Government Affairs: Eliminating the Death Tax for Good

Words: Randy Feenstra, U.S. Representative

As any taxpayer knows, the federal government never misses an opportunity to tax income, assets, earnings, or real estate. Family farms, small businesses, and other multigenerational enterprises – which sacrifice and invest their time, talent, resources, and energy into their operations – are often the target of the Internal Revenue Service’s army of auditors. While income taxes form the foundation of revenue generation for the federal government, the estate tax – also known as the “death tax” – represents one of the most invasive, unfair, and duplicative taxes levied by Uncle Sam. 

During my meetings and town halls across all 36 counties in my congressional district, I repeatedly hear from frustrated farmers and small business owners who want to see the death tax eliminated completely, as do I. This tax imposes an arbitrary and costly tax on the transfer of property, land, and other assets from a deceased family member to heirs of family farms and small businesses. Their view – which I share – is that the death tax punishes hard work, redistributes wealth, and aims at money that has already been taxed by the federal government. It also jeopardizes the future of family farms and small businesses in Iowa and nationwide. When a family member or loved one passes away, the next generation of farmers and business owners simply do not have access to the liquid cash necessary to pay a massive tax bill from the federal government. As is the case with most farms and businesses, the value of land, equipment, and other assets is not readily liquid, which would require the heirs of deceased family members to, quite literally, sell the farm and end the family tradition to pay a duplicative tax.

Not only is it wrong, but it also makes no sense for the economy. It represents only a small fraction of federal revenues but depends on multigenerational businesses selling the assets they’ve spent their lives investing in to pay it off. As many family businesses are well aware, often the greatest motivation is building a legacy and livelihood that can be passed down to children and grandchildren. The business was built up with the understanding that it could help keep the family financially secure well into the future. This is important not just for the family but also for our nation’s prosperity, and when the federal government takes 40% of those assets upon a family member’s death, we’re creating an enormous barrier to the success of the family business model while burdening the family with devastating taxes as they grieve.  

Even under the narrowest definition of a family business, where the family is heavily involved in the day-to-day operations of the business, 3 million businesses make up 27% of the workforce and 29% of GDP. Zooming out to a broader definition, including those where the family owns the business but may not be involved in its every aspect, those numbers grow to 24.2 million businesses, making up 62% of the workforce and 64% of GDP. I would also note that over 99% of our country’s two million farms and ranches and over 95% of our nation’s small businesses are owned and operated by individuals and families. Whether or not you are one of these family business owners, the ripple effects on our economy are bound to impact every American. 

Serving on the House Ways and Means Committee and having heard the personal stories of how the death tax has negatively impacted families in Iowa, I recently introduced legislation with nearly 170 of my colleagues to ensure that family farms and small businesses don’t have to close their doors after a loved one passes away. In addition to the overwhelming support we’ve seen from my colleagues, we’ve seen similar support from a diverse coalition of family businesses, with over 190 organizations, including the American Farm Bureau, the National Association of Manufacturers, the National Restaurant Association, the National Federation of Independent Businesses, amongst many others that demonstrate that it’s not just farms hit by this tax. My bill – aptly named the Death Tax Repeal Act – is as straightforward as it sounds. It will permanently eliminate the death tax from our federal tax code for good. My belief is that – by fully repealing the death tax – we can keep China away from our farmland, allow family farms and small businesses to succeed across multiple generations, and encourage the next generation of Iowa farmers and business owners to plant their roots in rural Iowa, support our main streets, and contribute to our economy. 

Republicans already made significant progress on this issue in the 2017 Tax Cuts and Jobs Act, which doubled the asset threshold at which the tax takes effect. This prevented a number of businesses from having to deal with it, but far too many are still within its scope. My district in Iowa consists of many farms with significant land values. Though the land may be valuable, that doesn’t mean the family has millions of dollars stashed away for when the IRS comes knocking. The value of this land has only grown over the past few decades. In Sioux County, Iowa, located in my district, the value of farmland has increased by 612% since 2000. This increase in land value pushes many farmers over the threshold, subjecting them to the death tax. The rising value of land is further fueled as billionaires, China, and hedge funds compete to acquire Iowa farmland and outbid family farmers who have called Iowa home for generations. 

For too long, the death tax has been a nightmare for family-owned-and-operated enterprises. The federal government has no business taxing money that has already been taxed and using that revenue to impose more mandates and red tape on small businesses and farmers. My legislation will ensure that Americans can keep more of their hard-earned money and spend it the way that they determine is best for their business. Ultimately, I know that eliminating the death tax will help farms, small businesses, and entrepreneurs create new jobs and hire more people, which, in turn, will grow our economy and keep our communities strong. 

When I say that I’m on a mission to permanently repeal the death tax, I’m not lying. I will work nonstop to ensure that this onerous tax ends up in the trash – where it belongs.

U.S. Rep. Randy Feenstra represents Iowa’s 4th Congressional District in the U.S. House of Representatives. He serves on both the House Ways and Means Committee and the House Agriculture Committee.