While most of the world this week was watching the court battle begin over pop icon Prince's estate, some U.S. House members were trying to reconfigure federal law to capture more tax money from more estates.
"Requiring more of the wealthiest estates to pay the estate tax and raising the estate tax rate are commonsense steps we can take toward making our tax code fairer," House Ways and Means Committee ranking minority member Sander M. Levin (D-Mich.) said in announcing introduction of H.R. 4996, the Sensible Estate Tax Act of 2016.
The estate tax has been around in some form for 100 years. Current federal law exempts estates from taxation if they are valued at or below $5.45 million or $10.9 million for married couples.
The exemption amount is adjusted annually for inflation. If an estate exceeds those amounts, the maximum estate tax rate of 40 percent could apply.
At those levels, fewer than 5,200 estates owed any estate tax in 2015, said Levin. That translates to 99.85 percent of all estates across the country last year owing no federal estate tax.
Rolling back the estate tax clock: Levin's bill would lower the exemption vale to $3.5 million ($7 million for jointly held estates) and increase the maximum tax rate to 45 percent.
That's what the estate tax law was in 2009, just before it expired the next year. It was resurrected in 2011 and permanently put into the Internal Revenue Code with the higher exemption levels as part of the American Taxpayer Relief Act of 2012, also known as the fiscal cliff tax bill.
Levin's bill also would reinstate the prior-law's $1 million lifetime gift exemption. He would keep, however, the annual $14,000 gift tax exclusion (also inflation adjusted), as well as the current unlimited spousal portability option.
The Sensible Estate Tax Act of 2016, which is very similar to changes proposed by President Obama in his last few budgets, is estimated to raise $161 billion over a decade.
Political support, opposition: In addition to increasing the U.S. Treasury's bottom line, the bill's supporters say it address the issue of wealth inequity in the United States.
While that's likely to get a thumbs-up from Democratic presidential hopeful (still) Bernie Sanders of Vermont, the bill is not likely to move at all during this session of congress.
The House last year passed H.R. 1105, the Death Tax Repeal of 2015, which was introduced by Ways and Means Chairman Kevin Brady (R-Texas). Brady and other GOP lawmakers denounce any estate tax as unfair to successful individuals and businesses that want to keep holdings in the family.
The libertarian Reason Foundation also just released a report that argues the estate tax is ecologically destructive.
"The ongoing debate over the federal estate tax tends to focus on the tax’s economic impacts, such as on small businesses, employment and capital formation, as well as the very small percentage it constitutes of federal tax receipts," says Brian Seasholes, Director of the Reason Foundation's Endangered Species Project. "Less well known, however, is the significant harm the estate tax does to the ecology of the United States."
The report says that the estate tax tends to force property owners to break up their real estate holdings. These subdivided properties then are sold, with the smaller pieces of land generally being of less ecological value.
With these battle lines drawn, don't look for the estate tax or the battle for and against it to go gentle into a good legislative night any time soon.
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