CLAIM

Hillary Clinton has proposed a 65% estate tax rate which would force farm families to give up their businesses. See Example( s )

EXAMPLES
Collected via Facebook, September 2016

clinton-targets-family-farms
MOSTLY FALSE

RATING

MOSTLY FALSE

WHAT'S TRUE

Clinton's tax reform proposal would subject more inherited family farms to estate taxes than under current law, and at a higher, graduated rate (45% to 65%) than the 40% flat rate currently in place.

WHAT'S FALSE

Only the very wealthiest estates valued at more than $1 billion — which wouldn't likely include many family farms — would pay the top rate of 65%.

ORIGIN

The social media post above stating that a so-called “65% death tax” proposed by Democratic presidential nominee Hillary Clinton would “take farms from families” echoes a claim made by Clinton’s GOP rival, Donald Trump, in a 28 September 2016 stump speech in Council Bluffs, Iowa:

By the way, for the family farmers, Hillary Clinton’s plan proposes an estate tax of 65 percent, 65 percent. So you are going to have an estate tax of up to 65 percent. Lots of luck having your kids hold on to your farms — not going to happen.

By way of comparison, Trump would repeal the estate tax altogether.

The “65%” figure cited in both instances comes from a set of tax reform proposals outlined on Clinton’s campaign web site covering topics ranging from closing tax loopholes to imposing a “risk fee” on the largest financial institutions to implementing the so-called “Buffet Rule” requiring millionaires pay at least a 30% effective tax rate. 

The basics of Clinton’s estate tax proposal are as follows:

Restoring fair taxation on multi-million dollar estates. Clinton is joining President Obama and other Democrats in calling for returning the Estate Tax to 2009 parameters, and lower the exemption for the Estate Tax from almost $11 million today, while raising the Estate Tax rate. And she will go further than that for estates valued in the tens and hundreds of millions, with higher rates as values rise, up to a 65% rate on estates valued at over $1 billion per couple. Hillary has called for Estate Tax reform for more than a decade, and embraced similar proposals in her 2008 presidential campaign. The Estate Tax only impacts the very largest estates, and the reformed Estate Tax would only affect the wealthiest 4 out of every 1,000 estates in the country. Her plan would also crack down on loopholes in the Estate Tax, including methods that people can now use to make their estates appear to be worth less than they really are.

As you can see, Clinton is indeed calling for a 65% tax rate, but this only applies to the largest estates — those valued at more than $1 billion per couple. That would probably include very few, if any, family farms.

That said, there’s more to Clinton’s proposal than slapping a 65% tax on the wealthiest estates. It would also lower the threshold for taxable estates from the existing $5.45 million in worth per individual ($10.9 million per couple) to $3.5 million per individual ($7 million per couple). It would raise the minimum tax rate on the smallest estates — currently at 40% — to 45%, and it would increase incrementally from there: 50% on the value of estates over $10 million ($20 million per couple), 55% on estates over $50 million ($100 million per couple), and, as already stated, 65% on estates over $500 million ($1 billion per couple).

This means that even though the “65%” figure people are raising alarms about probably wouldn’t affect family farms at all, other provisions in Clinton’s tax plan might. It would certainly be the case, for example, that inherited estates valued at between $7 million and $10 million per couple — which wouldn’t have been taxable before — would thereafter be taxed at the rate of 45 percent.

(A critical point to understand in calculating the effects of the estate tax is that it’s only levied on the portion of an estate’s value over a given threshold — e.g., an inherited estate valued at $8 million would be taxed at the 45% rate, but only on the value exceeding the $7 million threshold: $1 million. The first $7 million would not be subject to the tax.)

More details about the economic proposals of both major candidates can be found at crfb.org, the web site of the Committee for a Responsible Federal Budget.

Sources:

Wallace, Lewis.   “Clinton Tweaks Estate Tax Proposal to Raise Rates at the Top.”
   Marketplace.   23 September 2016.

Committee for a Responsible Federal Budget.   “Promises and Price Tags: A Preliminary Update.”
   22 September 2016.

Dasilva, Michael.   “Hillary Clinton’s Estate Tax Proposal Concerning to Family Farmers.”
   WHO 13 News.   29 September 2016.

HillaryClinton.com.   “Investing in America by Restoring Basic Fairness to Our Tax Code.”
   September 2016.

Reuters.   “Clinton Wants a 65% Inheritance Tax on Billionaire Estates.”
   23 September 2016.