Identical “Death Tax Repeal Act of 2013” bills have been introduced into the House and the Senate; H.B. 2429 by Representative Kevin Brady of Texas, and S. 1183 by Senator John Thune of South Dakota, respectively.
The legislation is supported by many organizations, such as 60 Plus Association, American Family Business Institute, and the American Farm Bureau Federation. See the full list in a press release, which describes the benefits of the repeal.
According to a study by former CBO Director Douglas Holtz-Eakin, repealing the death tax would create 1.5 million additional small business jobs and would shave almost a percentage point off the unemployment rate.
The bills call to amend the Internal Revenue Code of 1986, to repeal two specific types of taxes: the estate tax, dubbed the Death Tax, and the generation-skipping transfer taxes. The gift tax is also to be modified. It is reported that
The legislation introduced today would repeal the estate tax, maintain stepped-up basis and make permanent a 35 percent maximum gift tax rate and $5 million lifetime gift tax exemption indexed for inflation.
The value of family-owned farms and ranches is usually tied to illiquid assets, such as land, buildings and equipment, said [American Farm Bureau Federation]. With 85 percent of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax. Recent increases in agriculture cropland values, on average 15 percent from 2011 to 2012, have greatly expanded the number of farms and ranches that now top the estate tax exemption.
Americans for Tax Reform are big supports of the repeal. In a letter addressed to Brady and Thune, they site several reasons why the appeal is long overdue, including research by Steve Entin, President and Executive Director of the Institute for Research on the Economics of Taxation.
According to Entin, the estate tax could have severe effects on different kinds of people and organizations. ???The economy, the pre-tax and post-tax incomes of workers, savers, investors, and federal, state, and local revenue would all be higher if the estate tax and gift taxes would eliminated.??? If rates were to return to pre-2001 conditions GDP would decrease by $183 billion, and conversely, if the tax were to be eliminated, the GDP would increase by $119 billion. The taxes that Brady and Thune are worked to appeal actually lose revenue, when the damage they cause is factored.
???Because the estate and gift taxes add to the tax on capital formation, they result in a reduced stock of capital, which in turn reduces productivity, wages, and jobs. Consequently, the heirs and beneficiaries do not bear the full cost of the estate and gift taxes. Much of the economic cost of the tax is borne by the labor force in the form of lower wages.???
Americans for Tax Reform also argue that besides being unfair and immoral, the death tax has never been easier to repeal. Since the potential collections of the death tax over the next decade constitute less than .5% of federal tax revenue, it is feasible to replace that with other funds.
On June 19, Rep. Brady and Sen. Thune hosted a press conference regarding their introduction of the Act. See the video below.
Caroline Mahony is an editorial intern with Human Events.