This is one of a series of posts on Trump’s recent tax proposal. To see the entire collection of posts, click HERE.
What is the estate tax?
The estate tax is a tax on the transfer of the estate of a deceased person or couple. In simpler terms, once someone dies, if they have enough money or assets, some of what they leave behind will be taxed. The tax only kicks in, however, on anything above $5.49 million for an individual or $10.98 million for a married couple. Estates worth less than those amounts pay absolutely nothing. Estates worth more than that pay a 40% tax, but only on amounts above the cutoff, so the first $5.49 or $10.98 million are tax free. Because of the high exemption level, the few estates that pay any tax actually pay an average of just 16.6%.
Who does this affect?
The estate tax, as you might imagine given the minimum amount you need to start paying, affects very few people. The estate tax basically only affects the wealthiest Americans. In fact, only two out of every thousand estates pay any estate tax at all. That’s less than 5,000 in a typical year. Despite claims made by opponents of the estate tax, almost none of these are small businesses or small farms – in 2013 only 20 small businesses or farms owed any federal estate tax at all.
Why should you care?
Simply as a matter of fairness, our country taxes people who work for their income – why should the children of the rich who have never worked a day in their life get to inherit billions tax-free?
On a more concrete level, President Trump promised not to give the top 1% a tax cut, but this cut does just that. Only the top quarter of the one percent — the richest of the rich will pass along enough money to their children to be affected by the estate tax – a group that includes Donald Trump. If his claims of being worth $10 billion are true, this tax cut would save his children $4 billion dollars. It’s troubling that our President is advocating for policies which would save him and his children money, but would do nothing for the average American.
The estate tax was introduced a century ago to curb historic levels of economic inequality that had become a threat to national stability. We suffer the same level of imbalance today. Eliminating the estate tax would only expand the gap between the wealthy, who have never done better, and the majority of Americans, many of whom are still struggling to get by. The estate tax doesn’t just raise much-needed revenue, it prevents the rise of a permanent American aristocracy. It is the most American tax there is.
For the next post in this series, click here to read about Trump’s plan to eliminate the Alternative Minimum Tax.