As we celebrate our collective history this Fourth of July, we should remember that we live in a country where everyone’s voice counts, not just those with the most money.
Poll after poll shows that the majority want the wealthy to pay more in taxes. The vast majority also see economic inequality as an issue the government should address.
The federal estate tax accomplishes both of these goals and affects only the ultra wealthy, but it is under assault.
According to a recent report by Public Citizen, nine families worth a combined $137 billion in assets spent at least $10.4 million in an effort to repeal the tax on inheritances, from which they stand to gain tremendously. The investment helped pass a repeal through the House of Representatives this spring, but was later blocked in the Senate.
Independent Senator from Vermont and Democratic presidential candidate Bernie Sanders has decided to fight back against this unbalanced influence. He recently introduced legislation to increase the tax on inherited wealth — a tax that would impact just 0.3 percent of households, that is, those at the very top who have done phenomenally well in today’s economy.
Sanders’ Responsible Estate Tax Act forces millionaires and billionaires to pay their fair share by bolstering one of the most progressive aspects of the tax code: the federal estate tax. The estate tax levies a fee on the transfer of accumulated fortunes, up to 65 percent in Sanders’ bill, and breaks up concentrated wealth in the process.
Critics argue that the estate tax punishes success and unduly burdens family businesses and farms, but facts continue to prove otherwise. Only 20 family farms paid the estate tax in 2013, while almost 80 percent of the tax’s revenue came from the top one percent of income earners.
At a time when the top one tenth of one percent controls about as much wealth as the bottom 90 percent combined, it’s no surprise the American people believe the wealthy need to pay more. According to a recent poll conducted by the New York Times and CBS News, 66 percent of Americans want to see wealth more evenly distributed, and almost 70 percent favor raising taxes on millionaires.
Sanders understands these sentiments. His bill includes provisions to close loopholes that have allowed the wealthy to evade billions in taxes. One loophole, an arcane form of tax evasion known as Grantor Retained Annuity Trusts, or GRATs for short, permits donors to transfer money to their heirs tax-free. The maneuver has cost the Treasury an estimated $100 billion since 2010. Sanders’ legislation would close this and other loopholes that the wealthy have exploited over the years.
Recognizing the need to break up concentrated wealth, a number of the nation’s most successful business leaders have come out in support of the estate tax, from Warren Buffet to Ben Cohen and Jerry Greenfield of Ben & Jerry’s. Historically, the tax has garnered support from both Andrew Mellon and Teddy Roosevelt, and Andrew Carnegie considered it the “wisest” means of taxation.
Sanders’ legislation speaks directly to the needs and wishes of the American people. This Fourth of July, it should be held up and celebrated as a model towards reducing inequality and putting our tax system back on track.
Josh directs the Project on Opportunity and Taxation at the Institute for Policy Studies. Ben is an intern with the project and a junior at Fordham University.