Virginia Republicans vote to get rid of the death tax…all except Rigell

 

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In a vote of 240-179, the House Republicans voted to repeal the Death tax today. Proudly the entire  Virginia Republican delegation voted for repeal, except Congressman Scott Rigell.  In his press release, the Congressman explains his vote and I will leave it to the reader to agree or disagree with his reasoning:

“Today I voted against cutting the estate tax to zero. As our military absorbs the impacts of sequestration, I cannot justify supporting a bill that adds nearly $270 billion to the debt without providing an offset for these costs.

“Members of Congress hold different views on this, and I understand why many of my colleagues cast a principled vote in support of this bill. However, Congress and the White House have already made significant progress in this area. Legislation signed into law in 2013 allows an individual to pass on $5.4 million without paying an estate tax. A couple can pass on $10.8 million. The bill we voted on today would only affect an estimated two-tenths of one percent of Americans or about 5,500 households.

“Our nation’s financial problems are very serious and if not addressed, threaten the future of every American regardless of age, gender, ethnicity or political affiliation.

“We know with certainty that there will be a 33% increase in the number of seniors enrolling in Medicare and Social Security over the next ten years. Additionally, defense spending cuts driven by sequestration threaten our national security and reduce investments in other critical areas including transportation.

“My focus is on reversing sequestration, protecting our military, and putting our nation on a better fiscal path. I will continue to fight for sound financial policy driven by facts and an unapologetic resolve to pass on to the next generation of Americans the blessings of liberty and freedom.” – Congressman Scott Rigell

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With that being said Barbara Comstock voted with the majority of the GOP and the Virginia Delegation and voted against this invasive tax. Her statement is as follows:

“Imagine building up a family business or family farm your whole life only to lose much of that business upon the death of Mom or Dad.  Under current law, Uncle Sam swoops in and can take up to 40% of what you spent a lifetime building up for your children and grandchildren.  Today we voted to stop that injustice.

 

“Family businesses are the backbone of the American economy and should not be punished for saving responsibly and investing in our country.  This legislation provides hardworking families and small businesses with the economic security they need to create jobs and grow our economy.  No longer will families be forced to sell parts of their farms and small businesses in order to pay an unfair tax to the government due to the death of a loved one.

 

“The Death Tax is double taxation on income already earned and taxed as well as an undue burden on American families.  With passage of this legislation, those who own family farms and small businesses will be able to plan ahead for their future and pass along their hard earned businesses to their children and grandchildren.” – Barbara Comstock

 

This Blogger agrees with Comstocks explanation, I’m curious to what others may be thinking. 

 

 

 

 


5 thoughts on “Virginia Republicans vote to get rid of the death tax…all except Rigell

  1. I’m gonna have to go with Rigell on this one, because the Brady bill wasn’t about stopping double-taxation; it was about providing NO taxation for wealthy heirs. A lot of folks don’t understand tax esoterica like “stepped up basis,” so here’s the plain English story:

    A person builds a tech company, sells it off, and gets paid let’s say $90M for it, which ends up as $50M in his pocket after all taxes. He’s 45 years old, and invests that $50M in stocks and real estate partnerships through his financial advisor. Buys a yacht, divorces his wife, gives his kids everything they want because he feels a little guilty (but not if it will result in gift tax, so he’ll just pay for them to go to boarding school and ivy league and law school and gift them $14K a year besides), you know the story…

    When he dies at age 85 his estate has grown to $120M and that is split evenly between his 2 kids, now in their 40s or 50s. Because he was a “buy and hold” guy, he hasn’t paid tax on any of the $70M capital gains in his portfolio. What’s the fairest tax treatment?

    If he sold those assets the day before he died, he would have about a $21M tax bill ($70M x 20% cap gains + 3.8% Obamacare tax + 5.75% Virginia income tax). His kids would get the remaining $99M, no additional tax because he just paid the capital gains tax.

    Under today’s estate tax, if he died holding the portfolio, the first $5.43M would be tax free, and the rest subject to 40% estate tax. Uncle Sam’s cut would be about $46M, leaving $74M free for the kids. Not such a good plan, which is why he might want to start giving money to the kids and grandkids BEFORE he dies. Does he really need $120M for himself at age 80 anyway?

    Under the one-year Bush estate tax repeal that existed in 2010, there would be no estate tax at death, but his kids would be treated as having the same portfolio cost he originally had ($50M). So if the kids liquidated the portfolio the day AFTER he died they would have the same capital gains tax as if he had sold it the day before $21M, $99M left for them to do what they will. The only trouble with this plan was a practical one: a lot of times it’s hard to document how much a dead person paid for an asset many decades ago.

    Under the Brady bill that most of the GOP Congressmen just voted for, the kids would pay ZERO tax if they sold the assets the day after he died. Not only would there be no 40% estate tax, but the kid’s cost basis would be adjusted to $120M, the value at dear old dad’s date of death. Woo hoo, they have $120M to walk away with now! Except they had to wait until he kicked the bucket, because instead of having a tax incentive to start giving it away sooner, he had a tax incentive to hold onto it until death. Whose interests are served by this? How does this help the economy grow and create jobs?

    I don’t think most of the GOP Congressmen understood this. They just pushed out the talking points about family farms and businesses and assumed they were voting for the 2010 system. Their 24-year-old trust fund Legislative Assistant told them to do it. So I don’t really blame them, but I do say kudos to Scott Rigell for getting informed and thinking for himself (or at least hiring someone on his staff who did that).

  2. I support repeal of the death tax. Let’s remember that most millionaires are people who worked for their wealth, not people who inherited it. Those people worked many hours more than the average person to build their wealth, oftentimes at the expense of their families. The money they could keep to build wealth has already been taxed two or three times, at least. Furthermore, there are a lot of “wealthy” estates that are land and/or equipment rich but cash poor, and the estate tax forces debt on the heirs and/or the closing of small businesses and family farms. Ironically, minority-owned businesses are hit hardest.

    Another thing to point out is that the estate tax is, at best, a zero-sum gain. Many wealthy people engage in estate tax avoidance strategies. (Not surprisingly, the same people, especially wealthy leftists, support the estate tax for everyone else.) The resources put into legal defenses could otherwise be invested and create jobs. The government spends a lot of resources in estate litigation, further limiting the incremental value of supposed revenue.

    Between the cost to the government of enforcing the estate tax, the economic inefficiencies the tax introduces, and the disproportionate effects on minority and woman-owned businesses, repeal of the estate tax is the right thing to do.

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