Inheritance tax revenues plummet by 50% as the ultra-rich escape
(Bloomberg) – U.S. estate tax revenues cut in half in two years, news The data shows from the Internal Revenue Service, even as dynastic wealth soars.
Only 1,275 wealthy families paid $ 9.3 billion in estate taxes to the US Treasury in 2020. As of 2018, the IRS raised more than $ 20 billion from nearly 5,500 families.
The dramatic drop – to the point where tax is paid by 0.04% of dying Americans – is largely the result of the tax overhaul adopted by Republicans in 2017, which doubled the amount the rich can pass on to heirs without triggering the direct debit.
Married couples can now transfer $ 23.4 million over their lifetime tax-free, but families with much larger sums can hire knowledgeable advisers to circumvent the tax. Nike Inc. founder Phil Knight has used various techniques to transfer billions of dollars to his family tax-free, according to Bloomberg. investigation last month.
Inheritance tax is “easy to minimize,” said Richard Greenberg, attorney at Greenberg & Schulman based in Woodbridge, New Jersey. “With the combination of the doubled exemption and all the estate planning techniques available, you can take a lot of money out of an estate and transfer a lot of wealth. “
In recent months, Democrats had proposed halving the exemption and filling many loopholes used by the super-rich. But, after some moderate Democrats retreated, the latest version of President Joe Biden’s Build Back Better bill dropped those provisions.
Inheritance taxes of less than $ 10 billion now represent an imperceptible share of the revenue of the federal government, which in the last fiscal year raised more than $ 4 trillion. The modern inheritance tax was introduced in 1916 to help counter the growth of dynastic wealth.
Even before former President Donald Trump and Republican lawmakers relaxed inheritance tax rules, tax revenues had stagnated, despite an increase in wealth among the wealthiest.
Over the past five years, US billionaires have doubled their collective net worth to over $ 5,000 billion, according to the Bloomberg Billionaires Index. At the top of the richest families are the heirs of the founder of Walmart Inc., Sam Walton, worth more than 200 billion dollars.
While the levy is now easy to avoid, IRS data provides insight into America’s greatest fortunes, including their location. More than a fifth of estate taxpayers lived in California, followed by Florida at 13%, New York at 9%, and Texas at 6%.
Because the IRS gives families time to file tax returns, the 2020 data primarily reflects deaths that occurred in 2019.
Expect tax revenues to continue to decline in the years to come, said Tabetha Peavey, senior counsel at the Tax Law Center at New York University, who previously worked on estate planning at a large corporation.
In the years since the passing of the 2017 tax law, and particularly in the past two years, with an election looming and Democrats threatening to tighten the rules, “there has been a strong push to make a more aggressive planning, ”she said. “The higher exemption allows planners to take advantage of huge amounts of an estate’s wealth.”