Friday, October 4, 2019
The debate of how to resolve wealth inequality in the country is a hot topic, especially when it comes to the upcoming presidential election. Some candidates are pushing for an estate tax that will hit taxpayers at lower tax brackets, while others are of the belief that an annual wealth tax for citizens that are worth a certain amount per year would lower the disparity among income earners.
Both Bernie Sanders and Elizabeth Warren have put forth a potential wealth tax during their campaigns, but any new wealth tax would most certainly face constitutional challenge, and it probably wouldn’t raise the amount of revenue its supporters hope for. By contrast, an estate tax has been proven to bring in revenue to the Treasury. The exemption amount has been drastically scaled down recently, however, by the enactment of the Tax Cuts and Jobs Act by President Trump in 2017. At the moment only individuals that are worth more than $11.4 million at death are subject to the federal estate tax, while in 2000, the estate tax kicked in for an individual estate worth just $675,000.
Beth Kaufman, an estate lawyer with Caplin & Drysdale in Washington, D.C., says that “The exemption under the estate tax has risen astronomically. Probably by most measures, it’s too high.” Sanders' For the 99.8 Percent Act would bring the exemption rate down to $3.5 million for an individual. The rate the excess would be taxed at would be progressive; thus instead of taxing a flat rate of 40%, the amount from $3.5 million to $10 million would be taxed at 45%, 50% between $10 million and $50 million, 55% for the value in excess of $50 million and 77% over $1 billion.
See Ashlea Ebeling, Why the Rich Need to Plan for a Tougher Estate Tax, Not a Wealth Tax, Forbes, September 25, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.