WASHINGTON — Building on past success and what might be new momentum, Sen. Chuck Grassley of Iowa is a lead co-sponsor of newly re-introduced legislation to repeal the federal estate tax, better known as the death tax, that punishes family farmers and business owners on the death of an owner.
“The appreciated value of land is phantom income,” Grassley said. “The value is locked in the asset, so if there’s no intent to sell the land, there’s no real income to tax other than the income the land actually produces, and that’s already taxed. The estate tax doesn’t serve any purpose except sending more money to Washington, D.C., that would be better spent on keeping up the family farm or creating jobs at a business.”
Grassley is an original co-sponsor of the Death Tax Repeal Act of 2015 from Sen. John Thune (R-S.D.). The bill is identical to legislation advancing in the House of Representatives. Grassley is former chairman of the Finance Committee, with exclusive Senate jurisdiction over taxes, and where he presided over death tax relief.
Grassley’s prepared statement at a Capitol Hill news conference on the repeal effort follows here.
Prepared Statement of Sen. Chuck Grassley
Death Tax Repeal News Conference
Thursday, March 26, 2015
I’m pleased to join my colleagues in this Senate-House effort. We’ve had some success in easing the burden of the death tax on farmers and small businesses. When I first became Chairman of the Finance Committee in 2001, the tax had a top rate of 55 percent with the exclusion of just under $700,000. One of the first major tax bills I worked on gradually increased the exemption amount to $3.5 million and lowered the top rate to 45 percent. We hoped for eventual repeal.
However, due to political realities, we had to settle for the exemption at $5 million, indexed to inflation, with a top rate of 40 percent. On the bright side, that’s a lot better than where we were in 2001. But it falls short for many small businesses and farmers. That’s especially true for small businesses and farmers with assets, such as land, that have appreciated substantially over decades. For many, the death tax remains a planning nightmare. Time, money, and resources are devoted to ensuring families can pass their business onto the next generation. This is time that would be better spent on innovating and expanding a family business.
And even with the higher exemption amounts, too often assets have to be sold off simply so the government can get its cut. The only solution for ending the destructive nature of the death tax is its complete repeal. For those who think the current status is good enough, I’d remind them that proponents of raising these taxes are still among us. Working toward repeal and even maintaining the status quo require vigilance.