GOP House Votes 240-179 To Repeal Estate Tax; Giving 270 Billion To The Wealthy

The House of Representatives voted to kill the federal estate tax today 240-179, with 7 Democrats joining. That doesn’t mean that the estate tax is going away anytime soon, but anti-death tax advocates say it sets the stage for possible repeal in 2017. Significantly, the bill keeps in place a provision called “stepped up basis” that allows capital gains to escape taxation if passed to heirs.


For now, there aren’t enough votes in the Senate, and President Barack Obama would veto estate tax repeal anyway.


“Representatives are interested in showing that this is a priority and continuing the drumbeat,” says Palmer Schoening, head of the Family Business Coalition which lobbied on behalf of 82 business groups in favor of the repeal bill, H.R. 1105, introduced by Kevin Brady (R-TX). Sen. John Thune (R-SD) sponsored a companion bill, S. 860.


Only 2 out of every 1,000 people who die are subject to the federal estate tax, according to Tax Policy Center estimates. That’s because there’s a huge exclusion amount–$5.43 million per individual or $10.86 million per couple—before the tax kicks in (the top rate is 40%).



Arguments for repeal: it would spur the economy and lift burdens on owners of small businesses and farms. Karen Madonia, chief financial officer of Illco, a Chicago-area HVAC supplies distributor, testified on Capitol Hill last month how an estate tax on her father’s death would mean selling parts of the company (shutting down branches, laying off workers or liquidating inventory) to pay it.



Arguments in favor of the tax: it helps reduce concentrations of wealth and produces additional revenue. Repealing the tax would cost the Treasury $270 billion over 10 years. On average, 55% of the value of estates worth more than $100 million is made up of unrealized capital gains that have never faced income or capital gains tax, according to Americans For Tax Fairness’ review of Federal Reserve Data.


The White House frames the issue a different way on its blog: Taxpayers have a choice of “giveaways to the wealthy few” (“5,400 of America’s wealthiest households would get an average tax cut of more than $3 million”) versus “tax cuts for the middle class” (44 million middle-class families would get an average tax cut of nearly $600). [Forbes]


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