TAX NEWS - 2010

Vermont Tax: Sanders proposes new estate tax

BRATTLEBORO -- Sen. Bernie Sanders, I-Vt., wants the federal government to take 65 percent of a billionaire's estate when he or she dies.

The estate tax legislation proposed on Thursday by Sanders, with Sens. Tom Harkin, D-Iowa, Sheldon Whitehouse, D-R.I., and Sherrod Brown, D-Ohio, includes a billionaire's surtax of 10 percent on top of a 55 percent rate on the value of estates above $500 million per spouse or $1 billion per couple.

According to Forbes Magazine, there are only 403 billionaires in the United States with a collective net worth of $1.3 trillion.

"Clearly, the heirs to these multi-billion fortunes should be paying a higher estate tax rate than others," stated Sanders in a press release announcing the legislation.

Sanders' legislation -- the Responsible Estate Tax Act -- would bring in at least $264 billion over a decade to help lower the national debt.


Levels of tax

Estates valued at $50 million or more would be taxed at 55 percent and those between $10 million and $50 million would be taxed at 50 percent.

Estates valued between $3.5 million and $10 million would be taxed at 45 percent and those valued below $3.5 million would go untaxed.

"This legislation is an effort to address a record-breaking deficit which was caused in part by huge tax breaks to the wealthiest people in the country," Sanders said. "When we have a $13 trillion debt and a very large deficit, it is imperative that we do everything we can to address the crisis in a fair way."

Asking millionaires and billionaires who saw a reduction in their tax burden during the Bush years to start paying their fair share of taxes is one way of addressing the problem, said Sanders.

The legislation would affect only the top three-tenths of 1 percent of American families, said Sanders.

He said, "99.7 percent of families in this country would not pay one nickel of increased estate taxes."

Over the last 20 years, said Sanders, the United States has seen a growing gap between the very rich and everyone else.

"The top 1 percent in this country now have more wealth than the bottom 90 percent," he said. "This is the most unequal distribution of wealth of any major country."

While costs have been rising each year, the median family income of middle class families declined more than $2,000 in the Bush years, said Sanders.

There is a deeper issue involved in the estate tax besides the unequal distribution of wealth, he said, which is characterized by the very rich and huge corporations doing whatever they can to avoid paying taxes.

"They want all the advantages of being Americans but don't want to own up to the responsibility of citizenship," said Sanders.

One building in the Cayman Islands "houses" 18,000 corporations, he said, its only purpose to help them avoid paying taxes in the United States.

Sanders has made deficit reduction a priority, proposing legislation in the last month alone to repeal more than $35 billion in oil company tax breaks and commissioning Government Accountability Office studies spotlighting more than $20 billion in Pentagon waste on unneeded spare parts.

"I get a little bit tired of being lectured by Republicans for the deficit we are in," Sanders stated in his statement, noting that Bush-era Republicans funded but failed to pay for wars in Iraq and Afghanistan; tax breaks for the wealthy; a prescription drug bill written by the pharmaceutical industry; and a $700 billion Wall Street bailout.

The legislation would also close gift tax loopholes, generating at least $23.7 billion in revenue over 10 years. The gift tax is imposed on transfers of property during a person's life to prevent people from avoiding the estate tax.

In addition, the legislation would protect family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes and would increase the maximum exclusion for conservation easements to $2 million.

Sanders added that the estate tax is not an idea developed by him or his co-sponsors, but rather was introduced by President Theodore Roosevelt 100 years ago. "This is a good Republican idea," he said.