By Tim Nerozzi
Dying is about to become a lot more expensive, if Democratic leaders get their way.
Despite scholarly evidence showing an increase in the death tax slows the economy and ultimately reduces federal revenue, many of the party’s leading presidential candidates for 2020 are pushing for huge spikes in the amount government takes from the estates the deceased want to pass on to their spouses, children and other heirs. The man who almost won the nomination in 2016, Senator Bernard Sanders (I-VT) has proposed “The Responsible Estate Tax Act,” which would raise the tax rate on estates at graduated levels reaching a high of 65 percent.
Cory Booker (D-NJ) has proposed a return to 2009 estate tax laws before Republicans lowered them to their current rate. This would reduce the tax-free amount of estates from today’s $5.6 million per individual to $3.5 million. It would also raise the tax rate for estates worth more than that to 45 percent, from today’s rate of 40 percent. Some experts calculate the highest tax bracket in Booker plan – for the estates of married couples worth $100 million– would match the 65 percent rate Sanders supports.
All of these proposals would undo both the 2009 legislation and the death tax relief President Trump in 2017 provided as part of his broader tax reform legislation. Trump’s new tax policy increased the exemption for federal estate tax to $5.6 million for individuals and to $11.4 million for couples. Speaker of the House Paul Ryan and Senator Mitch McConnell (R-KY), both senior members of the Republican leadership supported the legislation.
The GOP’s “Tax Cuts and Jobs Act,” however, did not affect the taxation rate, which still today sits at approximately 40 percent. Key pieces of legislation currently being pushed by Democrats are seeking to raise this percentage on eligible estates.
Surprisingly, the least ambitious plan is being offered by progressive icon Senator Elizabeth Warren (D-MA). Her “American Housing and Economic Mobility Act,” would return the death tax rate to 2009 levels and its maximum tax rate of 45 percent on estates as small as $3.9 million. At that rate, the tax would harm even more family-run businesses and farms. Unlike her Democratic colleagues, Warren has said what she would spend the money on: more affordable housing projects and rent reductions in low-income areas. In a September announcement of her plan, Warren’s office said,
“To fully offset the cost of this historic effort, the bill returns the estate tax thresholds to their levels at the end of the George W. Bush administration and institutes more progressive rates above those thresholds.”
Republicans, meanwhile, continue to oppose the death tax. Senator Marco Rubio (R-FL), who ran for president in 2016, has signed the Family Business Coalition’s Death Tax Repeal Pledge: “I Hereby Pledge to Support Repeal of the Federal Estate Tax.”
The American Business Defense Council (ABDC), a think tank concerned with American industry and small businesses, believes raising the tax will be self-defeating. It warns that despite increases of gross revenue collected from eligible estates, “overall federal revenues over time can be expected to be curtailed.”
“We expect that just as repeal of the estate tax can be shown to increase federal revenues over time, an increase in the estate tax will result in a reduction in federal revenues because of reduced economic activity and concomitant lowered corporate, and individual income tax levels, lower capital gains tax revenues and lowered other tax revenues,” the ABDC said in the published statement.
The council is also planning to study the impact of the proposed tax hike on the overall economy. Including U.S. employment levels as well as overall federal revenue.
With the 2020 campaign season rapidly approaching, Democratic Party candidate hopefuls are pushing bold legislation and endorsing signature policies in order to differentiate themselves from the pack.
In describing the Estate Tax aspirations of Booker, Sanders and Warren , the ABDC said, “They’re also running to see who can get closest in their Death Tax proposals to Karl Marx’s: ‘There shall be no right of inheritance’ (third principle of the Communist Manifesto).”
Source: American Media InstituteWake up Right! Subscribe to our Morning Briefing and get the news delivered to your inbox before breakfast!