Attention Heirs: Repealing the Death Tax and the Generation-Skipping Transfer Tax (H.R. 1105)

What is H.R. 1105?

(Updated May 6, 2020)

This bill would eliminate the estate tax — a tax on the ability of a dead person to transfer their property at their death — and the generation-skipping transfer tax, which taxes gifts from dead people to their grandchildren. These taxes would be abolished as soon as this legislation is enacted.

It would also reduce the top rate on gift taxes from 40 percent to 35 percent on gifts of $500,000 or more. A lifetime gift tax exemption would be calculated by increasing $5,000,000 annually by the amount of inflation since 2010 to adjust for increases in the cost of living.

Transfers involving trusts would be treated as a taxable gift unless the trust is wholly owned by the donor or the donor’s spouse.

Argument in favor

Why should death or gifts from grandparents to their grandchildren be taxable events? These people already paid taxes on that money when they first earned it, taxing it again at a person’s death is not only insulting, it's double-taxation.

Argument opposed

The people who pay these taxes are the wealthiest in the country — they can afford it. Not to mention, the tax only applies to about 2 of every 1,000 estates. The government does not need to be giving the Paris Hiltons of the world a $269 billion gift.

Impact

People who would otherwise be subject the estate tax, the generation-skipping transfer tax, or the gift tax as they are currently structured, and the IRS.

Cost of H.R. 1105

A CBO cost estimate found that repealing the estate tax and the generation-skipping transfer tax would increase federal by $269 billion over the 2015-2025 period — or about $24 billion per year. It would have no effect on federal spending.

Additional Info

In-Depth:

Currently, individuals are exempt from the estate tax if their assets are less than $5.43 million, while the limit for married couples is $10.86 million, with the top tax rate on income above those levels being 40 percent.

A nearly identical version of this bill was introduced in June 2013, but failed to receive a vote in the House before the end of the 113th Congress.

Of Note:

Former Director of the Congressional Budget Office (CBO) Douglas Holtz-Eakin, produced a study in 2009 that estimated a repeal of the estate tax would lead to the creation of 1.5 million jobs, reduce the 2009 unemployment rate by nearly a full percentage point, and increase the amount of capital available to small business by over $1.6 trillion.

Farms are particularly likely to being hit hard by the estate tax, as a 1999 study by the CBO found that 12 percent of farms had estate tax bills that exceeded their liquid assets.

Senate Majority Leader Mitch McConnell (R-KY) has said of the estate tax that: 

“It is the federal government’s final insult to tax your family when you have already paid taxes on your property throughout your life. The thought of having to visit the IRS and the undertaker on the same day is an absolute outrage.”

Proponents of the estate tax believe that it fairly taxes the richest Americans, with some pointing out that only 2 out of every 1000 estates face the estate tax. They also note that the effective estate tax rate is actually closer to 17 percent than the 40 percent marginal rate. A writer for the Washington Post referred to the proposal as a “$246 billion gift to the Paris Hiltons of the world over the next decade.”

Media:

• Sponsoring Rep. Kevin Brady (R-TX) Press Release
• CBO Cost Estimate
• Bloomberg
• The Hill
• Heritage Foundation (Context - In Favor)
• MSNBC (Opposed)
• National Taxpayer’s Union (In Favor)
• R Street Institute (In Favor)
• Slate (Opposed)
• Washington Post (Opposed)