Tax code must stop coddling the rich
Tax code must stop coddling the rich
By: Sen. Bernie Sanders
August 3, 2010 04:32 AM EDT
One: The United States is in the middle of the worst economic downturn since the 1930s. More than 16 percent of working-age Americans are unemployed or underemployed. Long-term unemployment is the highest on record. Millions of people have lost their homes, savings and pensions.
Two: The United States today has a $13 trillion national debt and a record-breaking deficit. Last year alone, the federal government spent more than $186 billion just paying interest on the public debt.
Three: The United States has the most unequal distribution of wealth and income of any major country. Today, the top 1 percent of wage earners earn more income than the bottom 50 percent; and the top 1 percent has more wealth than the bottom 90 percent.
During the Bush administration, the middle class saw a $2,200 drop in median family income, down to slightly more than $50,000. Meanwhile, the 400 wealthiest families’ income more than doubled, while their effective income tax rates were slashed almost in half during the past 15 years. The wealthiest 400 Americans have accumulated $1.27 trillion in wealth, while the highest-paid 400 Americans had an average income of $345 million in 2007. As a result of Bush tax policy, they pay an effective income tax rate of 16.6 percent, the lowest on record.
Four: This year, a number of billionaires died and, for the first time since 1916, their families will pay no inheritance tax. This occurred as a result of President George W. Bush’s $1.35 trillion tax break, passed in 2001.
In other words, while this country has a devastatingly high unemployment rate, a huge debt, massive unmet needs and a widening gap between the very richest people and everyone else, we are providing enormous tax breaks to millionaire and billionaire families. This is insane!
Under the Bush tax law, inheritance taxes eliminated this year would be restored in 2011 to the pre-2001 rates — unless Congress acts. Needless to say, in response, a united Republican Party and a few Democrats are working hard to protect the interests of the wealthy few.
Sen. Jim DeMint (R-S.C.) recently offered an amendment that would permanently eliminate the estate tax. If it becomes law, huge tax breaks would go solely to the 0.3 percent of American families who are millionaires and billionaires. The other 99.7 percent of Americans — the middle class and working families — would not gain one penny in tax relief.
The DeMint amendment was supported by all but three Republicans, as well as two Democrats.
Over 10 years, the elimination of the estate tax would result in a $1 trillion increase in the deficit. In other words, while our Republican friends are moaning about record-breaking deficits and voted against extending unemployment benefits for 2.5 million Americans, they are prepared to give huge tax breaks to the nation’s richest people and drive up the national debt. I detect a bit of hypocrisy.
Some Republicans argue that eliminating the estate tax would save family farms and small businesses. Not true, though this argument has been tried before.
“President Bush, the American Farm Bureau Federation and the National Cattlemen’s Beef Association have asserted that the estate tax is destroying family farms,” The New York Times reported in 2005. “None, however, have cited a case of a farm lost to estate taxes.”
For small businesses, the nonpartisan Tax Policy Center has estimated that only 80 small businesses and farm estates in the country paid an estate tax in 2009 — 0.003 percent of all estates. In other words, virtually no small business or farm pays estate taxes, and, because of tax-code protections, their effective tax rate is only 14 percent. In addition, the relatively few who inherit small businesses that pay an estate tax have 14 years to pay it off.
President Theodore Roosevelt, a good Republican, called for a graduated inheritance tax on wealthy estates. In 1916, Congress passed that law. Here is what Roosevelt said in 1910.
“The absence of effective state, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. ... The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is passed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective — a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.”
I agree with Roosevelt. And that is what the Responsible Estate Tax Act that I have introduced with Democratic Sens. Tom Harkin of Iowa), Sheldon Whitehouse of Rhode Isand, Al Franken of Minnesota and Sherrod Brown of Ohio would do. Specifically, it would exempt the first $3.5 million of an inheritance from federal estate tax and would raise an estimated $318 billion over 10 years.
This legislation would not only help us lower the national debt — with the $318 billion raised over 10 years — but it could do something even more important. In the midst of these enormously difficult times, it makes clear that we are one country and that all Americans have a shared responsibility.
Sen. Bernie Sanders (I-Vt.) serves on the Senate Budget Committee.