House Gives $334 Billion Tax Break to 25 Richest Americans
by Scott Klinger, 4/24/2015
The House of Representatives gave 25 of the nation’s billionaires a $334 billion tax break on April 16 when it voted 240-179 to repeal the estate tax. The nearly 100-year old tax raises $27 billion a year for the U.S. government. Of the 2,662,000 Americans who died in 2013, just 3,700 of their estates paid any estate tax – one out of every 700 estates.
Of the nation’s 25 wealthiest billionaires, Bill Gates, Warren Buffett, George Soros, and Carl Icahn have all campaigned publicly to keep a strong estate tax. In contrast, the Mars family has been a big funder of efforts to repeal the tax.
The repeal would allow the nation’s wealthiest citizens to pass on all of their enormous wealth to their heirs with no taxes paid. The chart below outlines how much the 25 richest Americans would owe if their entire estates were subject to a 40 percent tax rate – after the first $5.4 million in wealth was excluded.
(in $ Billions)
|Estate Tax @ 40%
(In $ Billions)
|Warren Buffett||Berkshire Hathaway||67.0||26.8|
|Charles Koch||Inherited -- Koch Industries||42.0||16.8|
|David Koch||Inherited -- Koch Industries||42.0||16.8|
|Christy Walton||Inherited -- Walmart||38.0||15.2|
|Jim Walton||Inherited -- Walmart||36.0||14.4|
|Michael Bloomberg||Bloomberg plc||35.0||14.0|
|Alice Walton||Inherited -- Walmart||34.9||14.0|
|S Robson Walton||Inherited -- Walmart||34.8||13.9|
|Sheldon Adelson||Las Vegas Sands||32.0||12.8|
|Carl Icahn||Icahn Enterprises (private equity)||26.0||10.4|
|George Soros||Soros Asset Management||24.0||9.6|
|Forrest Mars Jr||Inherited - Mars Candy||22.0||8.8|
|Jacqueline Mars||Inherited - Mars Candy||22.0||8.8|
|John Mars||Inherited - Mars Candy||22.0||8.8|
|Len Blavanik||Access Industries (private equity)||21.5||8.6|
|Michael Dell||Dell Computer||17.7||7.1|
|Laurene Powell Jobs||Inherited -- Apple||16.6||6.6|
Source: Forbes 400
What would you do with $334 billion?
- We could expand opportunities for the next generation.
- For the next nine years, we could give every new U.S. baby $1,000 at birth and $500 more each year until he or she turns 18, creating a pool of funds to help pay for college or vocational training, to start a business, or to buy a first home.
- Or we could cut college debt for young adults.
- We could cut the nation’s student debt by a third, providing $25,000 of individual debt relief for more than 13 million Americans.
- Or we could simply repair a lot of schools, bridges, and sewer systems.
- We could repair or replace all of the nation’s deficient school buildings, bringing them up to 21st century standards so that all of our children have the opportunity to succeed ($270 billion). There’d be enough left over to repair or replace almost all of our structurally deficient bridges ($76 billion).
- We could fix our leaking wastewater and sewer systems, ending dangerous outflows of sewage into lakes, rivers, and oceans ($298 billion), with enough left over to repair or replace 4,000 U.S. dams that are at risk of failure ($20 billion).
Repealing the estate tax destroys a powerful charitable incentive.
Bill Gates, Warren Buffet, and George Soros all have large foundations that are expected to receive a large share of their estates when they die. If they hold to these plans, they will pay far less in estate taxes than shown in the chart above. Bequests to charities are fully deductible from estate taxes and reduce the overall amount of tax owed. Because of this, charitable giving is one of the most common estate planning strategies. Last year, estates contributed more than $27 billion to universities, hospitals, cultural institutions, and other community nonprofits. Eliminating the estate tax means that at least some of this money will probably be redirected to family members or friends.
Rather than repealing the estate tax, we should strengthen it.
The House repeal vote is only one threat facing our nation’s most progressive tax. The wealthy also avoid taxes through loopholes and tax shelters that highly paid trusts and estates consultants and lawyers have devised to allow families to shield even more than the $10.8 million that estates are currently allowed.
“Never in the history of plutocracy has so much been given away to so few who need it so little.”
-Washington Post columnist Dana Milbank
Billionaires like Sheldon Adelson have used a special trust known as the grantor retained annuity trust (GRAT) to shield nearly $8 billion of assets, saving nearly $3 billion in federal estate taxes, according to an analysis by Bloomberg journalist Zach Mider. Ironically, the GRAT was adopted to prevent another tax dodging technique known as the Grantor Retained Income Trust (GRIT). The GRAT loophole has cost the U.S. Treasury an estimated $100 billion since 2000.Tax dodging through GRAT and other loopholes, coupled with a dramatic increase in exemptions and lower tax rates on millionaires and billionaires as a result of the Bush tax cuts of 2003, resulted in the estate tax collecting just half the revenue in 2014 that it collected in 2000 (inflation adjusted).
Almost all the gains from growth and productivity over the past 30 years were taken by the wealthiest 1 percent. But instead of requiring them to pay into the system from which they so richly benefitted, we’ve allowed them to channel their great wealth into campaign finance gifts. These gifts allow them to curry favor with politicians who will cut their taxes and then tell middle America that they have to pay more for basic services or go without.
Who is Congress working for?
Have a look at the voting record for the House bill (H.R. 1105). If your representative voted in favor of estate tax repeal, ask why he or she is voting for the interests of the wealthiest 0.2 percent of Americans instead of the rest of us.
When you write or call, you might also want to pass along this assessment penned by Washington Post columnist Dana Milbank: “Never in the history of plutocracy has so much been given away to so few who need it so little.”