This week, House Republicans reintroduced a bill to permanently eliminate the federal estate tax, commonly called the “death tax.” This tax is imposed on inherited property exceeding a specific value threshold.

Rep. Randy Feenstra, R-Iowa, has introduced the Death Tax Repeal Act with the backing of 162 lawmakers. This legislation aligns with previous Republican initiatives to eliminate estate taxes, including a Senate bill introduced in early 2023.

Over 150 small business associations from various sectors of the economy are endorsing the Death Tax Repeal Act put forth by Feenstra. 

According to Palmer Schoening, Chairman of the Family Business Coalition, family businesses nationwide need help to sustain their operations and retain their workforce. 

Proposals from the current administration to tax unrealized gains exacerbate these people’s conditions. It also heightened the estate tax burden and eliminated the step-up in basis.

From Chairman Jason Smith, R-Mo

On Thursday, House Ways and Means Committee Chairman Jason Smith, R-Mo., asserted that the government should acknowledge, and not penalize with the tax code, families dedicating a generation to building a thriving farm, ranch, or small business. 

He voiced his endorsement for the bill, commending its goals.

Smith added that eliminating the estate tax is crucial to guarantee the sustained prosperity of family-owned farms and small businesses throughout America, allowing them to perpetuate their family’s tradition of hard work. 

According to him, estate tax epitomizes the worst form of double taxation. Iowa families, already mourning the loss of a loved one, should not pay a substantial tax bill from the federal government simply to maintain the family farming tradition or keep their small businesses running. 

Smith takes pride in leading a group of advocates to repeal the estate tax permanently. 

They want to ensure that hardworking families, farmers, and small businesses retain more earnings, fortify family-owned enterprises in Iowa, and prevent external interests, like China, from influencing Iowa farmlands. 

Encouraging the Next Generation of Farmers

By eliminating the estate tax, they can encourage the next generation of Iowa farmers and business owners to establish themselves in rural Iowa, support their main streets, and contribute to the overall strength of the local economy.

Nevertheless, experts pointed out the lack of bipartisan support for repealing the estate tax, making it unlikely for Congress to enact it. 

Garrett Watson, modeling manager and senior policy analyst at the Tax Foundation, said it is primarily a strategic messaging effort to keep these ideas at the forefront. This fact reminds him of the discussion they’ll be having in 2025. 

In 2024, the federal estate tax exemption was adjusted for inflation, increasing to $13.61 million per individual or $27.22 million for spouses. Estates may be subject to a 40% tax on amounts exceeding these thresholds.

However, those limits will decrease by approximately half after 2025, as provisions from former President Donald Trump’s 2017 signature tax overhaul will sunset.

Given that the impact on revenue is relatively minor, having complete control would give them greater flexibility to eliminate the estate tax.

In 2019, about 2,100 tax returns, equivalent to 0.08% of adult deaths in the U.S., were subject to federal estate taxes, as per the latest IRS data.

Who is Impacted?

McClelland emphasized that the average American, and even the average wealthy, should not be concerned about this matter.

Although some Republicans argue that the federal estate tax burdens family farm owners and small businesses, he mentioned that the majority are not adversely affected.

In 2022, the U.S. Department of Agriculture’s Economic Research Service projected that a mere 0.22% of the 39,534 farms experiencing the death of their principal operator would be subject to estate taxes.

Remember that the requirement for estate tax returns largely hinges on the size of the farm, as highlighted by the USDA.