The Bernie Sanders Estate Tax Plan

Bernie Sanders is heading up the proposals regarding estate taxes, and his proposals are deviating to some extent from what President Biden has campaigned on.

Joe Biden’s plan says that the estate tax exemption, which is currently $11.7 million as a single person, or $23.4 million as a married couple, will be reverted back to its 2009 levels.

Anything above and beyond those limits would be taxed at a rate of 40% and as high as 45%. Bernie Sanders’ proposal begins at 45% and goes up as the amount being passed on increases.

When Bernie Sanders ran for president he proposed a maximum estate tax of 77% at the highest tax bracket but has since toned it down. He is targeting the top .5% of all Americans with this tax and has promised that 99.5% of the American people will not see their taxes go up under the plan.

The wealthy already pay a tremendous amount of taxes. The 657 billionaires that are in America will end up owing $2.7 trillion in estate tax under the current tax law, and that money has already been accounted for. Bernie Sanders’ proposal would generate an additional $430 billion in revenue and would be earmarked for additional proposals, not to pay down the existing debt.

This is essentially rearranging the deck chairs on the Titanic. It doesn’t change the overall trajectory of the US and does nothing to shore up the programs that are driving all of the debt on the government’s balance sheet.

It’s not about what your estate is worth now, it’s about what your estate is worth when you die. You may not have an estate that would be taxed now, but you need to project out what your estate could be worth in the future.

Another question is what the estate tax exemption will be at this point. When a country is going insolvent, it looks at quarters to raise revenue to keep itself solvent and that could be the estate tax again in the future.

There are ways to mitigate the risk of estate taxes but it requires a long runway and careful planning. It involves shifting money, gifting money, and even loaning money into a trust. The specter of a much lower estate tax exemption means we are going to have to start addressing ways to mitigate tax rate risk when we have 20 to 30 years of runway to be able to position into the right types of accounts.