Eliminating the federal estate tax on inherited wealth, which the House Ways and Means Committee approved today and which we’ve explained would increase deficits and inequality, is a misguided — and expensive — policy, new data show. New cost and distributional estimates from the Joint Committee on Taxation (JCT) confirm that repeal would reduce revenues by $269 billion from 2016 through 2025 (adding $320 billion to deficits once the additional interest cost on the national debt is included), with the entire benefit going to the nation’s roughly 5,400 wealthiest estates.
The JCT distributional estimates show that in 2016:
Only the nation’s wealthiest 5,400 estates would benefit — about 2 of every 1,000 estates — because only those estates currently face the estate tax to begin with.
The nation’s wealthiest 1,336 estates — those worth $20 million or more — would receive 73 percent of the benefit, with each receiving a tax windfall averaging roughly $10 million.
The nation’s wealthiest 318 estates — those worth at least $50 million — would receive tax windfalls averaging more than $20 million each.
Ways and Means approved this windfall for heirs of extremely wealthy estates on the sameday the House is considering a Republican budget plan that would shrink programs for people with low- and moderate-incomes by an average 43 percent in 2025. Such deep cuts would produce a dramatically weaker safety net, driving millions of people into poverty and denying or weakening health coverage for tens of millions more. They would also reduce opportunity for students from modest backgrounds who are striving for a college education and a better future (see graphic). Proponents of the budget plan contend that such cuts are needed to meet their goal of balancing the budget in ten years.
In backing estate tax repeal, however, the House Ways and Means Committee suggests that the nation can afford $320 billion in higher deficits to deliver a tax cut to the wealthiest estates.