Last week lawmakers in the House of Representatives voted 240-179 to repeal the federal estate tax despite President Obama’s threats to veto the bill. The vote was largely on party lines.
The estate tax is a tax that applies to property (cash, real estate, stocks, or other assets) that is transferred from a deceased person to his or her heirs. The estate tax applies to estates worth more than about $5.4 million for individuals and $10.9 million for married couples. That means that the vast majority of deaths do not trigger federal estate taxes – only about 2 in every 1,000 estates owe any estate tax.
The top estate tax rate is 40 percent, though experts find that the average tax paid is less than 17 percent. That’s because only the value above $5.4 million is taxable – and heirs are able to shield large portions of the estate’s value even above that amount by using other deductions.
The bill would cost an estimated $269 billion in lost revenue over the next 10 years and does not provide any offset to make up for the lost money. For $269 billion, we could implement both the president’s Preschool for All initiative and free community college program over the next ten years and double investment in other federal discretionary education programs for two years – with money left over.
Currently, the top 1 percent of Americans owns 42 percent of the nation’s total wealth, while the bottom 90 percent of Americans own just 23 percent of the nation’s wealth. Even well-off folks like Ben Cohen and Jerry Greenfield, the founders of Ben & Jerry’s ice cream, argue that rich people don’t need yet another tax break. And 68 percent of Americans would agree: wealthy households don’t pay enough in taxes.
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