There’s a lot of talk about changing the estate tax exemption to something approaching previous levels, as well as increasing taxes on the wealthiest Americans. Will any of it happen, or is it campaign rhetoric?
Vermont Senator Bernie Sanders, who has recently announced that he’s running for president in 2020, has introduced Senate Bill 309, called "For the 99.8 Percent Tax." The legislation would establish a tax of 45% of the value of estates valued between $3.5 million and $10 million and set the top taxation rate as high as 77 percent.
Rubber & Plastics News reported in “Bernie Sanders introduces bill to re-establish estate tax threshold” that the 77% tax rate would be assessed only on estates worth more than $1 billion, according to the bill. The rate would be 50% for estates assessed between $10 million and $50 million, and 55% for estates between $50 million and $1 billion.
"At a time of massive wealth and income inequality, when the three richest Americans own more wealth than 160 million Americans, it is literally beyond belief that the Republican leadership wants to provide hundreds of billions of dollars in tax breaks to the top 0.2 percent," Sanders said in a statement accompanying the introduction of S. 309.
"Our bill does what the American people want, by substantially increasing the estate tax on the wealthiest families in this country and substantially reducing wealth inequality," he said.
Since 2017, the estate tax exemption has been $11.4 million for individuals and $22.8 million for couples. However, that rate is scheduled to expire at the end of 2025.
Sanders’ bill seeks to limit estate planning techniques that help small business owners keep their businesses in the family, such as gifts of interest in a family business to younger family members, says opponents.
The bill would also be inherently unfair to small businesses, even more so than current estate tax law, one association said.
Senate Bill 309 was introduced after the Death Tax Repeal Act of 2019 was introduced. That bill would totally repeal estate taxes. Senate Majority Leader Mitch McConnell (R-Ky.), Senate Majority Whip John Thune (R-S.D.), and Senate Finance Committee Chairman Chuck Grassley (R-Iowa) were the co-sponsors, joined by 26 other Senate Republicans.
The chances of either bill being passed into law is yet to be seen, but they both serve as reminders that nothing in tax laws are forever. Estate plans need to be updated when the tax laws change, and that includes any estate plans that have not been updated, since the 2017 tax reform bill became law.
Reference: Rubber & Plastics News (February 25, 2019) “Bernie Sanders introduces bill to re-establish estate tax threshold”