Repeal of the estate tax may be on early agenda of Trump agenda

President-elect Donald Trump, who won the hearts and minds of millions of working-class voters, may help deliver a multibillion-dollar bonanza to America’s wealthiest families.

The New York businessman’s election offers congressional Republicans their best chance in years to eliminate the estate tax, which he and others call the “death tax.” Abolishing it would save more than $20 billion a year for the millionaires and billionaires the tax applies to — including the Trump family and several of the people he has chosen for his administration.

“A lot of families go through hell over the death tax,” Mr. Trump said during his presidential run. The tax’s opponents say it forces some families to sell their farms or small businesses in order to pay up. Studies suggest that only a small percentage of estates fall into those categories.

Wiping out the estate tax has been a longstanding goal for Republican lawmakers, and the party’s sweeping victories in the 2016 election have brought them thrillingly close to achieving it. But there are potential stumbling blocks. Their narrow margin in the Senate leaves few votes to spare. And Mr. Trump may have a hard time reconciling his populist campaign themes with a tax break for America’s richest.

Under federal law, the tax, which is levied at a 40% rate, applies only to estates worth more than $5.45 million for individuals and $10.9 million for couples. Estates worth less than that may be passed on to heirs tax-free. Last year, just 0.2% of estates of people who died were subject to the tax, according to estimates by the Tax Policy Center, a Washington-based research group that’s a joint venture of the Urban Institute and the Brookings Institution.

‘THE FORGOTTEN GUY’

Mr. Trump “campaigned as someone who’s going to help the middle class, the forgotten guy, but every policy he’s advocating — huge tax cuts for the wealthy, estate tax &mash; all for the top .001%,” said Representative Jerry Nadler, a Democrat from Manhattan.

America’s wealthiest “hit the jackpot” with Mr. Trump’s election, he said.

Since his election, House Ways & Means Chairman Kevin Brady and Senate Finance Chairman Orrin Hatch have repeated their desire to repeal the estate tax. House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell have long supported its elimination. Passage in the Republican-led House is assured. In the Senate, a decade-long estate tax repeal can pass with 50 of 52 expected GOP senators under a special mechanism called reconciliation, while 60 votes could end it for good.

“The death tax on family farms, small businesses, ranches and estates has crippled hard-working families for far too long,” Mr. Hatch told Bloomberg News in a statement.

In 2013, 120 of the 3,780 estates subject to the tax were farms and businesses, according to the Tax Policy Center. That’s a little more than 3%. The same year, estates valued above $20 million paid an average tax rate of 18.8% — many achieve a lower effective rate through tax-planning strategies, including giving some of their fortune away to charity.

WINDFALL TO LEADERS

At that 18.8% effective rate, repealing the tax would be a large windfall to the leaders-in-waiting of the Trump administration.

Mr. Trump’s estate would save $564 million, based on his estimated net worth of $3 billion. Mr. Trump disagrees with that net-worth estimate, which Bloomberg News compiled in July; he has said his net worth exceeds $10 billion. If so, his savings would increase — to as much as $1.9 billion at an 18.8% effective tax rate. Mr. Trump’s transition team didn’t respond to a request for comment for this story.

Mr. Trump’s Commerce secretary choice, Wilbur Ross, might save about $545 million, based on his estimated net worth of $2.9 billion. Mr. Ross is the chairman and chief strategy officer of WL Ross & Co. Richard DeVos, the father-in-law of Mr. Trump’s education secretary choice Betsy DeVos, might save $900 million, based on his estimated $4.8 billion net worth. Richard DeVos is co-founder of Alticor Inc., the parent of closely held direct-seller Amway Corp. Linda McMahon, Mr. Trump’s pick to head the Small Business Administration, and her husband, Vince McMahon, who together founded World Wrestling Entertainment Inc., might save more than $250 million based on their shared net worth of at least $1.35 billion. The nominees’ net worth estimates were compiled by the Bloomberg Billionaires Index.

Repealing the tax would also benefit Treasury secretary nominee Steven Mnuchin, who held shares in CIT Group Inc. worth more than $100 million as of Dec. 2. And Gary Cohn, who is said to be Mr. Trump’s choice for his chief economic policy adviser, would leave his position as president of Goldman Sachs Group Inc. with $266 million of stock and awards amassed during his years at the investment bank, according to data compiled by Bloomberg.
EARLY TEST

The looming estate-tax debate may be an early test of how Republicans deal with the electorate’s populist-over-elite mood. In interviews, Republican senators and congressmen played down the tension between Mr. Trump’s populist image and repealing the estate tax.

“Every president who’s ever had the office is going to have tension between their campaign and reality,” said Sen. Lindsey Graham, a South Carolina Republican. “How he handles that tension is up to him. But there’s nothing new about a president campaigning one way and having to govern another.”

Senate Majority Whip John Cornyn, a Texas Republican, said on Thursday he expects an estate tax repeal to be included in the budget reconciliation beginning in April. Others want it to be part of a comprehensive tax overhaul package. GOP aides said many are waiting for guidance from Mr. Trump.

Some conservatives caution that upper-end tax breaks are politically problematic.

“[Mr.] Trump would do well to craft a tax-reform agenda that is populist in a very visible, obvious way that delivers tangible gains to middle-income voters,” said Reihan Salam, executive editor of the National Review, a conservative magazine. “I believe that coming right out of the gate and focusing on high-end tax cuts might prove costly.”

DEMOCRATIC OPPOSITION

Democrats overwhelmingly oppose reducing the tax — presidential nominee Hillary Clinton campaigned on raising its rate to 65% for couples worth $1 billion. “I’m against” repealing the tax, said incoming Senate Minority Leader Chuck Schumer. “To do it would sure help out the wealthiest few in America.”

GOP leaders are thus wary of over-promising. “Every tax bill is going to have a lot of tension and a lot of problems because the Democrats are not real enthused about things,” Mr. Hatch said in an interview. “We’ll just have to see. But we may be able to do some things.”

The politics of repeal may depend on which description of the tax reaches the public. A Gallup poll in March found that 54% of Americans favored eliminating it when told it’s a tax paid when a person dies. But researchers have found that people are more likely to support it — and to want it to be increased — when told who it affects.

“It becomes a question of how effective Democrats are at reframing that issue beyond this notion of a death tax,” said Norman Ornstein, a political analyst at the American Enterprise Institute.