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Pressure On US Senate To Repeal Estate Tax

by Mike Godfrey,, Washington

18 March 2016

A March 15 letter sent to Senate Majority Leader Mitch McConnell (R – Kentucky) from the Family Business Coalition, and signed by more than 100 organizations and business groups in the United States, has called for the US Senate to take action to repeal the estate tax.

The letter noted that the House of Representatives voted in April last year to repeal the tax, and that Senator John Thune's (R – South Dakota) mirror legislation to the House-passed bill "has already amassed support from the majority of the Republican caucus."

Until 2012, estates paid a 35 percent tax above a USD5m cap. The estate tax, or "death tax" as it is commonly known, was scheduled to revert in 2013 to 2001 tax law, with a USD1m exemption and a 55 percent tax rate, but the enactment of the American Taxpayer Relief Act indexed its USD5m exemption for inflation and set a 40 percent tax rate.

The burden that the estate tax places on family businesses and farms was the subject of much discussion in the House, and the Coalition's letter emphasized that the tax is "unfair" and its negative effects "make permanent repeal the only solution."

"It makes no sense to require grieving families to pay a confiscatory tax on their loved one's lifetime savings," the Coalition added. "Often this tax is paid by selling family assets like farms and businesses. Other times, employees of the family business must be laid off and payrolls slashed."

It pointed out that the death tax "currently accounts for less than one percent of federal revenue, … [and its repeal] would spur job creation and grow the economy. There is a good argument that not collecting the estate tax would create more economic growth and lead to an increase in federal revenue from other taxes."

"In addition," the letter continued, "the estate tax forces family businesses to waste money on expensive insurance policies and estate planning. These burdensome compliance costs make it even harder for business owners to expand their businesses and create more jobs."

However, the bill to repeal the tax in the House was subject to fierce Democratic party and White House opposition. It is also known that such a bill would be vetoed by President Barack Obama if it ever reaches his desk this year, as he has already proposed to go in the opposite direction and increase the tax's incidence.

TAGS: individuals | inheritance tax | compliance | tax | business | tax compliance | law | legislation | tax rates | United States | Tax

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