Jonathan G. Blattmachr writes, “This Article primarily will deal with how the wealth transfer tax system might be used to provide reparations for descendants of people enslaved in the United States as part of the system of chattel slavery. It will not discuss other potential reparations such as for Native Americans among others.” (P. 297, dagger note.) The term “wealth transfer tax system” refers to the estate, gift, and generation-skipping transfer taxes imposed by Subtitle B of Title 26 of the United States Code. (P. 297, note 1.) Blattmachr’s specific proposal is that “a refundable estate tax credit (perhaps, up to a certain limit of wealth or using a scaled credit) could be allowed for the estates of descendants of enslaved persons.” (P. 309.) Blattmachr contributes to the literature of wealth transfer taxes, wealth inequality, racial wealth disparity, and reparations with his thoughtful proposal.
The core of Blattmachr’s proposal is the “refundable estate tax credit.” For any decedent dying in 2024, the estate tax credit currently stands at $5,389,800. (This jot focuses on the estate tax credit of $5,389,800 because Blattmachr’s article focuses on the estate tax credit—often, discussion centers on the estate tax exemption amount ($13,610,000 for a decedent dying in 2024), which is, generally, the amount that can be transferred estate tax-free to persons other than one’s spouse and other than to charities.) That relatively high estate tax credit is slated to sunset at the end of 2025 and revert to a lower estate tax credit unless Congress enacts new legislation. Before we discuss the mechanics and merits of a refundable estate tax credit, we should note that Blattmachr does not propose unequivocally that $5,389,800 be refunded to each estate of descendants of enslaved persons. Instead, Blattmachr explains that the amount of the refundable credit could be limited or scaled. (P. 309.)
Summarizing the wealth transfer tax regime is beyond the scope of this jot, but a brief overview may be useful for readers unfamiliar with this system. Three related taxes apply to the voluntary, gratuitous transfer of property/wealth: the estate, gift, and generation-skipping transfer taxes. The basic idea is that a tax is imposed upon voluntary, gratuitous transfers of property other than to a spouse or charity (“taxable transfers”)—whether the transfer occurs when the transferor is alive or upon the transferor’s death. This integrated approach to taxing lifetime gifts and deathtime transfers from a decedent’s estate led to terms such as the unified gift and estate taxes and the unified credit against the gift and estate taxes.
For example, let’s assume that a decedent died in 2024 having made lifetime and deathtime taxable transfers of $13,610,000. Such an estate would yield an initial gross estate tax computation of $5,389,800. However, after applying the estate tax credit of $5,389,800, there would be no estate tax owed on the decedent’s lifetime and deathtime taxable transfers of $13,610,000. Estate taxes would become due only if a 2024 decedent had made lifetime and deathtime taxable transfers greater than $13,610,000. As Blattmachr writes, “only the wealthiest of Americans and their estates pay estate or related taxes.” (P. 300.)
Blattmachr’s thought-provoking proposal is a refundable estate tax credit. Let’s assume that the United States has enacted his proposal but has limited and scaled the refundable estate tax credit to $2,000,000 for descendants of people enslaved in the United States. Let’s also assume that a decedent has an initial estate tax calculated to be $500,000. Applying the refundable estate tax credit of $2,000,000 means that the decedent’s estate would receive $1,500,000 (which is the refundable estate tax credit of $2,000,000 minus the initial estate tax calculation of $500,000). Of course, if a different decedent’s initial estate tax is calculated to be $2,800,000, applying the refundable estate tax credit of $2,000,000 means that this other decedent’s estate must still pay an estate tax of $800,000.
How would the federal government pay for such a refundable estate tax credit? Blattmachr writes, “Arguably, the wealth transfer taxes are the appropriate source for funding reparations because those taxes are to be paid by those who have most greatly benefitted from America’s economy which benefitted, in part, from labor of enslaved people.” (P. 306.) Along the way, Blattmachr discusses some pros and cons of other ways to raise revenue for reparations, including increasing taxes on the transfer of wealth, earmarking wealth transfer taxes to pay for reparations, a special tax for reparations, and reducing wealth transfer taxes on descendants of enslaved people. (Pp. 306-309.)
Blattmachr suggests the following advantages and arguments supporting a refundable estate tax credit. First, because the estate tax credit applies only when an individual dies, “the ‘payment’ of these reparations” is postponed until eligible individuals die, thereby possibly reducing the present value cost of the reparations. (P. 309.) Second, the estate tax credit “might avoid publicly identifying the individual[s] who benefit from the refundable credit.” (P. 309.) Third, although the delayed payment of reparations would postpone their impact, “it is at least arguable that paying the reparations over time would increase the probability of their closing the wealth gap between Black Americans and others.” (P. 310.) Fourth, Blattmachr writes, “A rational case can be made that providing reparations . . . would help close the racial gap between those descendants and other Americans.” (P. 311.) Fifth, payment of reparations “seems likely to boost the United States economy for all.” (P. 311.) Finally, sixth, a refundable estate tax credit, because it is paid over time as opposed to all at one specific date, “might increase the political likelihood of reparations being paid.” (P. 311.)
Blattmachr’s proposed refundable estate tax credit is interesting. It might accomplish (or help to accomplish) many goals, including addressing past wrongs, reducing current racial wealth gaps, and boosting the economy. I learned much from Blattmachr’s article and will continue to reflect on his proposal.
