Republican lawmakers renewed their push to scrap the federal estate tax this week, saying the move would create jobs and keep family businesses afloat.
South Dakota Republican Sen. John Thune and Texas Republican Rep. Kevin Brady officially re-introduced the Death Tax Repeal Act. The bill would immediately eliminate the estate tax and repeal the generation-skipping transfer tax.
It would also make permanent a 35 percent gift tax rate and $5 million gift tax exemption, to be indexed to inflation. The legislation would maintain existing stepped-up basis provisions.
“Death should not be a taxable event,” Thune said Wednesday. Senate Minority Leader Mitch McConnell described the estate tax as the federal government’s “final insult” to deceased taxpayers.
The estate tax has been in a state of flux for more than a decade. Congress voted to gradually raise the estate tax exemption in 2001 as part of the Bush tax cuts, culminating in the temporary repeal of the tax in 2010. It was then partially reinstated in a compromise over tax rates between the Obama administration and congressional Republicans, and revised yet again at the end of last year as part of the bipartisan deal to avert the fiscal cliff.
Recent estate tax compromises have been criticized as overly generous to the wealthy by many liberal policymakers, while conservatives find them too onerous.
“The federal government has no place forcing grieving families to pay a tax on their loved one’s life savings that has been built from income already taxed when originally earned,” Thune said, arguing that 90 percent of family-owned businesses do not survive to the third generation.
Brady called the estate tax the “number one reason family owned farms and businesses don’t survive to the next generation.” The lawmakers cited a study by economist Douglas Holtz-Eakin finding that estate tax repeal would create 1.5 million jobs.
Last year estate tax repeal enjoyed majority support in the Republican-controlled House, where Brady’s bill has a Democratic co-sponsor, North Carolina Rep. Mike McIntyre. The measure’s prospects appear dimmer in the Democratic-dominated Senate.
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