Democratic Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have sparked intense debate this month by proposing higher taxes on the rich, with Warren calling for a wealth tax and Ocasio-Cortez proposing a 70% top marginal tax rate.
Senate Republicans — well, they’re moving in the opposite direction.
Three top GOP senators on Monday reintroduced legislation to permanently repeal the federal estate tax. The legislation was put forth by Sen. John Thune of South Dakota, the No. 2 Republican in the Senate, and is being co-sponsored by more than two dozen other Senate Republicans, including Majority Leader Mitch McConnell of Kentucky and Senate Finance Committee Chairman Chuck Grassley of Iowa.
The 2017 GOP tax overhaul already reduced the number of estates subject to the tax by roughly doubling the value of assets that can be excluded from the tax. This year, the new law exempts estates worth less than $11.4 million, meaning that couples filing jointly can pass along up to $22.8 million before facing the tax. In its current form, the estate tax would be paid by only about 1,700 families, according to the Tax Policy Center. That’s down from about 5,500 taxpayers who would have faced the tax under the previous law.
The reduction of the estate tax is set to expire after 2025.
What the American public says: Polling has found tax increases on the wealthy to be popular. A survey earlier this month by The Hill and HarrisX found that 59 percent of registered voters, including 45 percent of Republicans, support increasing the top income tax bracket to 70 percent. A Fox News poll released last week found that 70 percent of voters favor tax increases on families making over $10 million a year and 65 percent favor tax hikes on incomes over $1 million annually. (That poll also found that 51 percent of voters want to spend more on programs such as infrastructure, defense, education and health care).
Those numbers suggest that a full repeal of the estate tax might be about as popular as the polar vortex. “The quest for a tax cut even less popular than the TCJA is now over,” Len Burman of the Tax Policy Center tweeted, referring to the proposed repeal. But as Karlyn Bowman of the right-leaning American Enterprise Institute noted back in 2017, Americans have historically had at least some reservations about the estate tax.
Why it matters: The new GOP bill is unlikely to go anywhere over the next two years, but it signals that the party still prioritizes eliminating what many conservatives call the “death tax.” As Democrats call for increasing taxes on the richest Americans, the GOP legislation also indicates how vast the gulf is between the two parties on the issue. “On the right, death is not a taxable event, and the estate tax represents double taxation and an administrative headache,” Brian Riedl, an economist at the conservative Manhattan Institute think tank, told The Washington Post. “On the left, the estate tax is a vital source of eliminating inequality. It’s a completely different framework.”
More on the Debate Over Taxing the Rich:
- Why Taxing the Rich May Not Save Democracy – Zachary Karabell, Wired
- Soaking the Rich? It Could Backfire for Progressives – Noah Smith, Bloomberg
- Taxing the Rich Is an Idea Whose Time Has Come — and Gone – Stephen Mihm, Bloomberg
- What Is the Purpose of Raising Taxes on the Wealthy? – Nancy LeTourneau, Washington Monthly
- Inside the Warren Vs. Harris Battle Over Tax Progressivity – Howard Gleckman, Tax Policy Center
- Warren’s Push for a Wealth Tax Could Be a Game Changer – Katrina vanden Heuvel, Washington Post
- Elizabeth Warren Does Teddy Roosevelt – Paul Krugman, New York Times
- What Psychology Says About How Envy and Compassion Motivate Tax Preferences – Cato Institute Blog