WASHINGTON—Sen. Bernie Sanders, I-Vt., has introduced a bill that would re-establish the threshold of the estate tax at $3.5 million and set the top taxation rate as high as 77 percent.
S. 309, which Sen. Sanders introduced Jan. 31, is also called the "For the 99.8 Percent Tax." would establish a tax of 45 percent of the value of estates valued between $3.5 million and $10 million.
The 77-percent tax rate would be assessed only on estates worth more than $1 billion, according to S. 309's provisions. The rate would be 50 percent for estates assessed between $10 million and $50 million, and 55 percent 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.
While the Tire Industry Association favors a graduated estate tax, the tax levels in S. 309 are far too harsh, TIA said in the Feb. 25 issue of its Legislative Update.
A 20-percent tax rate on the first $5 million to $10 million of an estate, with a 40-percent tax rate on anything above that, would be much fairer, the association said.
"We contend that this type of lower estate tax rate on the smallest taxable estates would assist in job creation and increased profitability for small businesses," TIA said.
S. 309 would limit estate planning techniques that help small business owners to keep their businesses in the family, such as gifts of interest in a family business to younger family members, according to TIA.
S. 309 also would be inherently unfair to small businesses, even more so than current estate tax law, TIA said.
For example, a small business owner who died this year would owe nothing on an estate of $11.4 million, it said. If that same owner died in 2026, under current law he would owe $2.24 million.
If S. 309 became law, the tax on $11.4 million would be about $3.63 million, TIA said.
S. 309 was introduced one week after S. 215, the Death Tax Repeal Act of 2019, which would repeal estate taxes outright. 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.
TIA has long sought repeal of the estate tax. It is a member of the Family Business Coalition, a group formed specifically to oppose the estate tax.
TIA was one of more than 150 associations, also including the Auto Care Association and the American Trucking Associations, which signed a Feb. 19 Family Business Coalition letter supporting S. 215.
"The death tax is unfair," the letter said. "It makes no sense to require grieving families to pay a confiscatory tax on their loved one's nest egg. The negative effects of the estate tax make permanent repeal the only solution for family businesses and farms.
Although neither bill has a strong chance of passage, both serve as reminders to small business owners to take steps now to preserve their estates for their heirs, according to TIA.
"Even though many tax practitioners believe that their clients will have until at least the end of 2025 to take steps to preserve the higher exemption amount, this may not be the case if the country elects a Democratic majority in the Senate and House and a Democrat for president in 2020," it said.