WASHINGTON, D.C. – April 17, 2015 – (RealEstateRama) — The House of Representatives voted Thursday to repeal the federal tax on estates because “it’s a sad day” when heirs face huge financial burdens after someone dies, Rep. Buddy Carter told Newsmax.The House of Representatives voted Thursday to repeal the federal tax on estates because “it’s a sad day” when heirs face huge financial burdens after someone dies, Rep. Buddy Carter told Newsmax.
“That doesn’t make any sense at all,” the first-term Georgia Republican said. “Having a death tax in place had done a lot to tear apart family businesses, particularly family farms.
“What we’ve seen is that family businesses and family farms have gone away,” said Carter, who owns three independent pharmacies in his district. “It’s un-American.”
On a 240-179 vote, the GOP-controlled House repealed the 40 percent federal rate on estates — setting the stage for a showdown in the Senate over a bill that Democrats charge affects few inheritances.
President Barack Obama has threatened to veto the bill because it would add $269 billion to the budget deficit over the next decade. Democrats say that huge exemptions limit the share of estates that pay the tax to fewer than 1 percent.
Republicans call it the “death tax.” They say it prevents small-business owners and family farmers from passing businesses on to their heirs.
“Can you imagine working your whole life to build up a family-owned business and then upon your death Uncle Sam swoops in and takes nearly half of what you spent a lifetime building up for your children and grandchildren?” asked Texas Rep. Kevin Brady during floor debate. “It is, at its heart, an immoral tax.”
Brady, a GOP member of the House Ways and Means Committee, sponsored the legislation. Carter was among 135 co-signers, nearly all of whom were Republicans.
In addition, the House approved 272-152 legislation to make permanent a deduction for state and local sales taxes that expired at the beginning of the year. The White House has also threatened a veto because it would add $42 billion to the budget deficit over the next decade.
Democrats called the estate tax repeal a giveaway to the rich, since the only families who pay it have millions in assets. The bill now goes to the Senate, where Democrats appear to have enough votes to block it.
“The death of a loved one should not be a taxable event,” said South Dakota Sen. John Thune, who introduced similar legislation in the upper chamber. He is the GOP chairman of the Senate Commerce Committee.
The repeal, Thune said, “will finally give farmers, ranchers, and family business owners the peace of mind of knowing that they no longer have to spend substantial sums on planning to minimize their death-tax liability.”
His bill is co-sponsored by Majority Leader Mitch McConnell of Kentucky.
A federal tax on inheritances was first imposed in the 18th century. The current tax has appeared in various forms since 1916.
This year, the exemption is $5.43 million for a single person. Married couples can exempt up to $10.9 million. Larger estates pay taxes only on the amounts above those limits.
A total of 5,400 estates are expected to pay the tax this year — out of about 2.6 million deaths, according to the nonpartisan Joint Committee on Taxation, which provides official estimates for Congress. That’s 0.2 percent of all deaths in the U.S.
Republicans say that some business owners face the tax because they hold assets that do not necessarily generate much cash. These include family farms, which may sit on valuable land but don’t generate enough money to pay estate taxes unless heirs sell some or all the land.
“Family farmers, ranchers, and small business owners work tirelessly to create jobs in our communities, put food on our tables, and — God willing — have something to pass on to their children and grandchildren,” House Speaker John Boehner said. “Taking away that opportunity with a massive death tax bill is simply wrong.
“The Death Tax Repeal Act protects families and small businesses, and makes it easier for them to grow and plan for the future,” he said.
“Though it only accounts for a small portion of federal revenue,” California Rep. Mimi Walters noted, “the death tax impacts families tremendously — and is one of the biggest reasons that family businesses are forced to close their doors for good.
“When families are working hard to build a legacy in order to pass down opportunities to their future generations, they shouldn’t be punished by the federal government with burdensome additional taxation,” she said.
Rep. Tom Price, Carter’s fellow Peach State colleague, called the repeal a “no-brainer.”
“One ought not have to pay the undertaker and the IRS on the same day,” he said. “It makes absolutely no sense for people to pay taxes on their earnings and property their entire life, only to have their children pay additional taxes on the exact same property when their parents pass away.”
Carter, who sits on the House Oversight and Government Reform Committee, called for a full restructuring of the U.S. tax code. A flat-tax bill he introduced in January remains in committee.
“It’s more of a reflection of our antiquated tax system — and we should extend this into a revamping of our tax system as a whole,” Carter told Newsmax. “It’s common-sense legislation and it’s much needed.”
With the sales-tax deduction, Republicans argued that it helps people who live in the nine states without a state income tax on wages. The measure is about fairness, they said, because people in states that have incomes taxes can deduct those taxes on their federal returns.
These seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In addition, New Hampshire and Tennessee tax income from interest and dividends, but not wages.