Freshman New York Rep. Alexandria Ocasio-Cortez is going after income, Massachusetts Sen. Elizabeth Warren wants to target wealth, and now Vermont Independent Sen. Bernie Sanders has a third proposal for taxing the very rich: Hit their estates.
Sanders, who is considering a 2020 presidential run, unveiled a proposal Thursday that would expand the federal estate tax on the wealthiest 0.2% of Americans, imposing a top rate of 77% on estates worth more than $1 billion.
Sanders’ bill is the latest call to restructure the tax code to address the dramatic rise in US economic inequality. The increasing and varied levies would raise revenue to pay for new social spending and, more radically, to redistribute wealth – and power – across a society where the richest three people in the US, according to a report cited by Sanders, “now own more wealth than the entire bottom half of the American population combined.”
The Democratic plans differ in details and emphasis but combine to carve out a stark contrast to the Republican Party’s agenda. In its 2017 Tax Cuts and Jobs Act, the GOP lowered income tax rates temporarily on the middle class and permanently for corporations. But it also gave a big gift to the rich by doubling the estate tax exemption, though only until 2025.
Sanders, who is considering a second presidential run, released the details of his “For the 99.8% Act” a week after Warren introduced her own plan to hit the rich with a 2% “wealth tax” on assets over $50 million and an additional 1% levy on households with a net worth of more than $1 billion. Her plan would target about 75,000 households – less than the wealthiest 0.1% – but raise around $2.75 trillion over 10 years.
The plans, a Sanders aide told CNN, would not come into conflict, but rather – along with a concurrent rise in the top income tax rates, like the one Ocasio-Cortez has discussed – fit together as puzzle pieces in a broader progressive effort to reverse a trend of that has seen American wealth increasingly concentrated among its most affluent households.
Others are taking a different approach. California Democratic Sen. Kamala Harris, who recently declared her presidential candidacy, is emphasizing tax breaks for the middle class, putting more money directly in the pockets of those working families. She would provide a tax credit of up to $6,000 a year for married couples earning up to $100,000 annually, and a credit of up to $3,000 for single filers making up to $50,000 and single parents earning up to $100,000.
Unlike a typical tax credit, though, the bill would also allow taxpayers to receive the benefit – up to $500 – on a monthly basis. This would provide families with an alternative to taking out payday loans, which usually come with very high interest rates, according to her proposal.
The total cost, according to the non-partisan Tax Policy Center, would be $3 trillion over 10 years.
Hiking taxes on the rich is typically a popular move among Democrats, but a recent Fox News poll found that voters in both parties generally support raising rates on multimillionaires. Democrats are more enthusiastic, with 85% favoring increasing taxes on those making more than $10 million. Some 54% of Republicans agree.
Sanders’ proposal is supported by the progressive University of California Berkeley economics professors Emmanuel Saez and Gabriel Zucman, who also worked with the Warren team to analyze her plan, a source confirmed to CNN. French economist Thomas Piketty, who has previously worked with Saez and Zucman, and is the author of 2014’s “Capital in the 21st Century,” also backed the Sanders proposal.
“Today’s US is becoming even more unequal than Pre-World War I Europe. The way out is stronger investment in skills, higher paying jobs and a more progressive tax system. Sen. Sanders’ estate tax bill, including a 77% tax rate on estate values above $1 billion, is an important step in this direction,” Piketty said in a press release provided by Sanders’ office.
While Sanders has proposed boosting the estate tax before, the maximum rate on billionaires is new, the Sanders aide noted, returning the top rate to where it was between 1942 and 1976.
The plan would reduce the current exemption to $3.5 million, down from $11.4 million this year, and bump up the current rate from 40% to a floor of 45%. The figures would then gradually escalate until they reach 77% on estates worth more than $1 billion.
Sanders would subject a much larger portion of the wealthiest estates to federal taxes, while tightening up the rules on various types of trusts that allow the super-rich to avoid estate and gift taxes. He would also close the loopholes that let the owners of family businesses reduce the value of their estates.
Currently, the maximum estate tax levy on America’s 588 billionaires, who are collectively worth more than $3 trillion, would be $1.2 trillion, according to Sanders’ office. The senator’s proposal would increase it by $1 trillion. For instance, it would nearly double the liability of the nation’s richest man – Jeff Bezos of Amazon – to $101 million.
But one expert says Sanders’ revenue estimate may be too generous because the rich typically change their tactics when faced with additional taxes.
“Every time people try to close loopholes, creative people will find new ways to do planning to avoid these changes,” said Beth Shapiro Kaufman, a partner at Caplin & Drysdale attorneys and former official in the Treasury Department’s Office of Tax Policy. “It’s a game of whack-a-mole.”
Republicans are pursuing a much different path. Earlier this week, GOP Sens. John Thune, Chuck Grassley and Majority Leader Mitch McConnell reintroduced a plan to eliminate what they call “the death tax” entirely.
On Thursday afternoon, Sanders addressed top Republicans on Twitter.
“I say to Mitch McConnell and Donald Trump: Instead of repealing the estate tax, let’s substantially increase this tax on multi-millionaires and billionaires and reduce wealth inequality in America,” Sanders wrote, attaching a video of him on the Senate floor railing against economic inequality.
MJ Lee contributed to this report