By Allyson Versprille
Republican Donald Trump’s election signals good things for people who want to kill the federal estate tax.
In the weeks leading up to the election, lobbyists for and against repealing the tax—Trump’s plan calls for repeal—expected that the estate tax wouldn’t change much in the first few years of the next presidency. Many anticipated a divided government that would keep the issue at a standstill. But with Trump’s win and Republicans maintaining control of both House and Senate, groups in favor of repealing what they refer to as the “death tax” are seeing light at the end of the tunnel.
“Mr. Trump made repealing the death tax a key tenet of his tax reform proposal and we look forward to working with him to see it through,” Palmer Schoening, chairman of the Family Business Coalition, told Bloomberg BNA in a Nov. 9 e-mail. “We’ve already been working with his key economic advisers on a strategy,” he said.
Patricia A. Wolff, senior director of congressional relations at the anti-estate tax American Farm Bureau Federation, envisions that repeal is more likely to happen as part of a larger tax overhaul package, like the House Republicans’ “A Better Way” proposal introduced earlier this year, rather than as a standalone measure.
“The Republican sweep adds fuel for passage of the tax reform blueprint. Inclusion of estate tax repeal was always assumed but with the newly elected president in support of repeal, it could become a featured issue,” she told Bloomberg BNA after the election.
“Any estate tax repeal bill, either standalone or in the the context of tax reform, still needs to pass through the Senate, where mustering 60 votes remains a challenge,” Wolff said. Most Senate decisions on important bills or major nominations require 60 votes in order to remove the threat of filibuster.
However, as Eric Schoenberg of the pro-estate tax group the Patriotic Millionaires points out, there are procedures Republicans in the Senate could use to ram legislation through with a simple majority vote—the “nuclear” option and “reconciliation”—though those are rarely invoked. “It’s true that under the current rule, you need 60 votes in the Senate but it’s far from clear to me whether those rules will be sustained,” said Schoenberg, who is on the advisory board for the Patriotic Millionaires, which has a membership of high-net-worth individuals.
“Reconciliation is a way to get legislation through the Senate without needing 60 votes,” Wolff said. “A precursor to reconciliation is passage of a budget resolution,” which has been difficult in the past but may be smoother with Republicans controlling the House, the Senate and the presidency, she said.
However, “assuming that you have a budget resolution that provides for reconciliation, then you have a 10-year budget window issue,” she said. “The way that we got into the estate tax exemption going up and then being repealed for one year and then coming back was a result of a tax bill that was passed under reconciliation,” Wolff said, referring to the temporary repeal of the tax in 2010 as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001.
“We would want to make sure that we don’t get into another situation where there’s a yo-yo and that if we can use reconciliation to pass the tax package, to pass estate tax repeal that the results are permanent.”
Shift in Focus
Schoenberg said his group may amplify efforts to ensure that estate tax repeal doesn’t occur now that Trump has been elected president. The Patriotic Millionaires has a lobbying session schedule for mid-November where estate tax is likely to be a topic of discussion.
Frank Clemente, executive director of the liberal-leaning advocacy group Americans for Tax Fairness, said a Trump presidency really shifts the focus for his group on tax issues. Anticipating a Hillary Clinton win, “we were gearing up for a big fight around corporate tax issues. I think this change in the election means everything is in danger from our point of view, including the estate tax,” he said Nov. 9. “I didn’t think we’d see action on the estate tax next year,” he added.
One of the biggest challenges for pro-estate tax groups is educating taxpayers and debunking the narrative conveyed by Senate and House Republicans that small family farms and businesses are significantly impact by the tax, Clemente said in the days before the election.
“The issue of small businesses and family farms is a complete lie frankly,” Schoenberg said. “Nobody has been able to actually identify any farms—small family farms—that have had to be sold as a result of the estate tax.” For the 40 percent estate tax to apply, an estate in 2017 would have to be worth more than $5.49 million for an individual and almost $11 million for a couple.
Schoenberg said it’s still unclear whether or not repeal is a high priority for Trump. It would seem that Republicans would have the votes for eliminating the tax but with Trump “it’s kind of one of those dividing lines,” he said. “Is he really going to try and help the people who elected him? Or is he really going to try and help people like himself? I just have no way of judging the answer to that question.”
With Trump, repeal could appear as a “self-dealing,” which wouldn’t sit well with the media or his supporters, Clemente said. “I think having a billionaire as president could change the dynamic around the estate tax somewhat. It makes it harder to have a clean debate,” he said. “Clearly, Trump could save probably a few billion dollars for his heirs if he were to sign an estate tax repeal.”
Wolff said the farm bureau group will be conducting a series of meetings with newly elected members of Congress and the Trump administration in the coming months to talk more broadly about issues in the House’s tax overhaul blueprint that impact farmers, but also to discuss repeal of the estate tax. She said while the inflation-adjusted $5 million exemption per person passed in the American Taxpayer Relief Act of 2012 provided relief to many family farms, there are still some that are impacted because they have to arrange expensive estate planning.
“Whether it’s caused some business to entirely go under or not to my mind is kind of irrelevant,” said Matthew Turkstra, manager of legislative affairs for the National Federation of Independent Business, an anti-estate tax group.
“We know it does inflict harm on businesses and we know it does have a significant impact,” he said. Businesses have to plan around it by taking money out of the company to put assets into savings, purchasing life insurance, or frequently consulting with attorneys and accountants, Turkstra said.
Outside of repeal efforts, the anti-estate tax groups are supporting the nullification of the Internal Revenue Service’s proposed valuation discount rules, which many see as harming family businesses.
“Our belief is that the change in administration will make mute the proposed alterations to the valuation rules,” Wolff said. “The likelihood that they could be finalized during this administration has always been slim and the new team will see them for what they are—an estate tax increase,” she said. The IRS received nearly 10,000 responses to the regulations when the comment period ended Nov. 2 and there are two bills, sponsored by Rep. Warren Davidson (R-Ohio) and Sen. Marco Rubio (R-Fla.), introduced in both the House and Senate to block funding to the rules.
“It’s easy to believe that a President Trump would order all of that stuff to come to a halt,” said Ronald D. Aucutt, a partner at McGuireWoods LLP and co-chair of the firm’s Private Wealth Services Group. But, he added, “I think a President Trump would be barely more predictable than candidate Trump has been.”