The framework, released jointly by the Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance, is billed as a ”unified framework for fixing our broken tax code.” In addition to calling for estate tax repeal, the proposal would eliminate personal exemptions and most itemized deductions, repeal the alternative minimum tax, reduce the top individual tax rate to 35%, and reduce the top tax rate on trade or business income to 25%. It leaves open the possibility of an additional top rate for the highest income taxpayers. It’s unclear how all of this would be paid for, and when legislation will be forthcoming.
The federal estate tax kicks in at a rate of 40% on individual estates over $5.49 million. A married couple can shelter nearly $11 million. (In 2013, just 4,700 estates were taxable, bringing in $16.6 billion, according to the Tax Policy Center.) The GST tax applies to transfers during life or upon death that skip a generation—acting as a second layer of tax on these wealth transfers.
Notably, the framework does not include repeal of the gift tax, which applies to transfers made while you’re living. And it doesn’t specify whether the plan would maintain stepped-up basis, which lets heirs revalue assets they get by bequest, essentially bypassing capital gains taxes. Some proposals to eliminate the estate tax include provisions for carry-over basis, where heirs would owe capital gains taxes on inherited assets.
But death tax foes are optimistic. The Family Business Coalition says it’s going “all in” this fall for tax reform, including death tax repeal. In a September letter to tax writers, it argues that estate tax repeal would spur job creation and grow the economy. The House already passed (240-179) the Death Tax Repeal Act, H.R. 631, in April. It repeals the estate and GST tax, cuts the gift tax rate from 40% to 35%, and maintains stepped-up basis. In the Senate, Sen. John Thune (R-S.D.)’s Death Tax Repeal Act, S. 205, has 36 co-sponsors.
On the other side, estate tax supporters known as the Patriotic Millionaires, many of whom will personally owe estate tax, have penned an open letter to President Donald Trump and Congress, demanding that they “shelve any and all plans to decrease or eliminate the federal estate tax.” The tax, they argue, is needed to fight economic inequality.