President Trump’s tax plan calls for, among other things, the repeal of the death tax. Interestingly, the President’s plan appears to abandon an offsetting revenue-raising feature of the death tax repeal plan that had appeared on his campaign website, which proposed that “capital gains held until death and valued over $10 million will be subject to tax.”
The tenuousness of the President’s plan raises a whole host of additional questions. These include: (1) whether the President’s plan would be coupled with a step-up in basis at death versus carryover basis (carryover basis would effectively increase total taxes for most married couples with under $11 million in total wealth), (2) whether the gift tax will remain intact (presumably it’s needed to prevent a massive erosion of the income tax base) and (3) what will happen to the generation-skipping transfer tax.
Holes in the President’s proposal gives me the sense that it may have been thrown in as a bargaining chip to be readily peeled away when push comes to shove in favor of the administration’s higher priorities — such as achieving a substantial reduction in the business tax rate, the repeal of the alternative minimum tax and the repeal of the 3.8 percent Obamacare tax.