Like death and taxes, the estate tax issue is guaranteed to return every couple years to be kicked around by Democrats and Republicans.
The analogy is certainly appropriate considering opponents are fond of calling the estate tax the "death tax." And Republicans are apparently ready to push yet again for its repeal.
Thune was joined Tuesday by Sen. John Kennedy, R-La., and others in reintroducing the Death Tax Repeal Act of 2021. Rep. Jason Smith, R-Mo., introduced companion legislation in the House of Representatives.
"By ending the death tax, we can make it easier for families to pass their farms and businesses to the next generation,” Kennedy said.
Republicans have persistently introduced legislation to repeal the estate tax, without success. It is unlikely that the latest effort will go anywhere in a Senate and House that are both controlled by the Democrats.
The estate tax is a tax on a person's assets after death. In 2021, federal estate tax generally applies to assets over $11.7 million. Estate tax rate ranges from 18% to 40%. Some states also have estate taxes. Assets spouses inherit generally aren't subject to estate tax.
Less than 0.1 percent of the people who died in the U.S. last year were expected to leave estates large enough to owe any tax, according to the Urban-Brookings Tax Policy Center.
Repealing the estate tax has big implications for insurers and agents, however.
Survivorship life insurance is intended to pay federal estate taxes and other estate-settlement costs owed after both spouses pass away. It represents approximately 4% of the life insurance market and 10% of premium for companies who offer it annually.
In April 2017, LIMRA asked 24 U.S. insurers how they thought repealing the estate tax would affect life insurance sales.
All carriers surveyed felt repealing the estate tax would have some sort of negative impact on survivorship life insurance sales. Four in 10 carriers said it would have a significant negative impact on their survivorship life insurance sales and 54 percent thought it would have a minor negative impact on their single life sales.
Biden Has Other Ideas
President Joe Biden has other ideas for the estate tax -- like increasing it. Biden’s tax proposal calls for reducing the estate tax exemption amount all the way back to $3.5 million per person, immediately or retroactively to Jan. 1, 2021.
Biden has also suggested increasing the estate tax rate from 40% to 45%.
Likewise, Biden proposed doing away with the “step-up in basis” that allows people to minimize or avoid capital gains taxes on inherited assets. But no legislation has been proposed yet, and such a change could have a tough time getting approved by a divided Congress.
Although most estates don’t owe estate taxes, anyone who’s inherited a house, stock or other property has likely benefited from the step-up tax break that gives such assets a new value at the owner’s death.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
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