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Hillary Channels Her Inner Teddy

Clinton’s plan to expand the federal estate tax on the wealthy represents a bold step towards addressing today’s skyrocketing inequality.

Originally published by The American Prospect.

Hillary Clinton’s proposal to strengthen the federal estate tax is the best idea yet to reverse our national drift toward extreme wealth inequality.

Clinton proposes an expansion of the federal estate tax, our nation’s only levy on the transfer of accumulated wealth of multimillionaires and billionaires. The tax falls on fewer than two out of 1,000 estates, yet puts a brake on concentrated wealth, encourages charitable giving, and raises substantial revenue from those most able to pay.

Her plan would generate $260 billion over ten years, exclusively from multimillionaires and billionaires, that she plans to use for investments in expanding opportunity, such as reducing college debt, simplifying small business taxes and expanding the child tax credit.screen-shot-2016-09-23-at-10-26-06-am

The estate tax, which celebrates its 100th anniversary this month, was viewed at its inception as a way to address the excesses of the first Gilded Age. The impetus to pass a tax on inherited wealth came from rural populists and enlightened industrialists. In his 1889 essay, Wealth, steel magnate Andrew Carnegie observed about that estate tax “of all forms of taxation, this seems the wisest.”

President Theodore Roosevelt advocated for “a graduated inheritance tax on big fortunes” that should be “properly safeguarded against evasion” and must increase “rapidly in amount with the size of the estate.” Estate taxes, Roosevelt argued, were required “to preserve a measurable equality of opportunity.”

Clinton’s proposal adopts the Roosevelt principle by including a progressive rate structure—the greater the wealth, the higher the rate.

Clinton’s proposal adopts the Roosevelt principle by including a progressive rate structure—the greater the wealth, the higher the rate. Estates starting at $7 million would pay the current rate of 40 percent, but larger estates would pay incrementally more. Estates over $1 billion would pay a 65 percent rate. The plan also mirrors Bernie Sanders’s Responsible Estate Tax Act and represents a concrete example of her adopting a piece of his anti-inequality agenda. Such a tax would truly put a brake on the concentration of wealth.

The Clinton proposal makes another important improvement: It would close a “billionaire’s loophole” known as the Grantor Retained Annuity Trust (GRAT), which allows estates of the super-wealthy to avoid the estate tax. Some billionaires using the GRAT “billionaire loophole” include Goldman Sachs CEO Lloyd Blankfein, Facebook’s Mark Zuckerberg, Dish Networks’ Charles Ergen, fashion designer Ralph Lauren, and multiple Walton family members.

To be clear, the impact of this expansion is not on the successful small businesses hoping to hand off their enterprise to their children as some wrongly argue. The real impact falls on people like the Waltons, America’s wealthiest family, whose children will inherit tens of billions of dollars combined.

Clinton’s plan also ends the “stepped-up basis” loophole that allows heirs to avoid paying any capital gains on the assets they inherit, which have never been taxed.

Candidate Donald Trump said he would repeal the estate tax. He joins a generation of “born on third base” presidential candidates opposed to the tax. Like George W. Bush and Mitt Romney, Trump is from a family that experienced large transfers of inherited wealth subject to estate taxation. His children would avoid an estimated $4 billion in tax liabilities if he’s successful in his bid to eliminate the estate tax.

Reducing inequality appears to be an insurmountable matter. But there are key interventions that would dramatically reduce the vicious cycle of concentrated wealth, political corruption, and a collapsing standard of living for the majority.

Clinton’s proposal is a handhold on this path, one of the policies our country could and should implement to eliminate the grip of the super wealthy on our society.

  • Thomas A Dillon

    Chuck,
    First off, both reads were excellent reads and I am fairly well acquainted with Teddy Roosevelt and have wondered for many years why the Dems have not evoked his name and his principles more often.
    I have a couple of questions in regard to investments in America’s continued greatness which have not been talked about in this campaign cycle as the media emphasis is not on principles but only on personalities. I will list them here:
    1. The infrastructure investment assessment. The US has not added this investment since 1994 and the latest analysis is we should add approximately 12 cents to it and then index it to inflation. How much additional investment will that add?
    2. The Social Security Enhanced Trust Fund. Do we need to fund this by increases in everyone’s SS or can we do it by only asking those who make over 118k to continue to pay at the same rate? If this is done can we truly call it a locked box?
    3. The Wall Street High Speed Transaction Investment. How much should it be and how much will it raise?
    4. The carried interest relief to Americans act. Bringing up those rates will bring in how much?
    5. The inherited wealth alleviation act which would include GRAT which you indicated would be about $26 billion per year, which is a lot of gwop.
    Now in reference to the five above are there any more that should that should be added? And how much $ will they bring in?
    In reference to the 5 above which ones will bring in the most $?
    Which ones are the most important? Meaning which ones should go first? How realistic is it to get any of these in the next administration if Paul Ryan is still Speaker? When will someone start a campaign to anoint him as the “anti-christ”? Not in those words obviously, but he is a shyster and needs to be called out on it on a daily basis.
    Can Hillary do any of the above by executive order and can GRAT be abolished by a rule change within the IRS?
    What is your group and other progressive groups doing to frame the issue as one of moral necessity?
    I see that Pete Peterson is continuing to spread his fear tactics in very dire terms to the public but still do not see the push back necessary to counter act his shrill canard. How many progressives are traveling the country talking about the good news of progressivism, hammering day in and day out that our friends on the other side are just beholden to a way of life and a grand plan for living that is solely based on blaming the poor for their sorry lot in life while sinfully enriching the rich. Amorality personified.

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