It’s Time to End the Death Tax
By Sen. John Thune
Death should not be a taxable event. Anything you leave to your heirs has already been taxed once, and there should be a limit to how many times the government can tax you. Unfortunately, the estate tax, often called the death tax, is a concern for many American farmers, ranchers, and small business owners whose operations could be devastated by this tax. Eliminating the death tax once and for all has long been a priority of mine, and I recently introduced a bill to permanently repeal this fundamentally flawed tax.
I was proud to help secure a doubling of the death tax exemption in the 2017 Tax Cuts and Jobs Act, which has protected a lot of farms, ranches, and small businesses. But the larger exemption limit will expire at the end of this year, and it’s my hope that we will not merely extend the exemption, but that we will put an end to the death tax once and for all.
Death tax proponents talk as if it only affects the extremely wealthy, but that couldn’t be further from the truth. The death tax can sweep up those who have very little money in the bank. Take for example a family farm or ranch, which are often cash-poor businesses. They might have substantial-looking assets on paper, but the vast majority of that is land and farming equipment, and a small fraction of it is money in the bank.
So what happens when a farmer or rancher dies and his estate is subject to the tax? There’s a very good chance that his liquid assets – in other words, the cash that he has available in the bank – won’t come close to covering the tax bill from the federal government. The only alternative for his heirs in that case may be to start selling off land or farm equipment to pay the tax. They may be able to keep the farm – just a smaller version of it – or they may have to sell it off entirely. It’s the same plight that many ranches and small businesses face as well.
But it’s not just those who actually get hit by the death tax who suffer. Many family farms, ranches, and small businesses spend a lot of time and money on estate planning to avoid being hit by this tax. That’s time and money that could have gone into building their business, hiring new workers, and investing in their operation. Others set aside capital to prepare for the death tax, which is money that, again, could go into the building up of their operation.
It’s time we end the death tax once and for all. And I hope that 2025 will be the year that we permanently bid farewell to this flawed and unfair tax.
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Representing the interests of the millionaires
This will be great for the ultra wealthy! Middle class, working poor and poor? Not so much.
The “working poor” don’t pay income taxes. It’s all returned back to them.
In the future, most billionaires won’t pay income or inheritance taxes under the Senator’s proposal. Genius.
You are such a dolt. A dolt with a personality disorder. I feel sorry for your family.
To say that a couple with $13.99 million is not wealthy is out of touch. The tax doesn’t even start until that first dollar after $13.99 million. In 2022 about 00.25% of decedent’s estates needed to even file an Estate Tax return, and only about 00.16% paid any money.
If farmers are his focus, then exempt farms where the family continues to work the land. There is already a provision for farms operated by the descendants to pay the tax over a longer period of time than non-farmers at a low interest rate (3.6% as of December 2024).
Thune’s goal instead helps the kids who move away, inherit the land, and just rent it to other farmers in the area. This results inflated land prices and an increased rent burden on the farmers actually working the land. With each passing generation it creates more landlords for the farmers to work for. Those landlords, like any good business owner, will seek to get as much rent money as the backs of the farmers can bear. Why should the farmer’s kid who does not farm be aided in this?
Thune’s goal, while likely well intentioned, is bad for farming families and only serves to increase the wealth of urban elites like Bill Gates, George Soros, Oprah, Elon Musk, and families like the Waltons, Cargills, and Mars.
A family that owns a 1500 acre farm at today’s property prices would hit the $14,000,000 mark. So let’s double it to get the same amount of dollars above the $14,000,000 dollar mark as below it. Remember, these assets are not liquid and they cease to produce income after they are sold (obviously). The inheritor would be forced to pay roughly 40% at time of death, which would be around $5,600,000 on the $14,000,000 over and above the exemption. So unless the deceased had a $5,600,000 life insurance policy, the inheritor is basically forced to sell a section of ground just to pay the tax. Now if the inheritor receives a step up in basis before the death tax is imposed, (I honestly don’t know for certain if the inheritor receives a step up in basis if they have to sell the property to cover the death tax, or if they only receive the step up in basis AFTER the death tax has been payed, so I will use both examples) they would not have to pay capital gains on the property. This would leave them with 2,360 acres. So they would have lost 22% of their income producing assets to the death tax. Remember, all of those assets had been previously taxed. If the step up in basis happens only AFTER the death tax has been paid, the same inheritor has to sell $7,840,000 worth of property, or 870 acres to pay the death tax. Now you have sold off almost 30% of your income producing assets to secure the other 70%. There is no guarantee that their operation, of which the previous infrastructure was likely built to service a 3,000 acre farm, will continue to cash flow at 70% capacity. When the inheritor looks at all of this, all of a sudden selling the whole farm versus just selling the 640-870 acres it would cost them just to get even with the government, seems very attractive.
