Bernie And Ted’s Excellent Adventure – Estate Taxes, Fact Vs Fiction, Sanders Vs Cruz

video still of Senator Bernie Sanders (I-VT) and Senator Ted Cruz (R-TX) at CNN town hall debate 10/18/2017

by Richard Cameron


Wednesday evening this last week, Senator Ted Cruz (R-TX) and Senator Bernie Sanders (I-VT) once again renewed their old acquaintance at a CNN town hall where they sparred primarily about tax reform and to a lesser extent, continued to re-litigate healthcare

Incidentally, there was a short ribbing session between them at the front end of the proceedings and it is obvious that despite their philosophical and policy differences, they greatly enjoy one another’s company:

 

Beware the phrase ‘reform’ – in any context …

Congress and the White House, as you’ve heard, are gearing up for their own debate about ‘tax reform‘. What we will do here is to look at some of the verbal grenades tossed between the two and then apply some fact checking to their statements to arrive at a sense of reality on the topic.

In this report, we will begin with the disagreement between the two over the impact and consequences of estate taxes – or what Senator Cruz likes to describe as “death taxes”.  Of estate taxes, Cruz said in the debate:

“…Family businesses that lack these resources to manage their estates are the ones held accountable to pay this tax rather than the wealthy. Eliminating this tax will help prevent financial hardships imposed by this inflated tax on individuals.”

National Compass is post-partisan oriented, so we’re not looking to prop up one of these two gentleman over the other. What we’re interested in is what is the reality of the competing claims. With respect to the notion that family farms are being lost to estate taxes or “death taxes” – the facts just don’t support that assertion.

Ted Cruz carries water for his party, but the bucket’s got a hole in it …

Ted Cruz is most likely getting his “death taxes” talking points from the lobbyists at a handful of agriculture trade groups including the American Farm Bureau Federation that visited Congress this year and told Congressional panels that :

“all too often at the time of death, farming and ranching families are forced to sell off land, farm equipment, parts of the operation or take out loans” due to the tax.”

But is that actually happening? Such claims have been circulating since George W. Bush’s first term in office and they have been debunked ever since.

The first time they were addressed was by an investigative journalist, David Cay Johnson – whose reporting on taxes has been a specialty of his. Johnston challenged those who made the claims to cite an example of a farm that was lost because of estate taxes. They were unable to do so. 

Johnson learned from economists that the “death tax” rhetoric was a long repeated myth.  An IRS analysis of 1999 returns found that almost no working farmers owe estate taxes.

Has anything changed since? The United States Department of Agriculture (USDA) reports that 97% of the 2.1 million farms in the U.S. are family-owned. But as to the actual number of family farms affected by the estate tax, only 20 farms in 2013 paid estate taxes and no farms have been reported sold to pay off an estate tax debt.

How about from 2013 to now? The Tax Policy Center estimates based on their study of American farms, that only 50 small farm and small business estates in the entire country will pay any estate tax in 2017 and that they’ll owe less than 6 percent of their value in tax, on average.  It’s worth repeating – only 50 out of 2.1 million farms, will owe anything.

Oh Death Tax, Where Is Thy Sting?

Will they be in dire straits due to what Cruz calls “death taxes”?  Ramsay Slugg, a wealth strategist at investment management firm U.S. Trust said that because the estate tax exemption is $5.43 million per person, or $10.86 million per married couple, less than 1% of the total population is subject to it.

Family Farms Estate Tax Chart

The CBPP (Center on Budget and Policy Priorities) – on the broad view of estate taxes generally, found in their analysis that:

“Only the estates of the wealthiest 0.2 percent of Americans — roughly 2 out of every 1,000 people who die — owe any estate tax”, and they cite the Joint Committee on Taxation’s findings that “Today, 99.8 percent of estates owe no estate tax at all.”

But Ted Cruz, if he could not prevail on the facts regarding the effect of estate taxes on family farms and small businesses, had one more card (Trump card?) to play.  It was this:

“According to the Tax Foundation, repeal of the death tax will result in an estimated 2.3 percent increase in capital invested in the U.S. economy, ultimately boosting productivity 0.7 percent resulting in increased labor force participation by the equivalent of 159,000 full-time jobs.”

 

I’ll have a Koch, please …

The Tax Foundation is a lobbying group closely aligned with the Koch organization.  Of the proposition that repealing the estate tax would be an economic stimulant, the CBPP found just the opposite to be the case.

Citing data from the Joint Committee on Taxation, they concluded that, “Repealing the estate tax would cost $269 billion over a decade…before counting the interest costs of adding to the debt.”

The reality is that only the top 2/10ths of of the top 1 percent in America will derive any benefit from the changes proposed in the tax package the GOP and Donald Trump are touting to voters.

The conclusion on this aspect of the tax debate renders the GOP narrative on estate taxes as an appetizing Irish stew, but unfortunately consisting mainly of a combination of blarney and malarky with scarcely a fact or supporting data to be seen.

In our part two of this report, we will look at the facts underlying the dispute between Sanders and Cruz in regard to who should receive the Lion’s share of the proposed tax cuts and who will benefit from them and who won’t.

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