## Kamala Harris’s Death Tax Plan: A Boon for Teachers or a Bane for Small Businesses?
Vice President Kamala Harris’s vision for a revamped estate tax, touted as a solution to inadequate teacher salaries, is generating heated debate. While advocates see it as a way to level the playing field and generate revenue for crucial public services, critics argue it could stifle small businesses, drive up monopolies, and ultimately harm the very people it’s designed to help.
During her 2020 presidential campaign, Harris championed the idea of raising the estate tax, often referred to as the “death tax.” This tax applies to assets passed down to heirs exceeding a certain threshold, which currently sits at $13.61 million under the Trump-era Tax Cuts and Jobs Act (TCJA). Harris has signaled her support for reducing this threshold, potentially impacting more than just the ultra-wealthy.
The Harris administration’s proposed changes to the estate tax mirror those outlined in President Biden’s budget plan, which aims to lower the threshold to around $5 million. Furthermore, Harris has endorsed the death tax reforms laid out in the American Housing and Economic Mobility Act of 2024, suggesting an even steeper reduction to $3.5 million.
A Double-Edged Sword:
While proponents argue that a higher estate tax would generate revenue for public programs and address income inequality, detractors warn of potential consequences for the economy. Critics, including conservative economists and estate planning attorneys, contend that raising the estate tax could stifle small businesses and lead to the creation of monopolies.
They point to the plight of small business owners, such as McDonald’s franchisees, who often require substantial capital investments to launch their ventures. Raising the estate tax threshold, they argue, would make it harder for these businesses to pass down to their heirs without facing significant financial burdens. Similarly, family farms and family-owned construction companies could face a similar fate, potentially forcing them to sell off assets to cover estate taxes.
Impact on the Average Citizen:
The debate also extends to the average citizen. While some economists argue that the death tax changes will only affect a tiny percentage of estates (around 0.2%), others, like estate planning attorney Michael Kulzer, contend that the changes will impact a far broader segment of the population. Kulzer cites examples of seemingly average families who, due to rising real estate values and other assets, could find themselves exceeding the revised estate tax threshold.
A Tax on Capital Gains?
The debate over the estate tax often centers on the question of its impact on capital gains. Some argue that the estate tax, in effect, taxes capital gains twice, once during an individual’s lifetime and again upon their death. This double taxation, they argue, can create a disincentive for investment and economic growth.
Opposing Voices:
Oprah Winfrey, a prominent figure in American culture, famously criticized the estate tax in 1997, calling it a “double tax” and lamenting its impact on families who inherit property. She argued that it often resulted in the forced sale of inherited assets, preventing heirs from fully benefiting from their inheritances.
Economists and experts like Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center, echo these concerns, arguing that the estate tax can negatively impact wealth creation and entrepreneurship. She suggests that the estate tax, rather than focusing on a targeted group, can have unintended consequences for the broader economy.
The debate over the estate tax remains a complex and multifaceted issue, with no easy answers. While the intention might be to address income inequality and fund public programs, the potential impact on small businesses and the broader economy requires careful consideration. The ultimate impact of these proposed changes remains to be seen, and the outcome will undoubtedly shape the landscape of American economic policy for years to come.