I’m an investigative reporter.
The federal estate tax — which is imposed on a tiny sliver of rich Americans when they die — is being eviscerated.
In theory, the tax is simple. A married couple can pass along about $27 million (say in cash or stock) to their heirs tax-free. Anything above that is supposed to be taxed at a rate of 40 percent. But although the wealth of the richest Americans has soared over the past several decades, estate tax receipts have not.
To understand what that means, consider this: Revenue from the estate tax has barely changed since 2000, even as the wealth of the richest Americans has roughly quadrupled. If the tax had simply kept pace, it would have raised around $120 billion last year. Instead, it brought in about a quarter of that. That shortfall would be enough to triple federal research funding for both cancer and Alzheimer’s — and still leave enough to double the entire budget of the Justice Department.
There are several reasons the tax isn’t working. In today’s newsletter, I’ll explain three important ones.
Anti-tax warriors
The tax has been getting weaker since the 1990s, when a few things happened.
For one, a handful of billionaires, including the Kochs, Waltons and Mars families, funded a lobbying campaign to kill the estate tax. It culminated when George W. Bush signed a law that gradually cut the top rate to 45 percent, down from 55 percent, and gradually raised the size of the fortune that could be exempt. The amount excluded doubled in the 2017 Republican tax overhaul signed by Donald Trump. Now, a married couple can pass down $27.2 million to their heirs without paying a dime of estate tax.