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Trump Resurrects Dubya's "Death Tax" Myth in Iowa

December 8, 2015

Speaking to farmers in Spencer, Iowa on Saturday., 2016 GOP front-runner Donald Trump declared, "We are going to get rid of the estate taxes that are making the farmers sell their farms." That came as no surprise, given that Congressional Republicans and virtually every recent GOP White House wannabe shares the same position. But Trump's rhetoric turned doubly ironic when said this next:

"It is a very bad thing, and it is killing people in Iowa. I know that for a fact."

After all, back in 2001 President George W. Bush told Hawkeye State farmers pretty much the same thing. And as the numbers show, Trump's lie about the estate tax is no more true now than when Dubya uttered it almost 15 years ago. The facts, as CBPP has helpfully documented, are these:

Only roughly 20 small business and small farm estates nationwide owed any estate tax in 2013, according to the Tax Policy Center.
Those 20 estates owed just 4.9 percent of their value in tax, on average.

In April 2001, President Bush sold his plan to eliminate the estate tax this way. "To keep farms in the family, we are going to get rid of the death tax." Two months later, Bush returned to Iowa to declare victory for his plan which over time would lower the tax rate while raising the wealth threshold before the levy would even apply:

''I heard somebody say, 'Well, you know, the death tax doesn't cause people to sell their farms,' '' he added. ''I don't know who they're talking to in Iowa.''

But as the New York Times added in response:

Maybe Harold and Lilla Barrett, the heads of the family whose 1,300 acres of farmland Mr. Bush was visiting. When Mr. Barrett was asked by reporters if he had ever known someone forced to sell a family farm in order to pay estate taxes, Mr. Barrett, 80, said that he had not. Mrs. Barrett added that she did not think many children these days really wanted to go into farming.

As it turned out, neither Hawkeye State farmers nor researchers could name a single farmer forced to sell his or her land due to the federal estate tax. As David Cay Johnston, among the nation's leading journalists when it comes to tax issues, concluded almost 15 years ago:

Almost no working farmers do, according to data from an Internal Revenue Service analysis of 1999 returns that has not yet been published. Neil Harl, an Iowa State University economist whose tax advice has made him a household name among Midwest farmers, said he had searched far and wide but had never found a farm lost because of estate taxes. "It's a myth," he said.
Even one of the leading advocates for repeal of estate taxes, the American Farm Bureau Federation, said it could not cite a single example of a farm lost because of estate taxes.

The only thing that's changed since 2001 is that estate tax applies to even fewer family fortunes now. The individual exemption from the so-called "death tax" has risen from $675,000 to $5.43 million, while the statutory tax rate has dropped from 55 to 40 percent. (The effective rate is now only about 17 percent.) Back then, only two percent of all estates had to pay the tax. Now, the figure is only less than two in a thousand. As TPC noted, only 20 family farms and small businesses in the entire United States of America are affected. All told, CBPP estimates, just 5,400 families nationwide--just 60 in Iowa--will owe money as a result of the federal estate tax.
But while the supposed "death tax" has virtually zero impact on small businesses and family farms in Iowa or anywhere else, it's elimination would be very painful for the U.S. Treasury and America's charities. As the Congressional Budget Office (CBO) and other analysts have repeatedly documented, lowering or ending the estate tax would reduce contributions to charity by the wealthy. And as the nonpartisan CBO recently forecast, the estate tax will raise $246 billion for Uncle Sam between 2016 and 2025.
Unlike Donald Trump, I know that for a fact. The estate tax isn't "killing" anyone. And to paraphrase George W. Bush, if somebody thinks the so-called "death tax" causes people to sell their farms, I don't know who they are talking to--in Iowa or anywhere else.


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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