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What are the current Democratic proposals to reform or reverse Trump's inheritance tax law changes?
Executive summary
Democratic proposals to roll back changes from the 2017 Tax Cuts and Jobs Act (TCJA) are varied: options include restoring lower exemption levels, taxing unrealized gains at death (ending the stepped‑up basis), tightening rules that let wealthy families dodge estate tax through trusts and valuation discounts, and replacing or supplementing the estate tax with an inheritance‑style levy — all aimed at taxing more large transfers and raising revenue [1] [2] [3]. Estimates show the TCJA’s doubled exemption sharply reduced estate‑tax returns and liabilities; reverting or tightening the rules would raise revenue and expose many more estates to tax [4] [1].
1. The immediate hook: TCJA’s doubled exemption and the “sunset” effect
TCJA doubled the federal estate and gift tax exemption (from roughly $5.5M per person pre‑2017 to about $11.4M in 2018 and higher with inflation), a change that dramatically reduced the number of estates paying tax; the large exemptions are scheduled to revert after 2025 unless Congress acts, creating a policy window for Democrats to push different reforms [4] [1]. The Tax Policy Center calculates that making the TCJA permanent would reduce estate tax filings by 85,000 between 2025 and 2032 and shrink liabilities by about $131 billion, underscoring why Democrats frame reform as a recovery of revenue from the top [1].
2. The big-ticket Democratic ideas: lower exemptions, higher rates, or new bases
Democratic plans discussed publicly include lowering the estate and gift exemption back toward figures like $3.5M–$5M per person (a Sanders‑style threshold has had public support) or otherwise reducing the current exemption so more estates are taxable [5] [3]. Another recurring Democratic proposal is to treat inherited assets as if sold at death — taxing unrealized capital gains on transfer, often with modest exemptions (Biden’s past budget language and party platform language call for ending or limiting the stepped‑up basis) — which would capture accumulated appreciation that current rules largely let heirs inherit tax‑free [2] [6] [3].
3. Closing loopholes: trusts, valuation discounts, and planning techniques
Beyond headline exemption and rate changes, Democrats have also targeted techniques that wealthy families use to avoid estate tax: limiting or disallowing certain trust structures, valuation discounts for family businesses, and other preferences that reduce taxable estate values. The Tax Policy Center and media coverage note that modest reforms could focus on repealing or modifying those preference items rather than scrapping the whole tax [1] [7].
4. Alternative proposals Democrats have weighed: inheritance tax vs. estate tax tweaks
Some policy discussions favor moving toward an inheritance tax (levied on recipients) rather than an estate tax (levied on the estate), which several countries use; Tax Policy Center notes more countries tax inheritances than estates and that states already sometimes do this — Democrats have considered a range from modest tweaks to comprehensive replacements [1]. The Democratic Party platform and allied proposals have also included stepped proposals focused on the “wealthiest Americans,” signaling targeted approaches rather than universal changes [2].
5. Political reality and fiscal framing: funding priorities and compromises
Democratic estate‑tax proposals are often presented as a way to fund broad domestic priorities (climate, childcare, paid leave, education); House Democrats have at times dropped the most aggressive inheritance measures from packages and opted for other revenue sources, reflecting intra‑party tradeoffs and Senate math constraints [7] [3]. Legal and legislative hurdles (Byrd Rule, filibuster) and the need for supermajorities for some budget maneuvers mean final policy will reflect negotiation and may be narrower than some proposals [6].
6. Who would be affected, and the estimates behind the push
Analysts estimate that current high exemptions mean only a small number of returns pay estate tax now, but reverting exemptions or imposing gain‑at‑death rules would broaden the tax base substantially; for instance, Tax Policy Center modeling shows tens of thousands more returns and billions more revenue under reversion scenarios or major reforms [1] [4]. Critics warn (and some Republican proposals mirror) that aggressive changes could affect family farms or small businesses, a point Democrats have had to reckon with in framing targeted exemptions or transition rules [5] [7].
7. Bottom line and what reporting does not yet say
Available sources show a menu of Democratic approaches — lower exemptions, taxing unrealized gains at death, closing avoidance techniques, and shifting to inheritance‑style taxes — but they also show internal tradeoffs and instances where Democrats have scaled back proposals for political reasons [1] [3] [7]. Available sources do not mention a single, enacted Democratic law reversing Trump‑era TCJA estate changes; outcomes will depend on electoral results, Senate procedures, and negotiation details not fully spelled out in current reporting [4] [6].