The increasing concentration of U.S. wealth in the hands of a relative few has gotten much attention among the Democratic presidential candidates. Small wonder. The wealthiest three families now have as much ($248.5 billion) as the bottom half of all Americans ($245 billion). You don’t have to be a card-carrying socialist to question the wisdom of this concentration of wealth. Unfortunately, some of the possible fixes, like Sen. Elizabeth Warren’s outright tax on the assets of the super rich (a $2.75 trillion, 10-year initiative) may strike some Americans as too extreme, or at least too difficult to accomplish.
Well, Maryland’s own U.S. Sen. Chris Van Hollen has devised a more modest and straightforward approach to preserving a republic that won’t be wholly dominated by the offspring of the Buffets, Gateses or Bezoses and their ilk, and it deserves more attention than it has received since its unveiling last month. His aptly-named plan, the Strengthen Social Security by Taxing Dynastic Wealth Act, would return the estate tax and gift tax to 2009 levels (bumping it from 40% to 45%) while lowering the exemption to $3.5 million (or $7 million for married couples). The new revenue would then be be deposited entirely into the Social Security trust fund to help cover retirement, death and disability claims for many years to come.
In a recent meeting with The Sun’s editorial board, Senator Van Hollen noted that the Social Security half of his proposal was no accident but an attempt to broaden support for raising the estate tax which, despite being maligned as a “death tax” by Republicans, has been part of the U.S. tax code for a century (with a brief interruption in 2010). It is paid by fewer than 2% of heirs who come into a financial windfall. And the idea of dedicating the estate tax to Social Security? That was promoted more than a decade ago by none other than the late Robert M. Ball, perhaps the nation’s leading Social Security expert of the 20th century. And since Mr. Ball’s death in 2008, trust fund finances have only gotten shakier with reserves expected to be depleted by 2034.
There are two major criticisms to have emerged from the Van Hollen bill that deserve consideration. The first is that it doesn’t fully bridge the revenue versus benefits gap in Social Security finances. That’s absolutely true. As the senator acknowledges, it only covers about one-fifth the shortfall, but that doesn’t mean it can’t be part of a solution. As it happens, Senator Van Hollen is co-sponsor of a bill with that broader sweep, the Social Security 2100 Act, that raises the cap on Social Security taxes along with other steps to wipe out the imbalance. The other complaint is that certain families get hit too hard by the estate tax, the group most often cited being family farmers with high-valued land but not necessarily high corresponding cash flow to cover taxes. But this appears to be more legend than fact given how so few estates are even subject to the federal tax (nationwide, the number of such estates that include farm assets is well short of 1,000 each year) — not to mention provisions in tax laws that go easy on farm inheritance, including giving qualifying heirs up to 15 years to settle the tax bill.
Is the proposal perfect? Probably not. The affluent can always find tax avoidance loopholes that aren’t available to the rest of us, but again, that’s not a good reason to give up on tax fairness. Admittedly, the senator probably can’t convince President Donald Trump or most Senate Republicans to get behind such a measure, but the 2020 election could lead to some early retirements. After that, a return to 2009 estate tax rates might look a whole lot more do-able.