You know what Sen. Bernie Sanders would love to do? Soak the rich. And what have Democrats been doing lately? Antagonizing Howard Schultz by talking about how to soak the rich. So this week, the senator from Vermont joined the festivities by rolling out his plan to confiscate the wealth of America’s millionaires and billionaires when they die through a massive expansion of the estate tax.
As part of the 2017 tax cut, Republicans doubled the amount of money Americans could leave behind to their heirs before the estate tax would start to bite. Today, the levy only applies to fortunes worth at least $11.8 million, with a top rate of 40 percent. Sanders would lower the minimum back to down to $3.5 million while imposing progressively higher rates that top out a 77 percent for billionaires. (Sanders notes this was the maximum rate from 1941 to 1976). The proposal would impact the wealthiest 0.2 percent of U.S. households, which is why he has called it the “For the 99.8 Percent Act.”
Sanders is not the only Democrat to suggest blowing out the estate tax. Cory Booker proposed bringing back its 2009 parameters to fund his baby bonds proposal, for instance. More generally, Democrats have become newly interested in finding ways to tax the accumulated wealth of the ultra-rich, rather than merely skimming a bit of their income each year. Elizabeth Warren has proposed a tax on households with more than $50 million to their name that would take 2 to 3 percent of their net-worth each year. But in all likelihood, any concerted effort to go after wealth would require multiple taxes in order to close off avoidance opportunities.
Restoring the estate tax seems like an especially timely way to do it. How come? At the risk of being a bit crude, America’s billionaires are getting old. Very old. Forbes’ list of the 400 richest Americans includes, by my count, 128 individuals individuals over the age of 75. Most of these people are probably not going to live much more than a decade—according to research from the Equality of Opportunity Project, America’s one-percenters can expect to keep on keepin’ on roughly until their mid-to-late 80s (technically, that stat applies to individuals at age 40, but you get the idea). We only have a limited amount of time to take a reasonable cut of their money hoard before it gets passed on to their heirs. That, or we’re about to witness at a tidal wave of intergenerational wealth transfer that could leave us with a whole Forbes list worth of Wyatt Kochs. Is that what we want America? Even if you don’t mind the occasional gauche Hawaiian shirt, or the idea of parents handing gigantic brokerage accounts to their kids, or care whether people with vast financial resources at their disposal earned them, research has suggested that inequality driven specifically by inherited wealth may be a drag on the economic growth. (The reasons why aren’t entirely clear, and the researchers arrive at their conclusions through a series of cross-country regressions, which aren’t exactly the world’s greatest research method. But academic inquiry on this subject is surprisingly scarce and we’ve got to take what we’ve got). Pumping up estate taxes soon might not just be necessary for the sake of good taste, basic egalitarian instinct, or our bubbling class resentments. It may be necessary for the good our whole economy.