It’s anybody’s guess what kind of tax breaks Congress enacts into law. Republicans have a two-vote majority in the Senate. It’s a small margin given their inability to work across the political aisle.
Adding to complications, moderate Republican Sen. Susan Collins of Maine recently said, “I do not believe that the top rate should be lowered for individuals who are making more than $1 million per year.”
Collins added that plans to repeal the estate tax “concern me.” She remains open to increasing the estate tax exemption above its current $5.5 million individual and $11 million married levels.
Estate taxes are levied at a high 40 percent rate. The current exemption covers nearly everyone.
But, politically speaking, nearly everyone believes that estate taxes apply to them.
Internal Revenue Service data says that 28 tax filers paid a net estate tax in Montana in 2016. Nationwide about one out of every 500 deaths, or 0.2 percent, pay an estate tax.
That hardly stops politicians from claiming otherwise and people from believing them.
In September as President Donald Trump was pitching plans to eliminate the estate tax, he said, “The farmers, in particular, are affected. They have wonderful farms, but they can’t pay the tax, so they have to sell the farm.”
That heartbreaking story applies to some, not many, farms in Montana.
Montana Department of Revenue data says there are six farms out of almost 80,000 farms statewide that have a productive property tax market value greater than the individual estate tax exemption.
I relayed this to a farm journal editor in Iowa the other day. He responded that 62 out of the 29,000 people, who died in 2015 in his state, had someone file estate taxes. Half likely had tax liability.
Nationwide, 682 farms paid estate taxes in 2016, out of the total 5,219 estate tax filers with obligations. Farm assets represented 13 percent of these filers and constitute 3 percent of the total estate tax revenue collected, compared to stocks that make up over 40 percent.
Political rumors indicate that House Republicans will stop pushing their estate tax repeal plan. Base Republicans will be unhappy.
Estate taxes remain rigid politically. No amount of this kind of talk will convince anyone of anything, regarding taxes.
Earlier this month, Montana U.S. Sen. Jon Tester spoke in Whitefish and said that he will work with the President when it’s good for Montana, but hold him accountable if the policies are bad for our state.
Seven years ago Tester helped enact more than $575 million in tax relief for the people of Montana. That’s a big number that he may repeat this year.
Republican Sen. Bob Corker of Tennessee recently said, “But if it looks like to me … we’re adding one penny to the deficit, I am not going to be for it, OK?” Corker called debt, “The greatest threat to our nation.”
Congress enjoys plenty of moving parts on their secret tax cut plans. The House where tax bills begin will unveil plans first, followed by the Senate.
One new trick to Congress is dynamic scoring. This maneuver allows budget analysis to consider increased revenues based upon the predicted economic growth associated with tax policy.
Congress hasn’t used dynamic scoring on past tax cuts during the days of Presidents Kennedy, Reagan, Clinton, Obama or either Bush. And with good reason.
The growth and revenue collection anticipated by our Montana Legislature was wildly wrong. Montana is facing big losses to public services due to our Legislature’s bad revenue projection.
Nationally analysts predict that the federal budget cuts to Medicare alone, to pay for tax cuts, will be $28 billion from January to September of next year. Someone has to pay for tax cuts.