Eliminate the Death Tax

Author: Preston Brashers, Research Fellow

Affordability 101 · Chapter 6: Tax Reform

Plymouth Institute for Free Enterprise

Topline

Congress and state lawmakers should eliminate the death tax (including estate taxes, inheritance taxes, and gift taxes).

Background

The federal government 16 state governments, and Washington, D.C. tax the assets of individuals who die or the heirs themselves (Tax Foundation data). The first $15 million of assets are exempt from the federal estate tax, but above that, most wealth is taxed at a 40% rate.

Most state death taxes exempt considerably less than the federal estate tax. Three states allow exemptions of $1,000 or less from their inheritance taxes. Maryland is the only state that imposes both an estate tax (16%) and an inheritance tax (10%). Twelve states impose only an estate tax, with the highest rates in Washington (20% currently but 35% for deaths between July 1, 2025, and June 30, 2026) and Hawaii (20%). The median state with an estate tax has a top tax rate of 16%. The four states that impose only inheritance taxes all have top rates between 15% and 16%.

The Death Tax Kills Family Businesses and Opportunity

• Death taxes devastate asset-rich but cash-poor family farms and businesses.
• Death taxes discourage capital formation and building intergenerational wealth.
• State death taxes encourage wealthy people to move to other states.

Action Items (Congress and States)

• Eliminate or at least reduce all forms of death taxes.
• As a death tax repeal “pay-for”, Congress should consider reforming capital gains to include carryover in basis at death above a given threshold (instead of a step-up in basis).

How It Would Make Life More Affordable

• Eliminating death taxes would encourage more entrepreneurship and lead to more robust competition from family businesses that remain in the family.
• Death taxes divert millions of hours of labor away from the productive economy (or family and other pursuits) and toward compliance and estate-planning strategies.

Death Tax States Are Less Affordable

• Twelve of the 17 states with death taxes rank among the 15 highest cost-of-living states (based on MERIC data).

Related Legislation: Death Tax Repeal Act (S. 587, H.R. 1301).

Bottomline

The death tax is salt in the wounds of grieving families. The minuscule share of revenue collected from death taxes isn’t worth the cost.

This memo is part of Affordability 101, Advancing American Freedom’s playbook of 101 policy solutions to make life more affordable.

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