French economist Thomas Piketty made a sensation with his bestselling book about inequality, Capital In The Twenty-First Century. Piketty’s big solution is for nations around the world to adopt a “global wealth tax” to reverse the dizzying wealth inequalities that have emerged in the last three decades.
In the U.S., however, the most immediate action we can take to prevent the growth of a wealth aristocracy is to defend and expand our estate tax –our nation’s only levy on inherited wealth. Only multi-millionaires and billionaires pay the tax, fewer than one in 500 households.
The bad news is the estate tax is under assault. Republicans in the U.S. House have 221 co-sponsors on legislation to repeal the estate tax. And the superrich are hiring attorneys to construct complex trust mechanisms to circumvent the tax. In 2013, Casino mogul Sheldon Adelson used a system of trusts to funnel $8 billion in wealth to his heirs, dodging about $2.8 billion in estate taxes that would be due after his death.
Sometimes the best defense is a good offense. Today, Senator Bernie Sanders is introducing this “Responsible Estate Tax Act” which would strengthen the estate tax and plug up some of the worst “billionaire loopholes.”
“Unless we reduce skyrocketing wealth and income inequality,” Senator Sanders wrote in the Huffington Post, “unless we end the ability of the super-rich to buy elections, the United States will be well on its way toward becoming an oligarchic form of society where almost all power rests with the billionaire class.”
An important dimension of the Responsible Estate Tax Act is that it would institute a progressive rate structure –the greater the wealth, the higher the rate. Estates under $10 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. Such a tax would truly put a brake on the concentration of wealth
The Sanders bill makes another important improvement – it would close a “billionaire’s loophole” known as the Grantor Retained Annuity Trust (GRAT), which allows estates of super-wealthy to avoid the estate tax. Some billionaires using the GRAT “billionaire loophole” include Facebook’s Mark Zuckerberg, Goldman Sachs CEO Lloyd Blankfein, Dish Networks’ Charles Ergen, fashion designer Ralph Lauren, and multiple Walton family members.
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. Senator Sanders bill –the Responsible Estate Tax Act –is a handhold on this path, one of the policies we would need to institute to eliminate the grip of the super wealthy on our society.