The U.S. House voted 240-179 Thursday to permanently repeal the estate tax.
The bill, H.R. 1105, authored by Rep. Kevin Brady, R-Texas, repeals the estate tax and the generation-skipping transfer (GST) tax for all future transfers.
House Ways and Means Committee Chairman Paul Ryan, R-Wis., said after the vote that “the death tax can be a nightmare for some Americans — from family farmers to small- and minority business owners — who have worked hard to build something to pass on to their children.”
While the nation should “fix our tax code to make it simpler, flatter and fairer to help build a healthy economy, the death tax is actually hurting our economy now and putting unnecessary pressure on families and small businesses. That’s not how the tax code should work, and that’s why we passed this bipartisan bill to permanently repeal the death tax.”
Lawmakers need to “keep advancing these kinds of reforms,” Ryan added, “so we can give taxpayers the relief they deserve and hopefully one day rewrite this broken, antiquated code.”
Andrew Lundeen, director of federal projects for the Tax Foundation, a nonpartisan research group that says taxes should be simple, broad-based and low, told ThinkAdvisor in a Thursday email message that the U.S. has “the fourth highest estate tax rate in the developed world, yet raises less than a percent of federal revenue due to the level of the exemption.”
Despite the low amount of revenue the estate tax brings in, Lundeen told ThinkAdvisor, “it still creates a drag on the economy. Closely held businesses, farms and ranches often plan for the estate tax even if they never end up needing to pay it. Our analysis shows that eliminating the estate tax would boost the level of investment by 2.2%, increase GDP by 0.8% and create 139,000 jobs.”
Rep. John Delaney, D-Md., voted against the House bill. He cited in a statement data issued by the nonpartisan Congressional Budget Office that such a repeal would add $269 billion to the federal deficit. Under current law, he said, "the estate tax only applies to estates worth over $5.43 million, less than one-quarter of one percent of the population."
The current top federal estate tax, GST tax, and Gift tax rates are 40%, the federal estate tax and GST tax exemptions are $5.43 million, and the annual gift exclusion amount is $14,000.
“Instead of spending time on special interest legislation that only applies to a small number of the most fortunate Americans, we should work on bills that move the needle for the middle class and create jobs," Delaney said. "Giving the heirs of the most fortunate a tax cut isn’t going to get more people back to work, rebuild roads and bridges, or reduce the deficit. The estate tax isn’t perfect, no policy is, but a complete repeal is a drastic and irresponsible measure that is wrong for the country.”
Lundeen says it’s unclear whether the Senate will take up a similar estate tax measure.
On Wednesday, S. 155 and H.R. 25, companion bills titled the FairTax Act of 2015, were introduced. Both bills would remove all aspects of the current income tax code and replace it with a system based on consumption of new goods and services.
Sens. David Perdue, R-Georgia, and Jerry Moran, R-Kansas, as well as Rep. Rob Woodall, R-Georgia, issued a joint statement that with 74 supporters, the bill “remains one of the most widely supported fundamental tax reform bills in Congress.”