Gas prices are on the way up. Housing starts are on the way down. And taxpayers are concerned more than ever about rising health care costs as Obamacare stalls.
So as we head into the second half of a shaky summer, we’re concentrating on the really important stuff now – like eliminating that pesky federal estate tax.
That’s right. Congress has heard your cries for tax reform. And it apparently sounded something like this: “Focus all of your energies on those families who have more than $10 million in assets.”
They’ve responded with not one – but two – bills to repeal the federal estate tax. Sen. John Thune (R-SD) introduced S. 1183: Death Tax Repeal Act while Reps. Kevin Brady (R-TX) and Mike McIntyre (D-NC) introduced their uniquely named H.R. 2429: Death Tax Repeal Act of 2013. Both, as their clever names suggest, focus on a permanent repeal of the estate tax as well as retaining the “step-up” in basis for estate assets.
To be fair, I have clients – yes, those in the 1% that would be subject to federal estate tax – that would benefit from permanent repeal. But we should be careful when we talk about what “benefit” means. My clients don’t want to pay more in taxes: they feel that they’ve paid enough. However, in all of the years that I’ve been practicing, I’ve never had a client’s family business or farm fold because of estate taxes. (I’m not saying it doesn’t happen, I’m saying that I haven’t seen it happen – and I’ve represented a lot of family businesses.)
While Sen. Thune cites stats that indicate that “[c]urrently more than 70 percent of family businesses do not survive to the second generation, and 90 percent of family businesses do not survive to the third generation”, I would agree with him – but I wouldn’t place the blame on the shoulders of the federal estate tax. There are far more complex factors that go into business succession issues than the estate tax. If we’re going to talk facts, let’s make sure that we keep them in context.
I actually do believe that tackling the federal estate and gift tax should be part of the bigger picture of tax reform: cherry-picked or haphazard tax reform won’t get us anywhere. Even worse, constantly shifting tax laws make planning difficult and keep taxpayers on edge. So I say yes to tax reform.
But to expend resources to put forth yet another bill contemplating permanent repeal of a tax that affects so few taxpayers while ignoring the bigger issues affected taxpayers is, to paraphrase Phyllis Diller, like shoveling snow during an avalanche.
I don’t expect either version of the bill to pass and I’ll bet you that the sponsors don’t either. It’s politicking for the midterm elections. But wouldn’t it be nice if, every now and again, when Congress talked about tax reform, they really talked about tax reform? And not just waved their shovels about?
