For the Few, Not the Many

How the Estate Tax Repeal Savings for Trump and 15 of the Administration’s Wealthiest Officials Compares to the Median U.S. Family’s Net Worth

By Michael Tanglis

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Introduction

In his famous 1910 “new nationalism speech,” former President Theodore Roosevelt advocated for what is currently known as the estate tax – a tax on very large inheritances. President Donald

Trump has assembled one of the wealthiest administrations ever. As such, heirs to Trump administration officials may stand to save billions of dollars if the estate tax is repealed.

Roosevelt’s belief, shared by many who support the estate tax today, was that due to its size, a“swollen” estate “acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means.” Roosevelt then made the statement that is commonly cited as the foundation for the modern estate tax: “I believe in a graduated income tax on big fortunes … increasing rapidly in amount with the size of the estate.” The modern day estate tax was enacted with the passage of the Revenue Act of 1916.

There is an enormous exemption to the estate tax, which prevents it from affecting all but the wealthiest families. In 2017, the estate tax exemption was $5.49 million for an individual, meaning a couple has an overall exemption of roughly $11 million.

Center on Budget and Policy Priorities (CBPP), a nonpartisan research and policy institute,8describes the estate tax as the “most progressive part of the tax code.” It affects an extremely small percentage of Americans – 0.2 percent, roughly 2 people out of every 1,000 who die, according to CBPP. The other 99.8 percent of estates are not affected by the tax at all.

The estate tax rate has fluctuated since 1916. Currently, the top statutory estate tax rate is 40 percent. But due to estate tax avoidance and loopholes, the average amount that estates covered by the tax will actually pay in 2017 (commonly known as the “effective rate”) is about 17 percent, according to the Tax Policy Center (TPC).

Throughout this analysis, we analyze the amount that Trump and wealthy administration officials would save from repeal of the estate tax savings both at the 17 percent effective rate and the 40 percent top statutory rate.