When a farmer sells a 3,000 acre farm, whom do you think purchases that farm for $28,000,000? Do you think it’s the young guy or gal down the road that has always relished the opportunity to perhaps expand their operation into something they could do full time? Or do you think it’s a large “corporate” farm, a billionaire land collector, or perhaps an investment fund?
If you think getting rid of the death tax benefits the ultra wealthy, you simply don’t understand the economics behind it. Forced land sales are a billionaires best friend. The landowner needs money and fast. That means less time for local farmers to get financing secured in the hopes that maybe they actually have a chance to beat out another buyer who, often times, has no depth to their pockets.
I know a lot of 3,000 acre farmers, and neither they, nor the people that know them, would refer to them as “wealthy.” The death tax is absolutely a huge detriment to farming families and only aids in the building of “wealth of urban elites like Bill Gates, George Soros, Oprah, Elon Musk, and families like the Waltons, Cargills, and Mars.” It is exactly the OPPOSITE of what you stated in your closing remarks.
If you inherit a farm worth 20 million dollars, you won’t have a problem paying the tax. Get serious. Most of us would love to have that problem.
It is the rest of us who are getting screwed. We pay taxes too, you know.
And once again elk demonstrates he is clueless even after it has been explained in detail but what the hell, why should facts and logic get in the way of his “feelings” of being unfairly treated because of his lack of ability to become wealthy. Typical (and yes you are a dolt…a dolt with a personality disorder).
Just once… could you try to argue an issue without calling people names. Dolt, dolt, dolt. You can’t be that simple.
Jeesh.
Just once could you try to employ some logic? And yes you are that simple.
You just had all the intricate details explained to you, and your response is, “If you inherit a farm worth 20 million dollars, you won’t have a problem paying the tax.”
Perhaps try countering the points made in the reply to your post. At the very least, make this a productive back and forth conversation instead of just dismissing the facts and procedure that was laid out for you.
It doesn’t take much time and reading on this blog to quickly discover what you have stated is beyond what elk is willing to do.
Good point!
Anonymous@3:43 writes: “Forced land sales are a billionaires best friend.”
Not… even… close. That would be John Thune.
And there you go again…clueless.
All that you stated is recognized by my original post. Nothing you stated addressed anything I stated. The heirs are given time to pay the tax and the interest rate is better than what you’d get at a bank.
Yes, I do believe local operators would buy the land. If you’re concerned about corporate farms then push to pass a law prohibiting the corporate person’s freedom to buy, instead of carry water someone inheriting $28 million in assets and pretending that they are poor.
Yes, the heir receives a stepped up basis tied to the date of death. Which the way some land values have risen can be an insane amount of wealth not taxed (I’m not saying that should change, but it can be an incredible benefit that should be taken into account.)
The press release misses three key reasons why the “death tax” *should* be repealed. First, it actually raises very little revenue relative to total federal tax receipts (revenue). One key reason for this, of course, is that the truly wealthy who are tax-adverse engage expert advisors who — legally — minimize the negative effects of the tax.
Second, the cost to the federal government (IRS) to collect this relatively small amount of death tax is considerable. The lowest estimate I’ve seen indicates that collection costs are a third of receipts. So, the relatively small gross receipts are reduced by a third before other costs can be assessed.
The third reason is implied in the first reason. The cost to taxpayers and their estates to structure their business affairs to comply with the death tax while mitigating its effects on their heirs is a drain on both current and future estate value.
Most arguments against death tax repeal focus on hatred or envy of wealthy people and families. Often, these arguments also rely on the increasingly fallacious assumption that wealth is a static “zero-sum game.” The movement of wealth away from fixed assets such as real estate, factories, and the ability to employ labor and toward intellectual property requiring little in the way of fixed assets opens wealth potential to almost anyone.
OK… once again… this idiotic idea will give BILLIONS in tax breaks to each of these super-wealthy families, generation after generation, while the rest of us pay the taxes. It would reduce taxes for a few hundred South Dakota millionaires and pass that tax burden… to you!
I wrote a few days ago… Musk (or his heirs) could buy every single home in ND, SD and MT with his wealth. Literally. Yes, literally! And Thune thinks it’s wise to give that family a 100 billion dollar tax break? Maybe more.
This is so stupid, I find it hard to believe that this even needs to be debated. And where are all of you Thune folks? Where are you Rounds and Dusty staff members from the last twenty years? Try to defend this thing. Go ahead. Embarrass yourself.
Perhaps I wasn’t clear with that sentence above. Elon Musk (or his heirs) could buy every home in North Dakota, South Dakota and Montana…COMBINED. And still have billions left over.
