Trump-GOP Tax Law Closeup: Strengthen Rather Than Weaken The Estate Tax To Curb Dynastic Wealth

June 26, 2024

What Is The Estate Tax?

The estate tax or “silver spoon tax” is one way to make sure that families who pass down enormous fortunes give back and support the public investments that helped build those economic dynasties. Roads, ports, schools, courts, and public safety agencies are just some of the public services that support the American economy that makes some families fabulously rich. It’s only fitting that they should help pay for those services through the estate tax. The taxation of big intergenerational wealth transfers also narrows economic inequality, especially when the revenue is used to lower costs and expand opportunities for everyone who wasn’t born rich.  

The estate tax however is the weakest now it has been in its more than one-hundred-year history. The 2017 Trump-GOP tax law doubled the exemption and indexed it to inflation so that in 2024 a couple can pass along over $27 million without their heirs paying any estate tax. Only the richest eight families in every 10,000 now pay the estate tax – just about 1,300 estates a year. In fact, most of the estate tax is currently paid by estates worth more than $50 million. At the end of 2025, the estate-tax exemption is due to shrink to a still generous $14 million or so per couple. If the smaller exemption amount is allowed to return on schedule, it will still only be the richest 20 or so families out of 10,000 who pay the tax– and well over 99% of families would still not owe a penny. 

Extending A Weakened Estate Tax Wastes Money The Public Needs

Extending the weakened estate tax would only benefit super rich households while hurting everyone else. Continuing the Trump tax law provision would give a huge tax cut to a fraction of 1% of Americans and cost us $167 billion in lost revenue over 10 years. That’s about enough money to, among other public investments, institute President Biden’s plan for improved home care for elderly and disabled Americans, reduce housing costs for buyers and renters, or improve the Earned Income Tax Credit for childless workers. 

Almost All Small Businesses & Family Farms Are Exempt From The Estate Tax

One of the biggest myths about the estate tax is that small businesses and family farms are routinely sold to pay the estate tax. The fact is that almost no family businesses or farms are large enough for their inheritors to owe the tax. In 2020, only the 50 biggest farming operations in the whole country paid any estate tax. Over 60% of the assets in taxable estates are financial—stocks, bonds, and cash—so there’s no need to sell a business or farm even if the owners do owe the tax. The estate-tax law also contains special protections for family farms. 

Additionally, the claim that the estate tax constitutes double taxation is false. Much of the value of the biggest estates is unrealized capital gains which are increases in the value of assets that have never been taxed and will not be subject to any tax other than the estate tax upon an individual’s death. It’s estimated that over half the value of the biggest estates consists of income that’s never been taxed and never will be without the estate tax. 

We Should Strengthen The Estate Tax So The Ultra-Wealthy Pay Their Fair Share

Instead of extending the weakened estate tax, we should strengthen it so wealthy inheritors pay their fair share. There is legislation in Congress right now that would return the exemption to 2009 levels, create a progressive bracket structure,  and close loopholes like special trusts that allow huge fortunes to grow tax-free as they pass down the generations.