The tax reform framework from the "Big Six" is now out, but in the transfer tax area, we're still pretty much where we were in January. The framework has repeated previous calls to repeal the "death tax" as well as the generation-skipping transfer tax, but provides no additional information on whether those taxes would be replaced with some other tax or what will be done with some of the ancillary rules (most prominently, the rules regarding basis of property acquired from a decedent) in the wake of repeal.
I wrote last month that estate tax repeal seemed dead in light of the rhetoric about "the rich" that had been coming from top tax writers in Congress, as well as the Administration. Perhaps I was too hasty, but the framework still goes out of its way to avoid giving anything to the rich. In the context of individual and business tax reform, it states that the tax writing committees should consider an additional tax bracket for the highest earners to avoid shifting the tax burdens to lower income taxpayers, and that rules should be imposed to prevent wealthy individuals from avoiding the top individual rate through use of a new lower pass-through entity rate. Which leaves this author at a loss for how Congress and the Administration defend repeal of the estate tax (which, thanks to a high exclusion amount, only impacts very affluent taxpayers) against the certain claims from progressives members of Congress and interest groups, that this amounts to "tax cuts for the rich."
With recent reports that the full "wishlist" of tax cuts and reforms could come with a price tag of $5 trillion over a decade, Congress will likely need to find savings - the number floated for deficit-financed tax cuts to be included in the Senate's budget resolution is only $1.5 trillion over the next decade. Given the very terse mention on the estate tax and the clear signals that the Administration and Congressional leaders are focused on bringing down business and individual taxes as much as possible, it may still be the case that estate tax repeal will drop out of the final package, particularly if other parts of the legislation (like provisions to eliminate the state and local tax deduction), mean that Republican leaders will need to pick up at least some Democrats (particularly in the House) in order to advance the legislation.
We'll continue to follow developments with hopes of seeing more detail on where things are headed as we progress to the legislative drafting phase of this process and the eventual bill language that should surface. More details to come.
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