NLBMDA: Congress Renews Push to Repeal Estate Tax

By / 2 years ago

On April 16, the House of Representatives voted 240 to 179 to approve the Death Tax Repeal Act (H.R. 1105), which would permanently repeal the estate tax and the generation-skipping transfer taxes. It also makes permanent the maximum 35% gift tax rate and lifetime gift tax exemption, while adjusting the exemption amount for inflation. House Republicans ignored the veto threat from the White House in passing the legislation that was largely along party lines.

The vote marks the first time in 10 years that the House of Representatives has voted on full repeal of the estate tax, and is a major milestone in returning the issue of estate tax repeal back to the forefront of the tax policy debate, as over 250 current House members had never cast a vote on repeal legislation.

The vote marks the first time in 10 years that the House of Representatives has voted on full repeal of the estate tax, and is a major milestone in returning the issue of estate tax repeal back to the forefront of the tax policy debate, as over 250 current House members had never cast a vote on repeal legislation.

For its part, in March the Senate approved an amendment to the Fiscal Year 2016 Budget Resolution by a vote of 54 to 46 to establish a deficit-neutral reserve fund to allow for the permanent elimination of the federal estate tax. That vote, although meaningful in terms of having Senators on the record in support of estate tax repeal, is largely symbolic as it is non-binding.

Senator John Thune (R-SD) introduced the amendment to the Budget Resolution and is also the sponsor of the Senate version of the bill (S. 860). Despite a majority of Senators supporting estate tax repeal, at present the Death Tax Repeal Act does not have the 60 votes needed to avoid a filibuster from the opposition and move forward in the upper chamber.

Challenges with the Current Estate Tax Law
Current estate tax law does not adequately recognize the high asset base of lumber and building material dealers’ businesses or set the exemption level high enough to adequately cover the value of non-cash assets such as land, inventory, and equipment. The estate tax imposes a tax rate as high as 40% on family businesses—including lumberyards.

NLBMDA supports the Death Tax Repeal Act and submitted a written statement in March for a hearing in the House Select Revenue Measures Subcommittee titled “The Burden of the Estate Tax on Family Businesses and Farms,” stating it’s support for the legislation.

A 2012 study by the Joint Economic Committee found that the estate tax has destroyed over $1.1 trillion of capital to the U.S. economy, and suggests that ending the estate tax would actually increase overall federal tax revenue by encouraging more investment. Another study, by former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin, finds that repealing the estate tax would create 1.5 million additional small business jobs and would shave almost a percentage point off the unemployment rate.

In addition, the estate tax generates very little revenue for the federal government, accounting for less than half of 1% of receipts. A 2014 study from the nonpartisan Tax Foundation found that it is one of the least effective means of raising revenue in the federal tax code, because its combination of high administrative costs, low revenues, and implicit taxes on capital. The Tax Foundation study also found that on an annual basis eliminating the federal estate tax would increase Gross Domestic Product (GDP) by 0.58%, increase wages by 0.5%, create an equivalent of 104,800 full-time jobs, and increase federal revenue by $3.3 billion.

Federal estate and gift taxes harm family-owned businesses, such as lumberyards, on an ongoing basis because the owner of the business must take various—and often very costly—estate planning measures. The ongoing uncertainty of the estate tax has resulted in confusion, complexity, and estate planning costs for small businesses.

Current estate tax law is a drag on the economy and should be repealed. Federal tax policy should recognize this and enable many family-owned businesses, including lumberyards, to pass on the business to the next generation.

NLBMDA encourages all dealers to visit its Legislative Action Center and ask their Senators to support and pass the Death Tax Repeal Act, as it would help advance the issue and potentially set the stage for full repeal of this onerous tax on family-owned business.


Ben Gann

Ben Gann is Vice President of Legislative and Political Affairs for NLBMDA in Washington, D.C. For more information, visit www.Dealer.org.