Sen. Bernie Sanders (I-Vt.) just proposed huge increases to the estate tax, which would reverse decades of cuts that have allowed the nation’s richest to establish generations of wealth.
Sanders wants to tax billionaires at a top rate of 77 percent when they die, a massive increase from the current rate. His Thursday announcement of what he’s calling the For The 99.8% Act came just days after Republican senators announced they wanted to repeal the estate tax wholesale.
Sanders said the bill would raise $2.2 trillion from the more than 500 people who are billionaires in the U.S. at a time when Democratic contenders for president seem to be in a race to one-up each other with new ways of getting the rich to pay their fair share. Sanders is expected to announce his candidacy for 2020 soon.
“Our bill does what the American people want by substantially increasing the estate tax on the wealthiest families in this country and dramatically reducing wealth inequality,” Sanders said in a press release. “From a moral, economic, and political perspective our nation will not thrive when so few have so much and so many have so little.”
Republicans have railed against the estate tax for years, calling it the “death tax.” It was drastically lowered during the George W. Bush administration― even disappearing for a time in 2010 ― and cut again with the most recent GOP tax overhaul. On Monday, GOP Sens. Mitch McConnell (Ky.), Chuck Grassley (Iowa) and John Thune (S.D.) introduced legislation that would go even further: permanently eliminating the federal estate tax altogether.
Currently, assets worth more than $11.4 million are taxed at a maximum rate of 40 percent. As recently as 1976, the tax rate was 77 percent on assets of $10 million in today’s dollars.
Sanders would like to get back there: Under his plan, estates between $3.5 million and $10 million would be taxed at 45 percent. After that, the tax rate would increase to 50 percent for assets of $10 million to $50 million and to 55 percent for assets between $50 million and $1 billion.
Any assets above that would be taxed at a rate of 77 percent. Sanders said the bill would affect the richest 0.2 percent of earners.
His proposal is just the latest tax-the-rich idea coming from Democrats this year. Sen. Elizabeth Warren (D-Mass.), who has announced a 2020 presidential run, has proposed an annual wealth tax of 2 percent on people with more than $50 million in assets ― that’s a levy the wealthy would pay while they’re still living. And Rep. Alexandria Ocasio-Cortez (D-N.Y.) has said she wants to raise the top marginal tax rate on incomes over $10 million.
“In many ways, the US led the world toward the development of progressive taxation and the reduction of inequality at the global level during the first half of the 20th century,” Thomas Piketty, an economist known for his work on wealth inequality, told HuffPost in an email about Warren’s proposal. “Unfortunately, one century later, in 2019, the rise of inequality creates new threats to liberal democracies. It is time to take a new step and to develop new policy instruments, in line with the challenges raised by global wealth trends. “
Ocasio-Cortez has also taken a moral stand against the existence of billionaires.
“I’m not saying that Bill Gates or Warren Buffett are immoral, but a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong,” Ocasio-Cortez said on Martin Luther King Jr. Day.
As wealth concentration is surging in the United States, it is high time to revive the estate tax, plug the loopholes, and make it more progressive. Emmanuel Saez, a supporter of Sanders' estate tax proposal
Howard Schultz, the former Starbucks CEO who is now mulling a run for president as an independent candidate, has taken on the duty of publicly defending his fellow billionaires from political attacks. At a Monday event in Manhattan, he called Ocasio-Cortez’s recent criticism of billionaires “un-American” and “misinformed.” Then on Tuesday, he described Warren’s proposed wealth tax as “ridiculous.”
“What’s ‘ridiculous,’” Warren responded, “is billionaires who think they can buy the presidency to keep the system rigged for themselves while opportunity slips away for everyone else.”
Sanders’ proposal also would get rid of some of the tax shelters and dodges that the wealthy use to get out of paying the estate tax. That move echoes policy proposals from Warren and Sen. Cory Booker (D-N.J.). Each has included reforms to estate tax loopholes as funding mechanisms for other legislative proposals.
Figuring out how to raise taxes on the rich is shaping up to be one of the core pieces of the Democratic primary, said Greg Leiserson, director of tax policy and senior economist at the Washington Center for Equitable Growth. He’s agnostic so far on the method, though. Any of the proposals could work, he said, adding: “I think we should be taxing wealth more and I’m excited to see these different approaches.”
Sanders said his act already has the approval of economists including Thomas Piketty, Emmanuel Saez and Robert Reich.
“As wealth concentration is surging in the United States, it is high time to revive the estate tax, plug the loopholes, and make it more progressive. Sen. Sanders’ bill is a bold and welcome leap forward in this direction,” Saez said in Sanders’ press release.
Daniel Marans contributed reporting. This story has been updated with additional background on tax proposals and to make clear the proposed tax would adhere to graduated rates.