Wall Street Journal op-ed: Killing the Death Tax Would Resurrect Growth, by Stephen J. Entin (Tax Foundation):
The death tax is an inevitable point of disagreement in a presidential campaign. Donald Trump would eliminate it to promote growth. Hillary Clinton would raise it—up to 65%, while lowering the exemption for estates to $3.5 million—to promote equality. The outcomes would be as different as their intentions. ...
Analysts at the Tax Foundation, where I work, have run the numbers using two models: one of the estate tax, based on historical filings, and another to estimate the economic effects on capital formation, GDP, profits, wages and federal revenue from those sources.
Mr. Trump plans to eliminate the estate tax. As a partial offset, he would end step-up in basis—which currently excuses unrealized gains in an estate from capital gains tax—for estates over $10 million. Our models suggest that these changes would raise GDP by 0.7% over 10 years and create 142,000 full-time equivalent jobs. After-tax incomes for the bottom four-fifths of Americans would rise by 0.6% to 0.7%, mainly due to wage growth. For the top fifth of the population, after-tax incomes would rise between 0.9% and 1.7%.
The Treasury would lose $288 billion in estate-tax revenue over the 10-year budget window, assuming no effect on the economy, but only $46 billion after taking the rise in GDP, wages and other income into account. Revenue losses in the first six years would be almost entirely offset by gains later in the decade, with more gains thereafter. Both the public and the government would be net winners.
Mrs. Clinton plans to lower the exempt amount to $3.5 million for estates and $1 million for gifts. She would raise the top rate to 45% for assets over $3.5 million, with further increases up to 65% for individual estates above $500 million. Although she has not specified the intermediate rates and thresholds, her plan appears similar to one offered by Bernie Sanders, which had rates of 50% for estates between $10 million and $50 million and 55% for those between $50 million and $500 million. We modeled our estimates on that basis.
The calculations show that Mrs. Clinton’s plan would lower GDP by 1% over 10 years and cost 194,000 full-time equivalent jobs. After-tax incomes for the bottom four-fifths of Americans would fall by 0.9% to 1%, due to slower wage growth. For the top fifth of the population, after-tax incomes would fall by 1.3% to 2.3%.
The changes would raise $310 billion for the government over the 10-year budget window, ignoring economic changes, but only $28 billion after taking the drop in GDP into account. Gains in the first six years would be almost entirely offset by losses later in the decade, with more losses thereafter. Both the public and the government would be net losers. ...
Bottom line: Mr. Trump’s plan would deliver on his growth objective. Everyone would gain. Mrs. Clinton’s plan would not so much redistribute wealth as destroy it. Everyone would lose except estate lawyers and life insurers.