War over the estate tax returns

War over the estate tax returns
© Getty

Battles are flaring over the estate tax, with the issue receiving increased attention from the presidential candidates, the Obama administration and Congress.

Hillary ClintonHillary Diane Rodham ClintonLewandowski on potential NH Senate run: If I run, 'I'm going to win' Fighter pilot vs. astronaut match-up in Arizona could determine control of Senate Progressive Democrats' turnout plans simply don't add up MORE and Donald TrumpDonald John TrumpPossible GOP challenger says Trump doesn't doesn't deserve reelection, but would vote for him over Democrat O'Rourke: Trump driving global, U.S. economy into recession Manchin: Trump has 'golden opportunity' on gun reforms MORE have been attacking each other over their largely divergent proposals on the estate tax. And the Treasury Department proposed rules in August relating to the tax are drawing criticism from Republican lawmakers and business groups. 

ADVERTISEMENT

The tax now applies to estates over $5.45 million for individuals and $10.9 million for married couples. Assets in excess of those amounts are taxed at 40 percent.

Republicans have long opposed the estate tax, dubbing it a “death tax.” Democrats say the tax helps to make the IRS code more progressive.

Presidential politics 

Clinton has called for lowering the amount that’s exempt from the estate tax to $3.5 million per individual and $7 million per couple. The rates would increase as the value of estates rise, with a top rate of 65 percent for estates valued at more than $1 billion per couple. 

Trump, on the other hand, would repeal the tax. 

Both candidates would tax some capital gains held until death, with exemptions and protections aimed at protecting the middle class and small and family businesses. 

Clinton’s estate tax proposal is similar to the plan put forward by her main opponent in the Democratic primary, Bernie SandersBernie SandersJoe Biden faces an uncertain path Bernie Sanders vows to go to 'war with white nationalism and racism' as president Biden: 'There's an awful lot of really good Republicans out there' MORE. It is designed to raise revenue to pay for proposals to help small businesses and the middle class.

"It is imperative that we lift the living standards of working and middle-class Americans, which means creating good-paying jobs and generating wage growth,” Clinton campaign spokesman Donte Donald said. “That's exactly what Secretary Clinton's proposals will do." 

Trump spokeswoman Hope Hicks said Friday that by repealing the estate tax, the Republican would be “lifting the burden of estate planning from millions of small businesses and family-owned farms and businesses.” 

“This will end the double taxation that occurs under the estate tax — once when the money is earned, and again when it is passed on to heirs,” she said.  

The Trump campaign has gone on the attack against Clinton’s plan, and specifically the 65 percent tax rate. Senior communications adviser Jason Miller in a statement called Clinton’s proposal hypocritical because she “uses exotic tax loopholes reserved for the very wealthy to exempt her Chappaqua estate."

Trump has tweeted that Clinton “just lost every Republican she ever had” by proposing to “tax estates at 65%."

The Clinton campaign said the former secretary of State’s taxes would increase under her own plan. Clinton has also repeatedly said that Trump’s estate tax plan would be a $4 billion windfall for his own family, if his net worth is what he says it is.

Conservatives say that Trump’s call for an estate tax repeal could help him rally Republicans and possibly others as well. 

“It really helps Trump with his base” to be for estate tax repeal, said Ryan Ellis, a fellow at the Conservative Reform Network. He called the estate tax “one of the most intense anti-tax issues on the right.” 

Advantage, conservatives?

A Gallup poll from March found that 54 percent of Americans agreed with eliminating the tax, 19 percent disagreed and 26 percent said they didn’t know enough to have an opinion. 

“Abolishing the death tax is a popular issue,” said Grover Norquist, president of Americans for Tax Reform. 

Last year, the House passed a bill to do away with the tax, largely along party lines. Repeal of the estate tax is also part tax-reform plan that is a plank of the House Republican’s “A Better Way” agenda.

But many liberals see raising the estate tax as a way to increase fairness in the tax code.

Harry Stein, director of fiscal policy for the liberal Center for American Progress Action Fund, said that voters are frustrated with the feeling that the economy is rigged, and the estate tax is the part of the code that is designed to “apply to concentrated wealth.” 

Frank Clemente, executive director of the liberal-leaning Americans for Tax Fairness, said that taxing estates might be “the singular way” to address the wealth gap between the top 1 percent and the rest of Americans.

Clemente said his group is “very supportive” of Clinton’s proposal. But he said that Clinton would have to sell her plan because conservatives have convinced much of the public to think that the estate tax affects them even if that’s not actually the case.

Obama’s regulatory push   

The presidential campaign isn’t the only place where the estate tax has become a hot topic.

The Treasury Department recently proposed rules that would limit or eliminate discounts on the value of minority interests in closely held family businesses for estate-tax purposes.

The White House said in a blog post in August that the proposed rules are part of the administration's “efforts to make the tax code fairer.”

The administration said that wealthy people currently use sophisticated strategies to lower the value of their assets for estate-tax purposes, such as placing restrictions on assets to justify discounts “without meaningfully changing the value of the entire family’s interests in the property.”

The proposed rules aim to reduce tax avoidance “by making it more difficult for the wealthiest Americans to exploit this loophole and avoid contributing their fair share,” the White House said in the blog post, which was written by Simone Leiro, assistant director for online engagement.

But business groups and Republican lawmakers argue that the proposed rules are an example of executive-branch overreach and would be harmful to family businesses and farms.

“We think that staying in business is a good thing, and therefore we prefer the IRS not take action to discourage or limit the ability for businesses to be passed on,” said Caroline Harris, chief tax counsel and vice president of tax policy at the U.S. Chamber of Commerce.

Palmer Schoening, chairman of the Family Business Coalition, said that minority shares in family-owned businesses are currently given lower values because they are harder to sell.

If the regulations went through, there would be an “artificially high valuation of family businesses” that would force more family businesses and farms to pay the estate tax, he said.

Most small businesses and farms currently do not have to pay the estate tax. The non-partisan Urban-Brookings Tax Policy Center estimated that only about 30 small closely held businesses and small farms would pay estate taxes in 2015.

Republicans in Congress are against the proposed rules. 

On Thursday, 41 GOP Senators sent a letter to Treasury Secretary Jack LewJacob (Jack) Joseph LewHogan urges Mnuchin to reconsider delay of Harriet Tubman bill Mnuchin says new Harriet Tubman bill delayed until 2028 Overnight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint MORE, asking that the proposal be withdrawn. And legislation offered by Rep. Warren Davidson (R-Ohio) in the House and Sen. Marco RubioMarco Antonio RubioTrump moves forward with F-16 sale to Taiwan opposed by China The Hill's Morning Report — Trump and the new Israel-'squad' controversy Trump crosses new line with Omar, Tlaib, Israel move MORE (R-Fla.) in the Senate would prevent the proposed rules from taking effect and would prevent federal funds from being used to finalize or implement the rules.

“This is made necessary because there’s a continuing trend by the Obama administration, President Obama and his appointees, to use authority that they don’t have to attempt to legislate,” Davidson told The Hill.

Davidson said he hopes that the bill can be approved by the House Ways and Means Committee and added to spending legislation.