Latest news with #DeathTaxRepealActof2025
Yahoo
03-06-2025
- Business
- Yahoo
Estate tax repeal pending in Congress raises debate over charity, wealth gap
Jun. 3—A proposed repeal of the federal estate tax has advocates arguing about whether it would be a long-overdue fix for small business owners and farmers, or an unnecessary move widening the gap between the haves and have nots even further. Both U.S. Senators from Ohio are sponsors of the Death Tax Repeal Act of 2025, introduced by Republicans in the U.S. House and Senate, to eliminate the so-called death tax that is part of the federal gift and estate tax system. "Ohio's family small business owners and farmers spend a lifetime feeding and fueling our nation, and they often hope to pass down their businesses to the next generation. I'm supporting this bill to give hardworking families and farmers relief from the costly tax burden that makes it hard — or even impossible — for them to provide for our communities for generations," said U.S. Sen. Jon Husted, R-Ohio, in a prepared statement. Opponents say a proposed repeal of the federal estate tax would create broader wealth disparity, discourage charitable bequests and would not benefit the vast majority of Americans. As of Monday, versions of the bill were in the House Ways and Means committee and the Senate Finance Committee. The rhetoric around the legislation talks about farmers and small businesses, but a lot of the provisions touted have such high caps that they also help quite large estates, said Blaine Saito, an associate professor at Ohio State University's Moritz College of Law whose focus is on how tax law shapes social policy, the management of the tax system and tax law's interaction with democratic ideals. 2025 individual exemption is $13.99M Most Americans never pay any gift or estate tax. In 2025, the exemption is $13.99 million for individuals and $27.98 million for married couples. The higher exemption of the 2017 Tax Cuts and Jobs Act ends this year and will return to the base of $5 million plus an inflation adjustment for individuals. The One Big Beautiful Bill Act proposes increasing the federal estate tax exemption to $15 million a year for an individual, adjusted for inflation, and to make it permanent beginning in 2026. "A full repeal, or even a very high exemption amount would benefit those with a lot of wealth that they can pass on to their heirs, generally the very wealthy people in society," Saito said. Even the lower exemption rate is not likely to reach most family-owned small businesses and farms that fall below that threshold, he said. The estate and gift tax dates to 1916 after President Theodore Roosevelt sought to break up large family trusts and end the excesses of the Gilded Age. "Repealing the estate and gift tax would be one way of getting back toward large transfers of inherited wealth and further wealth disparities," Saito said. Tariffs more pressing concern to business owner Bill Castro, partner and general manager for El Meson, his family's Hispanic-fusion restaurant featuring dishes inspired by cuisine across Spain, the Caribbean and Americas, said he doesn't know what to think about a possible permanent repeal of the so-called death tax. Three generations of the Castro family work at El Meson at 960 E. Dixie Drive in West Carrollton, founded by Castro's parents. "I worry every day to pay my payroll, I worry every day to keep my staff working," he said, as many patrons are cash-strapped and dining out less often or only for special occasions. For Mother's Day, El Meson had more reservations than usual, but it was offset by food prices that doubled. "My level of reservations have increased but my level of profitability has decreased," he said. If they want to help small businesses, Castro said lawmakers should consider not taxing server tips and doing something about the economy, particularly the tariffs that have led to escalating prices and financial concerns. "These other issues are current, affecting us every day," he said. Estate taxes can harm farmers Harlan Twp. Trustee Ed Porginski, who owns Sugar Run Farms near Morrow in Warren County, said he supports a repeal of the federal estate tax. Similarly, he supported state lawmakers who permanently repealed Ohio's state-level version of the estate tax about a dozen years ago. He raises cattle, pigs and grows crops, but mostly his business is selling beef for the freezer. He said it's unlikely any of his three children will want to take over the family farm. One of his sons raises cattle on his own property, another son is a paramedic and he doesn't think his daughter is interested, though she runs the farm's website and social media for her parents. His support for the estate tax repeal comes from watching people he knew destroyed after losing their livelihood and farm near Mason where their family lived for generations when their parents, at about age 70, were both killed in a plane crash. "They lost that farm, they couldn't pay their tax," Porginski said. "That was the first time I was introduced to that. That hit really close to home." Tax exemption affects charitable giving In 2024, the U.S. Treasury collected approximately $33 billion in estate and gift tax revenues from only about 0.1% of estates that had to pay the tax, according to the Tax Policy Center of the Urban Institute and Brookings Institution, a nonprofit, nonpartisan think tank. Tax law change has led U.S. charitable giving to drop by billions a year since 2018. Bequests fell by about $20 billion in 2018, the first year the higher estate and giving tax exemption took effect, according to a study by researchers at Indiana University and the University of Notre Dame. The federal estate and gift tax, which imposes a tax rate up to 40% outside the exclusion, encourages charitable contributions by allowing dollar-for-dollar deductions for bequests. "Despite repeated claims to the contrary, there is little evidence that wealth transfer taxes reduce capital accumulation or efficiency, and they certainly can be structured in ways that take account of the special considerations raised by small businesses or family farms," Brookings said. Saito agreed, and said that measures that help small businesses and family farms include allowing deductions for the full cost of capital. Brookings advocates an inheritance tax instead of an estate tax. An inheritance tax would correct the unfairness of taxing income from work, saving, or even a lottery win, but leaving inheritances untaxed. "Our estimates show that inheritance taxes not only can raise more revenue and be more progressive than the existing estate tax, they can also broaden the income tax base, improve equity and raise economic mobility," the institution said.
