WASHINGTON ― Although their outline for tax reform calls for repealing a tax on extremely wealthy estates ― probably the single most progressive part of the tax code ― some Republicans in Congress seem open to keeping it.
“I believe the estate tax is an unfair tax inherently, but if that means we have to compromise and put a cap on it, I’m open to that,” Rep. Tom Reed (R-N.Y.) told HuffPost Tuesday. “I’m really open to trying to find a solution to get to the finish line.”
Reed is one of several Republicans from high-tax states who are chafing at their leadership’s proposal to nix a deduction for state and local taxes as part of the reform framework released in September. The broader framework eliminates a plethora of individual tax breaks not only to simplify the tax code, but also to partially offset the massive revenue loss from sharp cuts to individual and business taxes.
Getting rid of the state and local tax deduction would raise $1.3 trillion over 10 years by taking away the ability of wealthier filers to subtract those levies from their federal taxable income. Republicans from states like New York and New Jersey are pushing their leadership to scale back the provision. Doing so would cause the overall plan to lose even more revenue, so Republicans are now looking for ways to offset that additional cost.
“There’s a lot of talk about pay-fors” ― ways to offset the cost of keeping some state and local tax deductions ― Rep. Tom MacArthur (R-N.J.) said Tuesday. He didn’t specify whether keeping the estate tax, which would raise almost $240 billion over 10 years, is part of the discussion.
Reed said the estate tax ― commonly called the “death tax” by Republicans ― is “part of the mix.”
MacArthur, Reed and other members met Tuesday with Rep. Kevin Brady (R-Texas), chairman of the tax-writing Ways and Means Committee, to ask him to let their constituents keep deducting some of their state and local taxes. MacArthur and others have threatened to withhold support from a procedural vote on Thursday if they don’t get a deal.
Brady didn’t say Tuesday he would back away from the proposal to eliminate the estate tax. “I don’t want to get ahead of the committee’s work,” he told HuffPost, “but the framework we agreed on with the president fully repeals the death tax.”
The tax applies to single estates worth more than $5.4 million, or about $11 million for a married couple’s estate. The tax cuts enacted during President George W. Bush’s administration greatly expanded the amount of an estate exempt from the tax, which was only $675,000 in 2001. Republicans often complain that the tax hits farmers and small business owners, though the data show that’s not really the case.
Conceived as a source of revenue and a check on concentrated wealth among a handful of powerful families, the estate tax has been part of the tax code for more than 100 years. Since it only applies to the very rich, the Center on Budget and Policy Priorities, a liberal think tank, refers to it as the most progressive part of the tax code.
President Donald Trump ― both as a candidate and since taking office ― has repeatedly called for repealing the estate tax. Yet he has also insisted that the overall tax reform plan shouldn’t be a windfall for the rich, so keeping the estate tax would help back up that pledge.
A White House spokesperson didn’t respond to a request for comment.
The nonpartisan Tax Policy Center has estimated that 79 percent of the tax code changes the GOP plan outlines (the proposal’s details still remain sketchy) would benefit the richest 1 percent of taxpayers.
Earlier this month, some Senate Republicans expressed skepticism about completely ditching the estate tax, given how it’s already been scaled back and how few tax filers ― 0.2 percent ― it affects. A compromise could be to increase the amount of an estate not subject to the tax, or to reduce the 40 percent rate that applies to estates above the exemption threshold.
“It’s all more fluid than the public realizes,” Rep. Kenny Marchant (R-Texas), a Ways and Means Committee member, said Tuesday. “We only have room for so much, so eventually the adults in the room will have to say you can’t have everything.”
Another Ways and Means member, Rep. Pat Meehan (R-Pa), said he was “looking at it from both sides.”
Rep. Ted Yoho (R-Fla.), a member of the conservative House Freedom Caucus, said he favored completely repealing the tax. But he said he could see himself supporting more modest changes as part of an overall tax bill that meets conservative goals. He said the situation seemed to be in flux.
“We were told by [Treasury Secretary Steve] Mnuchin it was 100 percent gone but we were told by other members it could stay,” Yoho said. “I would look at what the whole package is.”