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Financial Planning > Tax Planning > Tax Reform

Sen. Bernie Sanders Introduces Estate Tax Bill

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What You Need to Know

  • The For the 99.5% Act reduces the estate tax exemption to $3.5 million per individual and $7 million per couple
  • The bill adds higher tax brackets for larger estates.
  • Sanders also introduced Thursday a bill to raise the corporate tax to 35% and reduce offshoring of profits.

Sen. Bernie Sanders, I-Vt., released Thursday the For the 99.5% Act, legislation that would restore the estate tax exemptions to the 2009 thresholds of $3.5 million per individual and $7 million per married couple from the current exemptions of $11.7 million and $23.4 million.

In a shift, larger estates would be subject to higher tax rates. The current 40% tax rate would be raised to 45%. Taxable estates greater than $10 million would be taxed at 50%, amounts greater than $50 million at 55%, and amounts greater than $1 billion would be taxed at 65%, according to the Joint Committee on Taxation.

The same rates would apply for gift taxes, for which the threshold would be lowered to $1 million.

“Introduction of this legislation is a big step forward to significantly strengthening the estate tax,” Frank Clemente, executive director of Americans for Tax Fairness, said Thursday in a statement.

During a Senate Budget Committee hearing Thursday, titled “Ending a Rigged Tax Code: The Need to Make the Wealthiest People and Largest Corporations Pay Their Fair Share of Taxes,” Sanders said that his bill would “demand that the families of the millionaire class not only not get a tax break but start paying their fair share of taxes.”

Sanders said that he’d also be introducing Thursday the Corporate Offshore Tax Dodging Prevention Act, “legislation that would prevent corporations from shifting their profits offshore to avoid paying U.S. taxes and would restore the top corporate rate to 35%, where it was before [Donald] Trump became president.”

Sens.  John Thune, R-S.D., and John Kennedy, R-La., introduced legislation in early March to repeal the estate tax.

Clemente noted that the tax plan released by President Joe Biden during his campaign “also tracked the 2009 estate tax levels that are the base” of Sanders’ bill, but due to the higher tax brackets for larger estates, his group expects the measure to raise about twice as much revenue as the Biden plan.

Andy Friedman, founder and principal of The Washington Update, and a former tax attorney, told ThinkAdvisor Thursday in and email that Biden’s plan “would retain the 40% estate tax rate currently in place. The Sanders bill would increase the rate significantly, topping out at a 65% rate on estates over $1 billion.”

Said Friedman: “We don’t yet know Biden’s final estate tax proposal, much less what changes Congress might make to it. My very early guess is that, if Congress does pass tax legislation, the estate tax rate rate will remain at 40% and the exclusion will be in the range of $5.5M-$6.5M, that is, somewhere between the exclusion in place before the [Tax Cuts and Jobs Act] TCJA and approximately half of the current exclusion. But there is a long way to go.”

In a letter to lawmakers Thursday, 51 groups backed the Sanders bill.

Since 2009, “the amount of an estate’s assets exempt from the tax has risen from $3.5 million for an individual ($7 million for a married couple) to $11.7 million ($23.4 million for a married couple) today,” the groups pointed out.

Former President Donald Trump’s 2017 tax overhaul doubled the amount of an estate exempt from taxation and cut the tax rate from 45% to 40%, which the groups said “reduced federal revenue by billions of dollars.”

The Tax Policy Center estimates that in 2022 just 0.59% of estates would be taxable, according to the groups’ letter.

The Joint Committee on Taxation found that the Sanders bill would raise $430 billion over 10 years.

Under current law, the estate and gift taxes are unified with a tax rate of 40% and a $10 million inflation-indexed exemption, the JCT explained.

The For the 99.5% Act, JCT continued, reduces the estate tax exemption to $3.5 million and the gift tax exemption to $1 million. These amounts are not indexed for inflation.


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