Newsweek
14-05-2025
- Business
- Newsweek
Inheritance Tax Could Be Scrapped For Millions of Americans
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A bill recently reintroduced in Pennsylvania could eliminate the state's inheritance tax currently levied on properties transferred from an individual to their heirs after they pass. According to the legislation's prime sponsor, Rep. Valerie Gaydos, a Republican representing Allegheny, the elimination of the state's inheritance tax "will protect against double taxation, ensure that inheritance goes to the family or heirs it was meant to go to and help preserve individuals who receive an inheritance from ending up with a tax bill at a time when they are also mourning the loss of their loved one." Why It Matters Pennsylvania is currently one of only six states still imposing an inheritance tax, together with Iowa, Maryland, Nebraska, Kentucky, and New Jersey. This tax can create a significant burden for beneficiaries—and that is why the bill pushed forward by Gaydos and eight other Pennsylvania Republicans in the state's House of Representatives, HB 1394, aims to eliminate it. Supporters of the bill argue that the state's inheritance tax is unfair to families who inherit property—particularly small businesses and family farms, which often struggle to pay estate taxes because of the high value of land and equipment relative to available cash. The move in the Keystone State comes as federal lawmakers are also pushing for the Death Tax Repeal Act of 2025. Introduced in February, the federal legislation seeks to permanently eliminate the estate tax, commonly known as the "death tax," which applies to estates valued over $13.99 million. If passed, the repeal would allow individuals to transfer an unlimited amount of property at death without federal estate taxes. What To Know When someone passes away in the U.S, an estate tax is levied on their estate based on the net value of their assets at death and paid to the federal or state government. An inheritance tax, on the other hand, is only paid by beneficiaries to a state government, when applicable, based on what they receive. While estate taxes have set thresholds and range from 18 percent to 40 percent, the range of an inheritance tax usually depends on the relationship between the deceased and the beneficiary. As mentioned before, inheritance taxes are quite rare in the U.S. The rates for Pennsylvania's inheritance tax range from 4.5 percent to 15 percent. Inheritances to a spouse or to a child aged 21 or under are normally applied a 0 percent rate. Transfers to children (aged over 21) or others in a direct line of descent are subject to a 4.5 percent rate. A 12 percent rate applies to inheritances for siblings. Transfers to any other heirs, except charitable organizations, are subject to a 15 percent rate. Pennsylvania is one of only six U.S. states levying an inheritance tax. Pennsylvania is one of only six U.S. states levying an inheritance tax. Getty Images HB 1394, which was first introduced in the 2023 legislative session as HB 136, seeks to amend Pennsylvania's Tax Reform Code of 1971 by repealing the state's inheritance tax entirely. A cosponsorship memo issued on February 7 said that, while the federal inheritance/estate tax has a general exclusion amount, Pennsylvania's inheritance tax does not. "The Federal inheritance/estate tax is applied to the transfer of property to an heir after the passing away of the original owner. Federal tax is calculated based on the fair market value of the property transferred to the beneficiary of the estate," the memo reads. "However, unlike Pennsylvania, the federal estate tax has a general exclusion amount. Under the Tax Cut and Jobs Act (TCJA), the filing threshold was increased to $11,580,000 in 2020, and $11,700,000 in 2021 and is adjusted for inflation thereafter through 2025." While, if passed, the bill would significantly ease the financial burden on inheritances in the state, it would also eliminate a source of revenue that has generated billions for Pennsylvania, potentially reducing funding for state services and leading to budget shortfalls. Pennsylvania's Treasury Department reported that the inheritance tax raised $38 billion in 2024. But according to its sponsors, the tax does more harm than good. Gaydos said that the state's inheritance tax "disincentivizes business investment in Pennsylvania and encourages high-net-worth individuals to relocate to more tax-friendly states." A Growing Movement Across The Country While the Death Tax Repeal Act of 2025 has been introduced at the federal level, the law firm Koley Jessen noted in a report that similar legislation has been introduced annually since 2015—with each attempt, though gaining support, failing to become law. Pennsylvania is not the only state trying to get rid of its inheritance tax. A similar effort in Nebraska failed on Tuesday after a bill fell two votes short of the 33 needed for advancing to the third and final round of debate. The failed legislation, LB468, had proposed lowering the inheritance tax rate for nieces and nephews from 11 percent to 7 percent for assets over $40,000, according to the Lincoln Journal Star. Nonrelatives would also pay 7 percent on inherited assets over $40,000, up from $25,000. The bill also included provisions to offset the loss of revenue to county governments by increasing various fees, including vehicle inspection fees and marriage license fees. However, opponents argued that the measures would place undue financial pressure on lower-income residents while generating insufficient revenue to cover the anticipated budget gaps. What People Are Saying Gaydos said in a news release on May 8: "Pennsylvania is one of only six states that still imposes an inheritance tax. At a time when families are grieving the loss of a loved one, the state should not be handing them a tax bill. The inheritance should go to the people it was intended for without the government taking a portion." What Happens Next House Bill 1394 is under review by Pennsylvania's Finance Committee. It is likely to face debate as it moves through the legislative process, with lawmakers weighing potential financial relief for families against the possible effects on state revenue.
