By Chuck Collins
It isn’t easy being a millionaire these days, especially if you’ve got less than $20 million. Fortunately, Congress is watching out for you.
Yes, the Republican tax cut bonanza targets lower end millionaires for special relief. Now those struggling to scrape by with $15 million or $20 million can breathe more easily. And even lowly billionaires will be able to keep more of their wealth.
Why? Because Congress just increased the amount of wealth exempted by the estate tax, our nation’s only levy on inherited wealth.
In the bad old days, a family had to have $11 million in wealth before they were subject to the tax. This exempted the 99.8 percent of undisciplined taxpayers who, in the words of Iowa Senator Chuck Grassley, had squandered their wealth on “booze, women, and movies.”
Now no family with less than $22 million will pay it (or individuals with less than $10.9 million). This gift to “grateful heirs” will cost $83 billion over the next decade.
Gutting the estate tax is a bad idea — it raises substantial revenue from those with the greatest capacity to pay. Even in a weakened state, it would have raised over $260 billion over the next decade.
The estate tax was established a century ago during the first Gilded Age, a period of grotesque inequality. Champions of establishing a tax on inherited wealth included President Theodore Roosevelt and industrialist Andrew Carnegie, who viewed it as a brake on the concentration of wealth and power.
Modern Republicans, however, paint the tyrannical “death tax” as an unfair penalty on small businesses and family farmers. But that’s a myth.
The most vocal champion of estate tax repeal is Rep. Kristi Noem, a South Dakota Republican who became the GOP poster child for farmers touched by the estate tax. House Speaker Paul Ryan appointed her on the tax conference committee to advocate for estate tax repeal because of her compelling story.
Noem says her family was subject to the tax after her father died in a farm accident in 1994, a story she repeats constantly.
The only problem, as journalists recently discovered, is that her family paid the tax only because of a fluke in South Dakota law that was changed in 1995. Her experience has little to do with the federal estate tax, which has been substantially scaled down in recent decades.
The reality is that the small number of estate tax beneficiaries aren’t farmers at all. They’re mostly wealthy city dwellers.
Still, the fact that the estate tax lives on creates an opportunity to make it better.
Lawmakers should institute a graduated rate structure, so that billionaires pay a higher estate tax rate than families with a “mere” $22 million. And loopholes should be closed so they can’t pay wealth managers to hide their wealth in complicated trusts and offshore tax havens.
Estate tax revenue could be dedicated to something that clearly expands opportunity for everyone else.
Bill Gates Sr. argues that the estate tax should fund “a GI bill for the next generation.” In exchange for military and community service, young adults should be able to get substantial tuition assistance for higher education or vocational training, paid for by a progressive estate tax.
If Congress were concerned about the middle class, that’s the kind of proposal that would become the law of the land.
And while Noem was complaining about government taxes, the family ranch has collected over $3.7 million in taxpayer funded farm subsidies since 1995.
Noem attacked the reporting as “fake news,” even though it was based on legal documents she filed herself.
Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies.He’s the author of the recent book, “Born on Third Base.”
just me says
yes thats how leftists see it. If you own your own business, lands or even a family farm GOVERNMENT deserves it MORE then your family. the part ” Modern Republicans, however, paint the tyrannical “death tax” as an unfair penalty on small businesses and family farmers. But that’s a myth. The reality is that the small number of estate tax beneficiaries aren’t farmers at all. They’re mostly wealthy city dwellers.” Is by pure number true BUT remember there are a LOT more “wealthy city dwellers” then family farmers. So just by saying that there are not as many farm families affected as city people is just a distraction from the truth that small business owners and family farmers are screwed by the DEATH tax.
Every word after your name was redundant. just me – indeed.
Let’s ALL remember that every dollar in our pocket or accounts has been “taxed” many times over. So, the “talking point” that estate taxes are “double taxation” is nothing short of ridiculous! Estate INCOME is just that. . . it is “NEW” money to the beneficiary. The beneficiary has NOT paid tax on it. “Death Tax” Indeed. . . no one in the millionaires income bracket is hurting for funeral expenses.
If you want to look for actual “double taxation” look no further than the new Republican tax (cut for the wealthy) law! Now over 4 million US citizens can NO longer deduct over $10,000 of their state, local and property taxes.
@ Sherry, “If you want to look for actual “double taxation” look no further than the new Republican tax (cut for the wealthy) law! Now over 4 million US citizens can NO longer deduct over $10,000 of their state, local and property taxes.”
Apparently you don’t realize all other federal tax payers were subsidizing their deductions. This now places the onus on the states to reduce their spending. Also, I own two properties, and property taxes are no where near $10,000 when added together. I could buy a third property, total value about $900,000, and still claim 100% of my property taxes.
Remember, since you think estate income is “NEW money”, be sure your children pay 100% of the value of your estate in taxes.
???????thanmost. . . Yes, of course, my beneficiaries will certainly pay their fair share of taxes. Just like I have NO problem paying property taxes that support “public” education, even though I have no children. An educated populace is the foundation of an evolved civilization.
The $10,000 deduction cap is for the total of ALL state and local income taxes, as well as property taxes. That means federal income taxes INCREASE for millions who live in states where their higher local taxes pay for trivial things like education. Therefore, the new tax code is detrimental to the middle class, while it is a huge “gift” to the wealthy.
The new tax code effects “everyone” in all states in our nation. It is NOT only about “you” . . . except, of course, in your own mind.
Happy New Year!