GOP’s Tax Conference Priority: Tax-Free Inheritances or Less Harm to Working Families?

Update, December 8:  We’ve added a table at the bottom of this post that lists the House members who called December 7 for estate tax repeal, along with the number of wealthy estates in their states that would benefit from repeal and the number of children in low-income working families that are entirely left out of the House bill’s Child Tax Credit increase.

Fifty-three House members today called on the House-Senate conference committee writing a final tax bill to eliminate the estate tax, as the House-passed bill does, rather than seriously weaken it, as the Senate-passed bill does. Giving the heirs of the nation’s wealthiest estates the largest possible estate tax cut would be a strikingly poor choice. Conference members should instead mitigate the serious problems in the House and Senate bills, which would raise taxes on millions of low- and middle-income families, deliver token or no Child Tax Credit (CTC) increases to millions of children in low-income working families, and (in the case of the Senate bill) leave millions more uninsured.

The estate tax is the federal tax code’s only tool to prevent large amounts of wealth from accumulating over multiple generations without ever facing taxation. Yet policymakers have severely weakened the estate tax in recent decades. Only the heirs to the wealthiest 2 in every 1,000 estates pay any estate tax, and they pay 16.6 percent of the estate’s value in tax, on average; heirs pay no income tax on inheritances. And roughly half of the value of the largest estates consists of “unrealized” capital gains that have never been taxed, as we’ve explained.

The Senate bill would double the value of estates that’s exempt from the estate tax, to $22 million per couple ($11 million per person). This change, which would cost $83 billion over ten years, would eliminate the tax for two-thirds of the small sliver of wealthy estates that now face it. The remaining third — 1,800 estates with assets over $22 million per couple — would get a tax cut of $4.4 million each.

The House bill would fully repeal the tax after 2024, at a cost of $151 billion over ten years. And it would mean families could transfer hundreds of millions (or billions) of dollars across generations without paying any taxes whatsoever.

Some Senate Republicans, such as Finance Committee Chairman Orrin Hatch, Susan Collins, Mike Rounds, and Jeff Flake, have said that repealing the estate tax isn’t a high priority. They’re right, especially given the nation’s growing fiscal challenges and wealth inequality. Scaling back the tax shouldn’t be a priority, either. If House-Senate conferees want to improve the tax legislation, they should focus on its real problems, including:

• Tax increases for millions of low- and middle-income people. Even in 2025, when most of its individual income tax provisions would be in place, the Senate bill would raise taxes on 22.5 million households with incomes under $200,000. In 2027, after those provisions largely expire, the bill would raise taxes on 37.8 million households with incomes under $200,000. Meanwhile, the bill would leave in place its corporate tax cuts, which flow overwhelmingly to the wealthy, and its slower measure of inflation for adjusting tax brackets and other tax provisions, which would raise taxes on households across the board — as well as a provision that would leave 13 million more people uninsured, described below.
• Millions more uninsured and higher premiums in the individual market. To help pay for its corporate tax cuts, the bill would permanently repeal the Affordable Care Act’s individual mandate, the requirement that most people get health insurance or pay a penalty. All of the savings from repeal ($53 billion in 2027, for example) would come because fewer people would be insured, which would lower federal costs for Medicaid and for federal tax credits that help people buy insurance.
• A token increase in the CTC for low-income working families. The Senate bill would raise the maximum CTC from $1,000 to $2,000 per child and make people with much higher incomes eligible for the credit. A family of four making $500,000, for example, would receive a new credit of $4,000. But 10 million children in low-income working families would get just $75 or less, and 16 million other children in working families would get more than $75 but less than the full increase. Their parents are truck drivers, cooks, health aides, and millions of others who do important work.

At every step in the process, House and Senate Republicans have tilted their tax bills against working families and toward the wealthy and corporations. The conference committee should address that problem instead of doling out even bigger tax cuts to wealth.