Tax bill agreed to by House, Senate committees, but faces uncertain future in full Congress
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Another GOP attempt to repeal the federal estate tax

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Photo by Waldemar on Unsplash

The major challenge for Congress right now is finalizing funding so the federal government won't shut down in March. But some members also are, as noted in yesterday's post, trying to get a mini tax extenders measure passed.

And that's not the only tax bill on some lawmakers' minds.

A bill to eliminate the federal estate tax was introduced just as the larger bipartisan House/Senate tax bill was clearing the House Ways and Means Committee.

Estate tax elimination effort. Again: Some cynical Washington, D.C., watchers might say this bill was introduced primarily for political purposes.

This is not uncommon on Capitol Hill. The bill sponsors know their proposal is unlikely to be passed, but they want to get their support on the record.

That's not necessarily bad. Sometimes, such long-shot bills do find their way into law, often tacked on to another measure that's more likely to pass.

And I'm not saying politics is the sole reason this latest proposed estate tax repeal bill was introduced last week. I'm sure its sponsor, Iowa Republican Rep. Randy Feenstra, is all for doing away with the estate tax, as are most in his party.

That Republican tax goal was achieved back in 2010, largely due to Congressional inaction. But the federal estate tax was out of the Internal Revenue Code for just that year.

GOP tax reform eased estate tax bite: The Republican written Tax Cuts and Jobs Act (TCJA) of 2017 greatly lessened the estate tax's bite. The TCJA nearly doubled the individual lifetime estate and gift tax exemption in 2018 from $5.6 million per individual ($11.2 million for married couples) to $11.18 million for individuals ($22.36 million for married couples).

That exemption amount also is indexed for inflation. In 2024, an individual can leave heirs a tax-free estate of up $13.61 million. A married couple can protect as much as $27.22 million from estate taxation.

But if Congress doesn't act by the end of 2025, we'll have shades of 2010 again, with the estate tax this time going the other way. The federal estate tax exemption provisions are scheduled to revert on Jan. 1, 2026, to the much lower pre-TCJA levels. That's estimated to be, based on inflation, around $7 million per individual, $14 million for married couples.

Feenstra's H.R. 7035, which he's dubbed The Death Tax Repeal Act, would do what its name says. It would permanently eliminate the federal estate tax, as well as generation-skipping transfer taxes.

Family farm tax threat, or not: Not surprisingly, in announcing the introduction of the bill Feenstra cited the concerns of family farms, a large constituency in the Hawkeye State.

"The death tax represents double taxation at its worst. Iowa families grieving the loss of a loved one should not face an enormous tax bill from the federal government just to continue the family tradition of farming or keep their small business open and operational," said Feenstra.

Advocates of the estate tax dispute the extent of the tax's effect.

Even before the Republican tax reform law was enacted in late 2017, supporters of the estate tax say the number of farms that were subject to the tax was minimal. Those that did owe any estate tax had adequate liquid assets to cover the bill without having to sell any part of the business to do so.

Invoking the loss of family farms to the tax collector simply is an anti-tax sales pitch that capitalizes on the mystique of the American family farm, argue estate tax proponents.

Since the TCJA took effect, the estate tax threat to family farms has decreased. The U.S. Department of Agriculture Economic Research Service, using the latest data from the 2019 Agricultural Resource Management Survey (ARMS) and actuarial tables that report the probability of death by age, estimated that approximately 31,000 principal farm operators died in 2020.

Of those farm estates, an estimated 189 (0.6 percent) were required to file an estate tax return, and only 50 (0.16 percent) owed federal estate taxes.

Still resonates with some voters: OK, 50 farms facing federal estate taxes is not nothing to those families. Sen. John Thune (R-South Dakota), who has repeatedly introduced estate tax repeal bills during his time as a lawmaker in D.C., said back in 2021 when he dropped such legislation in the hopper, "I've said it before, and I'll say it again: One family farm or business lost to the death tax is one too many."

Again, it's a great political tag line, but a hard reality to achieve for Thune and now Feenstra and the 162 other House members who, along with 194 private sector organizations, support H.R. 7035.

The only way Feenstra's bill, or any other similar measure, becomes law is if the GOP gets total Capitol Hill control. Republicans would need to take the White House, retain their majority in the House, and get enough seats for a filibuster-proof Senate.

That's definitely not the case now, and with the country seemingly almost equally divided, it doesn't look like either party will get such a mandate any time soon.

But since 2024 is an election year, H.R. 7035 will make a good talking point when the campaign trail takes country roads.

Sometimes that's the best a member of Congress can hope for. It's also one of the reasons why H.R. 7035 is this weekend's By the Numbers figure.

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