That is how much $375 billion can buy. And Sen. John Thune thinks Musk’s heirs need another tax break – of over $100 billion. That tax break… ALONE… is so large that it could buy every single home in South Dakota.
So Thune is for the establishment of a new-American nobility class? This is nothing more than cementing our new overlords and their spawn. The concentration of wealth at the hands of a few is absolutely insane.
https://www.propublica.org/series/the-secret-irs-files
Thune wrote: “Death should not be a taxable event.”
Cute slogan but the half of Americans who get little or no inheritance still have to pay taxes after a parent’s death. You just want millionaires and billionaires to be exempt from the burden.
The Senator writes: “Death tax proponents talk as if it only affects the extremely wealthy, but that couldn’t be further from the truth.”
Only somebody who has been in Washington for twenty years thinks that a person with a net worth in excess of 14 million dollars… is not wealthy. The top 1% of inheritances are only around one million dollars.
You have no problem taxing a person making $50,000 to $100,000 a year. You aren’t eliminating those taxes. But this is a priority?
And remember… they don’t even START to pay the tax until the estate exceeds 14 million dollars. Thune wants to raise that exemption to an unlimited amount. Billionaires can then pass on their massive fortunes for generation after generation without inheritance or income taxes.
You won’t be so lucky.
You seem to be unfairly comparing federal income tax to a death tax. The person who passed away, also likely paid federal income tax, property tax, and capital gains on anything they bought and sold up to the point they died. The point is that the deceased has already been taxed on everything that the death tax would be imposed on. It is not about tax breaks for the wealthy, it is about all Americans not being taxed a SECOND time, just because they had the audacity to cease living.
When did Elon Musk pay income taxes on his 375 billion estate? Same for Warren Buffet? Walmart heirs? They have no need to sell their business or stock
When their kids inherit their wealth, they don’t have to pay income tax either. And neither will the next generation. Or the one after that. The billionaires just get to watch as we, the middle class, pay to run the government.
No one claimed that Elon Musk paid income taxes on his 375 billion dollar estate. Elk claimed “You have no problem taxing a person making $50,000 to $100,000 a year.”
That is a comparison of federal income tax to the current topic, which is death tax. That is not a fair or accurate comparison.
Estate taxes on the rich are often the only way to tax that income/inheritance. People like Elon Musk and Warren Buffet can defer taxes until they die. If Thune gets his way, then their heirs don’t pay a tax (like they must do currently) and they get to keep billions in untaxed fortunes. Meanwhile, everyday Americans pay those taxes on their income.
They would not be paying capital gains. Heirs would be getting a stepped up basis to avoid capital gains.
If the person does not want to be taxed they can start passing on the wealth before they die, instead of having the government pass it on for them. I recommend govt not be involved, let might make right, the strongest who fight for the land deserves the land. (it sounds insane, because it is insane)
I’ll only support this if the tariffs pay for it instead, or Mexico can pay the taxes for us too.
I may have a little bit of respect for Senator Thune’s position on the estate tax which I feel is very important to keep if he would be honest about who exactly he is doing this for. Using farmers, ranchers and small business owners is a smokescreen for the mega-rich, few of whom live in SD.
Just think… your great, great grandchildren, eighty years from now, could watch as Trillionaires live a life free of income tax, just like their parents and grandparents did. Meanwhile, your descendants must pay the taxes from their modest incomes.
They can thank South Dakota’s Senior Senator from the year 2025 – for that one.
I meant to write that as “Trillionaires live a life free of income/estate tax….”
They will be able to escape both under this proposal.
Rather than completely abolishing the death tax, why not raise the exemption to $100 million? No too many South Dakota farmers in that range of wealth, and those that are, can certainly work with/afford a lawyer who can put everything into a trust, LLC, etc. This is a just a simple piece of graft to the 1% of the 1%.
These guys are worried about people inheriting $100 million? But the laborer making $50,000 doesn’t register with them?
Here you go again comparing oranges to apples, Elk. Death tax is not federal income tax. They are not the same thing, I don’t know why you continually compare them. Also, I imagine if that laborer making $50,000 a year is able to stash some money away, take a few risks, maybe get lucky on a few investments, and builds him or herself a nice life, they don’t want the government asking for a second piece of their pie when they die either.
Elon Musk has not paid income taxes on his $375 billion. And his heirs won’t either, if the senator has his way. I think it is pretty clear what is going on here. It’s not that hard to comprehend.
Super-rich… no pay. Middle income… pay. In perpetuity.
Clueless.
Oranges and apples? Exactly.
It is hard to compare a billionaire who doesn’t pay income taxes and leaves that estate to his heirs without their paying estate or income taxes… to the rest of us. I hear ya.