The Republican tax plan will exempt the 0.2% of Americans who pass on estates of $5.49 million (each) to their heirs, a tiny elite that includes most of the Trump cabinet of one-percenter plutocrats; under the Senate proposal, that exemption would double.
The argument against inheritance taxes is that they're "double taxation" because the savings were taxed once as earnings and then again as estates. But the 0.2% who currently pay estate tax primarily accumulate wealth through investments that are not taxed until they are sold — in other words, Trump is about to give the 0.2% a tax holiday.
Trump has lied about the estate tax, saying that it is "[crushing] millions of small businesses and the American farmer." Last year, 2,204 families held estates that would have paid any tax under the estate tax.
"It was a kind of imperfect substitute or surrogate for the capital-gains tax," Wojciech Kopczuk, an economist at Columbia University, explained. "It's a roundabout way of getting some revenue that escapes some other type of a tax."
In the past, a reduction in the estate tax was always coupled with a plan to end the protective shell that encases inherited capital gains and keeps them from being taxed.
"What's unusual about the current bill is that when there's been previous efforts to cut back or repeal the estate tax, there was also an effort to change the tax on capital gains," said Michael J. Graetz, a Treasury official in the elder President George Bush's administration and a co-author of a book on the estate tax.
Who'd Gain From an Estate Tax Rollback: The 0.2 Percenters
[Patricia Cohen/The New York Times]
(via Naked Capitalism)
(Image: Trump Organization, CC-BY-SA)