Lawmakers, farmers urge repeal of estate tax

WASHINGTON – Opponents of a century-old tax on people who die with large estates said Thursday they are optimistic there is enough support in Congress to repeal the estate tax, despite opposition from many Democrats.

The House Ways and Means Committee voted 22-10 Wednesday to do away with the tax, sending it to the full House for a vote. The federal tax applies to the transfer of an estate worth more than $5.43 million per person, or $10.86 million for a married couple, following a death. The tax rate is 40 percent on amounts above the exemption. In addition to the U.S. government, some states also levy their own estate and inheritance taxes.

A contingent of mostly Republican lawmakers, small-business owners and farmers expressed hope that the House action was the beginning of the end for the estate tax. They warned Thursday that unless it was abolished, agricultural producers in particular could be hit hard because of the soaring value of land the past few decades. As a result, it could be easy for a producer with 700 or 800 acres to reach the taxable threshold.

“The good news is we’re heading toward a repeal,” said Sen. John Thune, R-S.D., a member of the tax-writing Senate Finance Committee who has proposed similar legislation. “I believe there is now a majority in both the House and the Senate who agree with us that the death tax punishes a lifetime of hard work.”

Todd Wilkinson, president of the South Dakota Cattlemen’s Association and co-owner of a feedlot near De Smet, said the “death tax is a crushing blow that is facing all of us.” Wilkinson said if he or one of his brothers were to die they would be forced to pay a “big” estate tax.

“I guess the point is I should just go out and blow the money, then my kids don’t have to worry about it. That’s the lesson we are learning in the (agriculture) sector,” Wilkinson said. “Just give us a break. Take this away. Don’t tax us out of business.”

Still, even if it does pass in the GOP-led Congress, it is unlikely to gain the backing of the White House. The Obama administration, along with many Democrats, contend the end of the tax would do nothing more than help the country’s wealthy.

“This is a tax break that is directed solely at the top 0.1 percent of the country,” White House Press Secretary Josh Earnest said Tuesday. “We obviously think that those priorities aren’t just backwards, they’re wrong for the country.”

Republicans have argued repealing the tax would help farmers and small-business owners keep and invest in their businesses. Rep. Kristi Noem, R-S.D., told the story Thursday of how her family decided to take out a loan to pay the tax after her father unexpectedly passed away, instead of selling land or potentially losing the farm. Noem, a member of the House Ways and Means Committee, also voted Wednesday to repeal the tax.

Democrats “like to tell the story that this only impacts the wealthy, they talk a lot about Warren Buffett and Paris Hilton and just chose to ignore the real life stories that happen every day across the United States,” Noem said. “This tax punishes farmers and ranchers. It punishes people who have family businesses who have spent a lifetime working hard and investing in their businesses.”

But a congressional panel, the Joint Committee on Taxation, has estimated only about 0.2 percent of estates with people who die pay the tax, down from about 2 percent 15 years ago. The committee has estimated abolishing the tax would cost the federal government $269 billion in revenue during the next decade.

Matthew Gardner, executive director with the Institute on Taxation and Economic Policy, said there are special tax breaks in place to make sure that most small family-owned farms and businesses will be exempt from the estate tax. For the few that do have to pay, he said there are rules allowing those taxes to be paid over 15 years.

“The idea that the estate tax hurts farms and small businesses is really a red herring. It’s not borne out by the data,” Gardner said. “This Congress seems a lot less interested in meaningful tax reform, and more interested in these showboating things with the estate tax repeal.”