Reform Needed: Estate Tax Repeal

Impact: This end-of-life tax assessment obstructs and discourages small business succession planning, weighing on the viability of loggers and other businesses supporting the wood supply chain, while also contributing to forest fragmentation and retention of land in forest.

The Issue: The federal Estate Tax, or “Death Tax,” has become subject to mounting criticism, particularly now that Republicans control both House and Senate, and efforts to repeal it have launched in both chambers.  Currently, exclusion thresholds--$5.43 million per individual, or $10.86 million per couple—limit its direct effects to about 2 out of every 1,000 annual deaths.  The tax’s impact on estates subject to the tax, however, is considerable--the top rate is 40%, and if assets include the assessed value of a business or timberland holding, the burdens the tax imposes can be disastrous.

Status: The Death Tax Repeal Act, HR 1105, sponsored by Rep. Kevin Brady (R-Texas), passed the House April 16, 2015 by a 240-179 vote. The bill repeals the federal estate tax and, significantly, retains a provision called “stepped up basis” that allows capital gains to escape taxation if they are passed on to heirs. In the Senate, Sen. John Thune (R-South Dakota) has sponsored a similar estate tax repeal bill, S 860, which had 38 cosponsors as of June 8, 2015—all Republican. The bill is awaiting action in the Senate Finance Committee.