This week, Senator John Thune of South Dakota, announced that he is, once again, leading an effort to repeal the federal estate tax. If passed, the Death Tax Repeal Act of 2019 would completely and permanently repeal the federal estate tax, also known as the death tax.
Thune and many of his Republican colleagues, including Senate Majority Leader, Mitch McConnell, argue that the estate tax is unfair and punishes family-run farms, ranches, and family-owned businesses. However, the estate tax has been reduced considerably since the Tax Cuts and Jobs Act was passed in 2017. Under the current law, less than 0.1 percent of estates qualify for the estate tax. According to an analysis from the Tax Policy Center, in 2017, before the new tax act went into effect, only about 80 small farms and closely held businesses paid any estate tax in 2017. In 2018, no small farms and businesses were expected to be subject to the estate tax because of the $11.2 million effective exemption for individuals and $22.4 million for married couples.
It is unlikely that the legislation will get the support required to pass since it would require 60 votes to pass the Senate and would be unable to pass the Democratic-controlled House. Thune has introduced similar legislation several times in the past and it has repeatedly failed. With the 2020 election on the horizon, this push is most likely about continuing to highlighting a key differentiator between Republican and Democratic tax policy. Democrats have long advocated for the estate tax as a means of taxing the wealthy.
The above underscores our belief that an estate plan should be a living, breathing document. Your documents need to be reviewed regularly to ensure that they provide the necessary flexibility and provisions to account for ever-changing tax circumstances. Contact us today to determine if your estate is in need of review.