Harris' death tax reform could impact more than just the ultra-wealthy, experts say

Under former President Donald Trump's Tax Cuts and Jobs Act (TCJA), the federal estate tax – often referred to as the death tax – can only apply to estates passed on to heirs valued over $13.61 million. 

If that exemption threshold were to expire or lapse, as Vice President Kamala Harris has signaled she would allow if she becomes president, some experts say it could impact more than just the ultra-wealthy.

"It creates monopolies," one conservative economist said. 

"It's going to impact a lot of our clients," a New Jersey estate planning attorney insisted. 

"The exemption is meant to reduce the double taxation of income," another economist said. "In a way, it's like the capital gains tax, where people are like, 'Oh, it's to [tax] privileged capital.' No, it's actually to reduce the double taxation of income."

The Harris campaign told The New York Times in August that the vice president supports President Biden's proposed tax increases laid out in the most recent federal budget plan put together by his administration, which would reduce the threshold at which the death tax kicks in from roughly $13 million to around $5 million. 

Meanwhile, Harris reportedly endorsed the death tax reforms outlined in the American Housing and Economic Mobility Act of 2024, which would reduce the threshold even further to $3.5 million. While running for the presidency in 2019, Harris wrote in an op-ed for The Washington Post that raising the estate tax was a solution to poor teacher wages.

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Critics of letting the TCJA's current exclusionary threshold for the death tax expire told Fox News it will promote monopolies, impact small businesses and create an additional tax for a meaningful portion of the country. However, others strongly disagree. 

"If estate tax parameters revert, that will only affect a tiny sliver (about two-tenths of 1%) of estates – those with estates over the (now lower) threshold," Kimberly Clausing, an economist with the Peterson Institute for International Economics, told Fox News Digital in an emailed statement. "Those affected will be quite well off and easily able to pay the tax, and without an estate tax, much capital income would escape tax entirely."

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Garrett Watson is a senior policy analyst at the Tax Foundation, a Washington, D.C.-based nonprofit aimed at helping Americans understand the tax code. He said under the new death tax threshold, only an additional 0.13% of heirs will be impacted. He added that under the $13 million threshold provided under the TCJA, about $206 billion in revenue would be lost from 2025 to 2034.

However, Michael Kulzer, an estate planning attorney from New Jersey, argued the move will impact "a lot" of his clients. "You bought a shore house 30 years ago for $500,000, it's probably worth $3 million today," Kulzer said. He noted that when adding other assets, like pensions, "you don't have to be really wealthy today" for an estate to reach a $3.5 million, or even $5 million, valuation.

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Meanwhile, Heritage Foundation economist Richard Stern pointed out that "it's really the business part of this where it will affect a lot of people."  

Stern pointed to hopeful McDonald's franchise owners as an example, who, on average, must have $1.5 million to $2.5 million in start-up costs to get going. "If the price to buy the franchise for one McDonald's is a million and a half dollars, you don't need to have a lot of restaurants under your belt to reach $3.5 or $5 million in value." Family farms and family-owned construction companies, Stern added, are other examples of potentially vulnerable targets. Family-owned companies have gone public about being forced to sell, at least in part, due to estate taxes.

Stern added that a small business does not need to be far over the threshold to face a big tax bill when the owner dies and tries to pass it on to one of his heirs. This, Stern argued, would force the heir to start selling off parts of their business, and, in turn, serves to "create monopolies."

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"The people who are going to be affected the most are often those whose income is not held in cash. It's often held in stocks. In a company. And in order to pay it, it means you have to sell it," Veronique de Rugy, a senior research fellow at George Mason University's Mercatus Center, added. "So, in a way, I don't really care how many people it affects. It's just a bad – it's a bad policy."

Oprah Winfrey, who has endorsed Harris for president, blasted the federal estate tax in 1997 as a "double tax" and blamed it for "why you always hear about people where their aunts left them houses, or left them stuff, and they can't keep the house because the taxes are so much." 

"In a way, it's like the capital gains tax, where people are like, 'Oh, it's to [tax] privileged capital.' No, it's actually to reduce the double taxation of income," echoed de Rugy in talks with Fox News Digital.

The Harris campaign declined to provide an on-the-record response for this article.