During the recent Democratic debates, and more generally during the current presidential election campaign, we heard very little about the inheritance tax, even from the progressive candidates. This despite the fact that the amount of money the estate of any single person can exempt from the inheritance tax has consistently increased through the Bush and Obama Administrations--by more than 400%! It was a "mere" $1 million in 2002; now it is $5.25 million. For a couple, the exemption increased from $2 to $10 million over the same period. The remaining inheritance tax is so low that, when combined with the various devices the rich use to avoid paying taxes, only 2 out of 1000 households pay this tax each year, according to the highly regarded Center on Budget and Policy Priorities. Since its introduction in 1916, many less rich people have paid much more of an inheritance tax than the very rich pay today.
To the extent that candidates discuss tax increases, these discussions have focused almost exclusively on income taxes and corporate taxes. Some Republicans, true to their long-standing position, seek still lower tax rates, including a total elimination of the inheritance tax. (A GOP-sponsored bill, the Death Tax Repeal Act of 2015, is pending in the Senate.) Every Republican nominee who has made a statement about the estate tax has recommended eliminating it altogether. Hillary Clinton and Bernie Sanders focus almost completely on raising taxes other than the inheritance tax. Hillary has yet to discuss the estate tax during this campaign cycle. Sanders has introduced a bill that would allow exemptions of $3.5 million per person. Even this bill would only increase the estate tax from 2 to 3 out of 1,000 households. And Sanders very rarely mentions it. A true progressive position would call for the inheritance tax to be reinstated at the same level it was in 2002, when the exemption was $1 million per person and $2 million per couple--or allow for still lower exceptions.
Critics argue that such a tax would force children of farmers to sell the farms they inherit because "business assets" account for a large share of farmers' estates. To determine whether this is in fact a reason to keep inheritance tax very low, one can look at the year 2000, when the estate tax exemption was $675,000. Adjusted for inflation, that would be about $932,000 in 2015, close to the proposed $1 million exemption. In 2000, only 8 percent of farmers' estates (or 138 estates) that owed estate taxes faced a liability greater than their liquid assets. Moreover, during the same time, the American Farm Bureau could not find a single farm that was lost because of estate taxes.
Above all, anyone concerned with reducing inequality must note that reducing differences in income (through higher income taxes on the rich, either by increasing the rates or closing loop holes) will not accomplish this goal unless differences in wealth are also taxed. One need not waste one's breath to ask the GOP candidates about re-raising the inheritance tax. However, surely someone should ask the Democratic candidates if they favor that the rich will make their children rich, without them having to put in a day of work, while those with low incomes will never be able to buy a home or even an apartment, and will leave their kids only debts?