along with individuals with assets worth less than $11.2 million.
According to an analysis from the Tax Policy Center, in 2017, before the new tax act went into effect, an estimated 80 small farms and closely held businesses across the US were subject to the estate tax. The analysis defined small farms and businesses as having less than $5 million in assets.
With the new law, no small farms and businesses under that definition will owe an estate tax.
The higher exemption created by the new tax laws is set to expire in 2025. Thune’s bill would completely eliminate the tax.