The Republican party has long opposed the federal estate tax, or as its members call it, the Death Tax.
Bills are regularly introduced to kill the tax. Eliminating it even made it into the GOP-led House Budget Committee working paper on extending the tax cuts enacted the last time Donald J. Trump was president.
Now, however, that committee’s chairman has decided that a, dare we say, more conservative approach would be better. Rather than eliminate the tax, he’s introduced a bill that would cut the current 40 percent estate tax rate in half.
Short-lived tax death: The estate tax actually died in 2010, thanks ironically to Congressional inaction rather than a concerted effort to kill it. But the levy didn’t stay legislatively buried for long. It was back in the Internal Revenue Code the next year.
The Tax Cuts and Jobs Act (TCJA) of 2017 did manage to ease the federal estate tax. The GOP tax reform law doubled the amount of an estate’s value that’s subject to the tax. That estate exclusion amount also is adjusted for inflation.
In 2025, up to $13.99 million left by a decedent is not taxable. That's per person, so a married couple can protect $27.98 million from estate taxation.
If an estate’s value exceeds the exclusion amount, that overage is taxed at 40 percent.
Arrington’s halfway proposal: The bill by Texas Rep. Jodey Arrington, the GOP chair of the House Budget Committee, would cut the estate tax rate to 20 percent.
Arrington’s bill, the Estate Tax Rate Reduction Act (H.R. 601), essentially is a reintroduction of the same 20 percent tax proposal he dropped in the hopper on Tax Day last year. It also has a Democratic cosponsor, Georgia Rep. Sanford D. Bishop, Jr., who also cosponsored the prior measure.
Both lawmakers tout the measure as a way to protect the future of family-owned businesses. They say in their joint press release that much of the value in these operations are in hard assets and must be sold when the owner passes away, thus endangering the ability of a family business to survive between generations.
They also say the tax reduction would help family businesses, of which they say only 30 percent survive the transition from first to second-generation ownership.
Political tax considerations: So why not hold firm on total elimination of the federal estate tax? Political pragmatism.
"It’s doubtful an elimination is fiscally possible with the limited majority the GOP has in the 119th Congress," financial analyst Jeff Bush told ALM Think Advisor.
Plus, he added, the significant tax rate would not substantially reduce the amount the U.S. Treasury collects from the tax. "The revenue generated by these events is a minimal portion of the approximate $5 trillion in revenue the [Internal Revenue S]ervice collects each year," Bush said.
Chances potentially better now: Arrington’s earlier version of the Estate Tax Rate Reduction Act didn’t go anywhere last Congress, but that’s not surprising.
In 2024, everyone was waiting for the presidential election to see how much leverage either party would have. That would dictate how to proceed on the expiring TCJA provisions.
The results offered some, but not complete, clarity. Although the GOP controls the House, Senate, and White House, the legislative bodies’ margins are slim. So Arrington’s halving of the estate tax might be more acceptable in any final tax bill.
And that’s why its proposed 20 percent rate is this weekend’s By the Numbers figure.
You also might find these items of interest:
- 17 states & D.C. collect an estate or inheritance tax
- Another GOP attempt to repeal the federal estate tax
- Estate tax planning tips as Trump 2.0 is set to take over
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