The chairman of the House Ways and Means Committee told Breitbart News that he is committed to abolish permanently the federal tax on the property of the deceased, or the ‘Death Tax.’
“It’s just wrong to work your whole life to build up a nest egg, build your own business–you pass away and Uncle Sam can swoop in and take away nearly half of everything you’ve earned,” because of the ‘Death Tax,’ said Rep. Kevin P. Brady (R.-Texas). “Can you imagine that? Having to sell off most of your land, just to keep it from the government, just to save the house,” he said.
“There are two new major threats to family-owned farms and businesses right now,” said Brady, who succeeded Speaker Paul D. Ryan (R.-Wis.) as the committee chairman when Ryan became the Speaker.
“Number one is Hillary Clinton’s proposal to raise the death tax rate to 65 percent, which would be the highest rate since the 1980s,” he said. “At that point, you’re confiscating property and land and businesses,” he said.
“The other threat is the Obama administration’s Treasury Department rules that came put in August.” The new rules, called “valuation rules,” impose higher tax liabilities onto families trying to pass their businesses to family members, he said. It is as if the IRS decided to raise taxes on its own, he said.
Prior to the new rules, the IRS accepted that most farms and businesses are relatively illiquid. A family-owned restaurant might be worth $12 million, based on the book value of its tangible assets, cash flow and good will, but unlike a stock, it is difficult to convert the ongoing business into cash quickly, especially if it is held in a family partnership or family corporation.
Often these businesses partnerships have restrictions or covenants, such as two brothers with equal shares, but one cannot sellout without permission from the other. This difficulty in getting liquid means the restaurant, or farm or dry cleaners, is actually worth less than its valuation. The new IRS rules no longer accounts for this illiquidity when valuing the value of the business for the purposes of assessing the tax.
Estates valued more than $5.45 million are taxed at 40 percent of their excess more than the threshold. Putting aside other factors, if a person died with a $8 million ranch, the family would have pay the IRS $1.2 million, whether they keep the ranch or not.
The rules also curtail the ability of individuals to gift property to family members during their lifetime without it becoming a taxable event.
The IRS released the proposed rules Aug. 2 and will receive comments until Nov. 2. The agency will hold a hearing Dec. 1 before the final rules that would be effective Jan. 1. “We think it is wrong and a major overreach,” Brady said.
The chairman said his office and the committee have received complaints from families around the country about the new rules, including petitions and letters with hundreds of signatures.
The Texan said Ryan supports full repeal, too. “He’s all in. He’s from Wisconsin.”
Ryan, then the committee chairman, worked with Brady to bring the measure to the House floor April 16, 2015 when, it passed 240-179, the congressman said. The companion bill in the Senate is sponsored by Sen. John R. Thune (R.-S.D.).
In was the first House floor vote to abolish the death tax in 10 years, he said.
Brady is an intense force charging in the hallways of the Capitol. He has the hands of a workman and his eyes lock onto their target. Although, he holds one of the most storied and powerful chairmanships on Capitol Hill with jurisdiction over taxes, spending and banking, as well as other matters, he spends a lot of his time in his constituency office, rather than the chairman’s chambers.
Brady is a man who never forgets his own family’s struggles after his father died. It is an attitude he puts in practice by never wearing his Member of Congress lapel pin. The absent pin means he forgoes the everyday courtesies of his office and he can see how staffers and other people around the Capitol treat someone, who they don’t know is a congressman.
His father died when he was 12, which is part of his bond with Ryan, who lost his father with he was in high school.
But, more importantly, Brady saw at an early age how life for his mother and his four siblings changed forever with that one event– and how it changes for others, too.
Brady said the death tax is the number one reason why family farms and businesses are not passed down to the next generation.
Now as women and minority businesses become more common, new people are becoming exposed to the confiscatory practice of taxes estates, he said. “They thought it was for the wealthy, but now they are discovering, uh-oh, it’s their nest egg they’re coming after.”
“We got a family in our district and they are taking out their third ‘Death Tax’ loan,” he said. “Grandfather, father and spouse, just to keep the same land they’ve had for generations,” he said.
“We have another one–one of our former staffers here–she went back home to settle her aunt’s estate in Texas and I think she and her brother had to sell the bulk of her family’s property, and they’ve had it since the 1880s,” he said.
Brady told Breitbart News he did not grow up in a wealthy family, so he did not understand the death tax and its impact until 1997, his first year in Congress. The moment came when a couple from his district came up to him and sketched out what the death tax had in store for them, their children and their nursery business.
The couple took out a piece of paper and sketched it out for him. “Just on a piece of paper, they wrote down how they had no debt, two or three kids were running the business and they basically showed me that if they could have enough money in life insurance and could go to the bank to borrow the money, they could keep their family business,” the chairman said.
The idea the family would have to exhaust its life insurance and then go into debt, just to keep its business going after paying off the death tax, he said, is “un-American, immoral and wrong.”