— Tom Cotton (@SenTomCotton) January 18, 2019
Sens. Tom Cotton and John Boozman are dishonestly touting a proposal to cut the estate tax even further than it was cut in 2017 as a benefit for farmers when it’s an enormous windfall for superwealthy and would affect precious few farmers. It would be worth billions, for example, to heirs of the Walmart fortune.
Cotton and Boozman have joined Sen. Roy Blunt in legislation to cut the top estate tax rate from 40 percent to 20 percent.
The estate tax already totally exempts the first $11.4 million in net assets for an individual and $22.8 million for a married couple.
Among the tax breaks extended to the wealthy in 2017 legislation in addition to the higher exemption were: Preservation of the stepped-up basis of capital assets for heirs (that Walmart stock acquired for pennies passes to heirs at the greatly increased value today); provisions for gifts to trusts; leveraging gifts to pay for life insurance to offset taxes; enabling philanthropic gifts.
Only about 2,000 estates nationwide owed estate taxes in 2018, according to the Tax Policy Center. No more than a couple dozen owed estate taxes in Arkansas, which also has no state estate tax. Cotton touted his legislation on Twitter this way:
This week I introduced a bill with @JohnBoozman and @RoyBlunt to reduce the estate tax by 20%, helping Arkansas farmers preserve their family legacies and way of life.
This isn’t about farmers. Unless you’re a chicken farmer named Tyson.
Despite years of searching, the farm lobby has been unable to find a “family farm”
lost to estate taxes. Estate planning is available to pay taxes in rare cases where it’s due and farmers have enjoyed preferential treatment in tax payments to further preserve their holdings. The Center for Budget and Policy Priorities says only 20 farms and “small businesses” owed any estate tax nationwide in 2017.
Remember that $22.8 million exemption. For the estate of a married land-poor farmer (no assets except land) to owe taxes under the current system, he or she’d have to own 7,000 acres of good cropland (worth $3,200 an acre) free and clear of any debt to be facing any estate tax. FREE AND CLEAR. If you have 7,000 acres with no debt, I’m guessing you’re not struggling to make a payment on a new F-150. The same is true for a “small business” owner — an asset is only taxable after it’s worth $22 million after any debt and other adjustments to value. This gives
In Twitter parlance, Cotton is getting “ratioed” with overwhelming putdown responses to his dishonest crocodile tears Tweet for the small farmers.
A point of arithmetic: Cotton is reducing the estate tax top rate by 20 percentage points, but that’s a 50 percent reduction in the tax. In 2018, the U.S. collected $14 billion from the relative handful of super wealthy people who owed estate taxes. Cotton would cut it roughly to $7 billion.
Another point of simple arithmetic overlooked by Cotton: The effective tax rate is only about 16.5 percent, according to the CBPP, because of the rich initial exemption. The top tax rate only applies on value above the exemption level.
Cotton and Boozman prefer to tax work, not wealth. (I know they’d like to cut the income tax, too. Can we tax beans and rice enough to pay for the defense budget Cotton prefers?)