Today, Senator Bernie Sanders introduced new legislation, the For The 99.8% Act, to dramatically expand the federal estate tax. If successful, this bill would combat growing wealth inequality in our country, and send the message that no one should have a monopoly on the American dream.
Currently, the federal estate tax allows up to $11.2 million for an individual or $22.4 million per couple to be passed down without paying a cent in estate tax. It then treats all estates over those thresholds exactly the same, taxing the amount over the threshold at 40% whether it’s $50 million or $2 billion.Sanders’ bill would not only lower the threshold to $3.5 million per individual, but tax larger estates at progressively higher rates, with the highest percent, 77, only applying to estates over $1 billion. Even with the lower threshold, the bill would only affect the wealthiest 0.2% of Americans, leaving the tax bill of 99.8% of Americans untouched.
In addition, the bill would close loopholes in the estate tax that the uber-rich have been driving their metaphorical getaway trucks through, such as giving made-up valuations for assets in an attempt to make their estate seem less valuable than it really is. And in a preemptive attempt to stave of the oft-repeated, inaccurate criticism that the estate tax hurts family farms, the bill allows family farmers to lower the value of their farmland by up to $3 million for estate tax purposes.
The last provision is extremely important because it shuts down one of the key misleading talking points deployed by opponents of the estate tax. In order to make the estate tax appear unfair, family farms are cited as suffering the most from the estate tax’s handling of assets. But in reality, in previous years family farms made up less than 700, or 13%, of estates qualifying for the estate tax. Even that number is inflated, because they counted estates reporting any farming equipment assets, which doesn’t mean that the farm was the primary or sole source of income. Still, Sen. Sanders’ bill acknowledges the importance of family farms and the complexity of including farming equipment in asset counts, and includes the $3 million credit to balance this out.
At the same time, Republican senators have introduced their own bill on the estate tax. This one, however, would eliminate it altogether. Led by Senator Thune of South Dakota, the bill would allow the already destabilizing concentration of wealth in the hands of a few to balloon even further by allowing heirs of wealthy people to become millionaires and billionaires without ever having to earn a penny or pay a cent in taxes. For some reason, Senator Thune believes this is the appropriate thing to do while almost half of Americans are one missed paycheck away from poverty, millions of students have to mortgage their future to afford higher education, and nearly 40% of citizens cannot afford a $400 emergency. The difference in priorities between Senator Sanders and Senator Thune is revealing.
Ultimately, it’s time for Republicans to start legislating on behalf of their entire constituency, not just the donor class. Sen. Sanders’ bill would only tax the richest 0.2% of the country and improve the lives of 100% of Americans. There is really no argument against this legislation that doesn’t hinge on the importance of giving away vast amounts of wealth to people who simply haven’t earned it. Where’s the meritocracy in that?
The majority of Americans want the wealthy to pay more in taxes. This bill would ensure just that. Any politician who votes against this bill would be doing so for the exclusive benefit of their donors– and at the expense of our democracy. As a millionaire whose estate would be subject to such a tax, I care more about the future of our country than setting my children up with more wealth than they would ever need. Any true patriot should feel the same.
(Cross-posted with permission from PatrioticMillionaires.org)
Morris Pearl is a former managing director at BlackRock, Inc. and Chair of the Patriotic Millionaires, a coalition of high-net worth Americans concerned about the destabilizing concentration of wealth and power in the U.S.