Monday, April 13, 2015

Death Tax Repeal Act of 2015 passes Ways and Means

On a party-line vote, H.R. 1105, The Death Tax Repeal Act of 2015, passed the Ways and Means Committee on March 25 and was sent along to the House for consideration.  The alleged "cost" of enactment is scored at a loss of $269 billion over ten years.

That the advocates for death tax repeal might get this far is not surprising.  The freshman Representative from South Dakota, Kristi Noem, has personally experienced the federal estate tax, and as a consequence has made it one of her life missions to repeal it. Her rancher father died unexpectedly, while she was at college.  She left school to help manage the farm. The devastating premature loss of her parent was made much worse when the family was slammed with the federal estate tax.

 “We made the decision to take out a loan, so we didn’t have to sell our land and potentially lose the farm. The decision impacted nearly every financial choice we made for a decade. No family should have to go through something like that. I am committed to repealing this unjust – and frankly, immoral – tax that hurts small businesses and family farms most. Today marks a step forward toward a time where hard work is respected and death is no longer a taxable event.”

The surprising part is the bill itself.  The estate and generation-skipping tax would be repealed, but the gift tax would be retained!  Why would we create an even greater incentive to not put estate plans into motion until death?

Still more odd, the basis rules would be retained--so, full basis step-up at death, carryover basis for gifts.  The fact that the gift tax rate would be reduced to 35% is small comfort.  The lifetime federal gift exemption and annual exclusion would be retained.

My guess is that, somehow, keeping the gift tax lowered the "cost" of death tax repeal. In practice, of course, it would do no such thing.  But that's the way tax scoring works in DC.

1 comment:

JLM said...

Seems like a weirdo reason for keeping the gift tax, but I can't think of a better explanation for this puzzling provision.

We should note that Marco Rubio, today's new formally-announced presidential hopeful, includes death-tax repeal in his tax reform plan.