Repeal of the federal estate tax has long been a major policy objective among Republican leaders, and is a current staple of the Republican platform. Now with the party in control of both chambers of Congress and the White House and tax reform on the horizon, it would seem that ending the so-called “death” tax would be a near certainty, right? The odds may seem stacked in repeal’s favor, but the actual numbers are far more complicated.
Why Do We Care About the Estate Tax?
The federal estate tax is an important incentive for charitable giving through charitable bequests. According to Giving USA, charitable bequests accounted for $30.36 billion in charitable giving in 2016. The Congressional Budget Office (CBO) has found that the estate tax leads affluent individuals to donate far more than they otherwise would, because such donations sharply reduce estate tax liability, and that repealing the estate tax could reduce charitable bequests by 16 to 28 percent.
The Road to Repeal
Despite assurances from Republican leaders that repeal of the estate tax remains a top priority, some prominent members of Congress are beginning to question whether or not repeal should be pursued. In addition to a projected loss in giving, repeal of the estate tax is estimated to $279 billion over ten years. This is a significant chunk of revenue that Republicans would have to account for in their tax reform plans. There is also the fact that the current threshold and rate ($5.49 million for individuals; 40 percent rate) only applies to very few estates each year. Some Republicans, including Sen. Susan Collins (R-ME), say the increased threshold has helped to address concerns that the estate tax was negatively impacting the families of small business owners and family farms.
However, even though the numbers do not quite favor repeal, it has been difficult to find Republicans willing to withdraw support for tax reform over the issue. It is unclear whether or not final tax legislation will include an estate tax provision as broader concerns over cost begin to take shape.
Independent Sector has historically opposed estate tax repeal and is working to educate policymakers what repeal would mean for charitable giving if it remains a core component of tax reform.