It’s been said the only certain things are death and taxes.
But it’s only a matter of time before the combination of the two -- what is commonly called the death tax or estate tax -- goes away, said U.S. Rep. Sanford Bishop of Albany, one of just seven House Democrats to vote this month to repeal estate taxes.
In attacking estate taxes, Bishop puts himself squarely into a centuries-old debate involving social justice, providing for children, the sanctity of family businesses, wealth redistribution and class warfare.
“It’s really a political football,” said Greg George, director of Middle Georgia State College’s Center for Economic Analysis. “It’s just a political game piece.”
The death or estate tax also is fairly rare. All estates valued at less than $5.4 million are completely free of the tax, as are estates of couples worth less than $10.8 million. Amounts above those exemptions are taxed at 40 percent.
Want to leave $5 million for your children? No problem. If you’re wanting to give them $15 million? If you’re single, the government will tax $9.6 million of that and take about $4 million.
Few Georgians face such financial penalties.
The Internal Revenue Service says that for estate tax returns filed in 2013 just 83 estates in Georgia paid any estate tax at all. But those taxes came to some $134.5 million.
Tom Ellington, an associate professor of political science at Wesleyan College, said nobody likes to pay taxes. But he’d rather pay taxes after he was dead.
“How much money does anyone need after they’re dead? I think it’s an issue that is not tremendously well understood. But the estate tax as it exists now only affects about 5,000 people a year,” Ellington said. “You can pass on an enormous estate without tax implications at all. If we’re talking about the intergenerational transfer of wealth, for most people, this is not something that’s going to have an impact. I would challenge anyone to find somebody in Middle Georgia who’s involved in paying an estate tax in the past five years.”
Ellington said there are legitimate concerns about things like family farms, but exemptions and the opportunities to delay payment of taxes have limited the harm.
“You’re talking about a really large estate before this becomes an issue at all,” he said.
Bishop said his district, which comprises Peach and Crawford counties and a portion of Bibb County, is one of the nation’s largest agricultural districts. He offered an example: a farm of 3,000 acres worth $2,000 per acre; three or four tractors that might run up to $600,000; and irrigation equipment. Getting hit with an estate tax could mean selling off a big chunk of property, laying off a proportionate amount of employees and buying that much less fertilizer. Also potentially hard hit: small chains of funeral homes, often owned by African-American families, Bishop said.
“Many African-American families that are now finding themselves to be successful after careers of hard work now have to face the challenge of what to do in case one of the family members and one of the principals in the family business should pass away,” Bishop said.
Bishop cited a study by two Boston College professors that suggests estate taxes through 2055 would erase about 12.5 percent of African-American wealth, some $257 billion dollars.
Search for that study, though, and you may just find out how divided people can be on the estate tax. Instead of the Boston College study Bishop cites, you may just find testimony by a Boston College law professor, Ray Madoff, who told Congress: “The only taxes imposed on inherited wealth are estate taxes and if we fail to have estate taxes, then we’re going to have even greater concentration of wealth among the wealthiest Americans.”
George, the Middle Georgia State College economist, said there are economic arguments on both sides of the issue. The larger issue seems to be one of philosophy.
“Everybody has their own opinion about how much someone should be able to bequeath to their heirs,” he said. “It’s a way for people to look out for the kids in kind of an altruistic manner. Some people just see it as kind of an unnecessary hoarding of wealth.”
George said the estate tax does suffer from an economic problem: People hire accountants to structure their wealth to mitigate the effects of the tax policy. That takes money out of the pockets of rich people but cuts the actual tax revenue.
Depending on whom you listen to, the estate tax is either an enormous amount of critical money, or it generates a rather small amount. Congress’ Joint Committee on Taxation said that if the House’s repeal of the estate tax were put into law, it would add $269 billion to the deficit over 10 years. All of that money comes from about 0.2 percent of Americans.
U.S. Sen. Ron Wyden, D-Utah, said in a tweet that “Republicans demand a balanced budget but want estate tax repeal that costs taxpayers $269 billion.” Left unsaid is that estate tax payers also are regular taxpayers who will help pay that $269 billion anyway.
A Congressional Budget Office study from 2005 found that in 2000, about 8 percent -- 138 farms -- that had to pay estate taxes didn’t have enough liquid assets to pay the tax.
Bishop told The Telegraph that situation shouldn’t happen to anyone. He also argues that repealing the estate tax would probably get the federal government more money.
Bishop said a repeal of the estate tax would add 139,000 jobs and boost the gross domestic product by 2.2 percent.
“I would think that would more than offset the cost,” he said.
The full House hadn’t voted on repealing the estate tax since 2005, Bloomberg News reported. The measure passed the House in a 240-179 vote generally along party lines. Bishop says there’s a chance -- not a likelihood -- that the Senate will approve the bill. President Barack Obama has already vowed to veto it, and Congress wouldn’t have the votes to overturn a veto.
Bishop said it’s a moral issue.
“I’m obligated to try to do my best for all citizens,” he said, “The wealthy and the not-so wealthy.”
Bishop said the estate tax further taxes money that already was taxed at least once before. He sees it as an issue of justice and calls it a tax on success. He said he’ll keep fighting.
“Persistence pays off. You have to continue to work, and it may take a while for it to come to fruition,” he said. “But fruition is always worth the effort, particularly if it’s the right thing to do.”
To contact writer Mike Stucka, call 744-4251.