“I think not having the estate tax recognizes the people that are investing,” Grassley told the Register in a story published Saturday. “As opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”
The estate tax, often described by Republicans as the “death tax,” is levied only on the very rich, passing on assets of more than $5.5 million for individuals and $11 million for married couples. The current tax on estates is 40 percent of an individual’s wealth at death.
Grassley, a Senate Finance Committee member responsible for writing the tax proposal, was immediately slammed by critics over the comments.
The suggestion — that anyone not socking away their savings in the bank or investments must be profligately throwing their money away — played directly into the critique that Republicans are disconnected from the majority of working Americans.
“Darn straight, Sen. Grassley,” former Hillary Clinton spokesman Jesse Ferguson wrote on Twitter. “If we gave that money in middle class tax cuts, they’d just waste it on hookers and blow. right?”
You spelled “food and childcare” wrong.
Pull it together.
On Monday, Grassley said his point about the estate tax had been taken out of context and sought to expound on his thoughts.
“My point regarding the estate tax, which has been taken out of context, is that the government shouldn’t seize the fruits of someone’s lifetime of labor after they die,” he said in a statement. “The question is one of basic fairness, and working to create a tax code that doesn’t penalize frugality, saving and investment. That’s as true for family farmers who have to break up their operations to pay the IRS following the death of a loved one as it is for parents saving for their children’s college education or working families investing and saving for their retirement.”
Under the Senate tax plan passed early Saturday morning along partisan lines, the exemptions are raised to $11 million per individual and $22 million per couple. The House version of the bill does the same but also axes the tax completely in 2024.
In Grassley’s home state of Iowa, the estate tax has been particularly fraught with controversy. Republicans have often argued that the 40 percent government tax creates a cost-prohibitive situation for farmers hoping to pass their farms on to heirs.
“Death should not be a taxable event and families should not have to fear the Internal Revenue Service and more taxes making it more difficult and costly to pass on the farm or family business to the next generation,” Rep. David Young (R), a Des Moines-area congressman, wrote on Friday in a newsletter to constituents.
But according to the Register, the actual numbers do not support that narrative. Citing 2016 data from the IRS, the newspaper determined 5,219 tax returns were affected by the current estate tax. Only 682, or 13 percent, of the tax filers owned farm assets.
The paper also referred to a 2015 report from the Congressional Research Service noting that only 65 farm estates in the United States annually are touched by the estate tax.
Grassley and other congressional Republicans have long maintained that even if farmers are not affected by the tax directly, the planning involved is an additional strain.
“[M]any are forced into spending large sums of their hard-earned dollars on lawyers and accountants to avoid its impact instead of reinvesting in their business,” he told the Register. “This means that while many don’t end up paying the tax, it still has a negative effect on the economy.”
This post has been updated.