Long live inheritance tax

Last week, Yellowhammer News published an op-ed by Alabama Senator Tommy Tuberville and ALFA President/CEO Jimmy Parnell about the inheritance tax. Or, as you’d probably rather hear me call it, the “death tax.”

In case you don’t know, inheritance tax is a progressive tax on the largest estates that was first introduced into law in 1916.

Just over a hundred years later, the Tax Cuts and Jobs Act, as part of President Trump’s massive giveaway to the wealthy and big corporations, doubled the estate tax exemption. Before the TCJA, any estate valued over $5.5 million had to file (but not necessarily pay) an estate tax return. After that, that exemption increased to $11 million.

Tuberville and Parnell want to convince you that Congress should extend this tax break or, ideally, abolish the estate tax altogether.

Of course, they open their column with lyrical descriptions of the farmers’ daily problems. Family farmers are a sacred cow of the nation and, unlike the animals they raise, may not be slaughtered.

Tuberville and Parnell try to explain that the inheritance tax threatens the “tradition of farming that has been understood and respected for centuries” whereby parents pass on their farms to their children.

And the article ends, just as predictably, with a call for passage of the Death Tax Repeal Act, which both Tuberville and his Senator Katie Britt of Alabama co-sponsored. “Given the economic hurdles facing our farmers, we should eliminate the inheritance tax altogether,” they write.

Tuberville and Parnell have distorted the facts so well beyond recognition in this text of less than 500 words that I probably could have used twice as many words to do it half as well.

And somehow they even made an obvious and fundamental factual error by claiming that “the TCJA exemption will go back up to $5.5 million on January 1, 2026, unless Congress acts.” In reality, it would be about $7.5 million—the exemption is adjusted for inflation.

But more importantly, Tuberville spends his entire commentary obscuring a simple truth: Only the richest 0.1 percent have to pay inheritance taxes. And the inheritance tax hardly affects any of his esteemed family farmers.

According to the most recent available data from the IRS, only 0.08 percent of estates had to pay inheritance taxes in 2019: less than one-tenth of one percent. Only the very wealthiest families ever have to worry about paying inheritance taxes, and the estate tax raises over $18 billion in tax revenue each year that does not have to come from the wages of working families.

And in 2021, the last year for which the IRS released data on estate tax returns by occupation, of more than 6,000 estate tax returns filed, only 263 estates belonged to people who worked in “agriculture, fishing and forestry.”

With over eight times as many tax returns filed, the most common profession of far? “Business and financial transactions.” Not exactly the cozy family farms that come to mind for Tuberville and Parnell when they think of inheritance taxes.

Additionally, only a fraction of farms required to file a tax return will actually pay inheritance taxes. The USDA’s Economic Research Service estimated that while 1 percent of farms would be required to file a tax return in 2023, only 0.2 percent would actually owe inheritance taxes.

With an estimated 39,988 farms established, this corresponds to a total of 89 farms that paid inheritance taxes in the whole of 2023.

Tuberville and Parnell talk about “over two million farms” in America and the “44,000 of them in Alabama,” but only a tiny fraction of those farmers will ever have to worry about inheritance taxes, whether the TCJA exemption is extended or not.

A February ERS report even found that when the TCJA inheritance tax abatement expires, God willing, only 1 percent of farms would actually have to pay inheritance taxes. If we use Tuberville and Parnell’s numbers, that’s just 440 Alabama farms, a scant handful each year.

Now, has anyone anywhere had to sell part of their family farm to pay the inheritance tax? I’m sure that’s probably happened once or twice – America is a big country.

But it would be foolish to cut taxes for the richest Americans by tens of billions of dollars just because fewer than 100 of the country’s most successful farmers might have to downsize their operations.

I am sure that if Tuberville and Parnell had written an op-ed about the plight of poor oil magnates, everyone would have immediately recognized what their argument really is: just another hackneyed justification for making the rich pay less taxes.