By Ryan Sweeney
In a Senate Budget Committee hearing recently, Senator Bernie Sanders engaged in a heated exchange with White House Budget Director Mick Mulvaney. Sanders berated Mulvaney for the White House’s proposal to repeal the estate tax while cutting programs for the poor. The exchange received much air time on news networks and social media and Sanders garnered praise from the left as a result.
It was disappointing to see Sanders garner so much praise following the event. The exchange revealed what should be common knowledge at this point: Sanders has no idea what he is talking about. The self-described socialist has a habit of taking random figures out of context and then screaming them until he is literally red in the face while neglecting to explain what the figures actually mean.
For those who may not be familiar with the estate tax, I will explain. The estate tax is a tax on the transfer of an estate from a deceased person. It is also known sometimes as the inheritance tax, or more derisively as the “death tax.” The current rate is set at 40% and applies only to estates valued over $5.5 million.
In this instance, Sanders seized on the claim that repeal of the estate tax would constitute a $52 billion tax cut for the Walton family. PolitiFact rated the statement “Mostly False.” Sanders’ source was apparently a report from the Democrats on the Senate Budget Committee which simply pulled the net worth of a few select people liberals love to hate from Forbes, subtracted 40%, and then declared that to be the amount of the tax break. This is lazy research and a gross oversimplification of the estate tax. As PolitiFact explained, due to numerous deductions and loopholes, calculating the tax bill for an estate is a complicated process and only the tax lawyers and accountants involved with the specific estate could hope to say with any credibility what that bill actually is.
Beyond the simple inaccuracy, Sanders’ affection for the estate tax seems to come solely from the juvenile hostility he holds towards the wealthy, rather than any tangible policy considerations.
The reality is the estate tax is one of the most inefficient taxes on the books. A tax is considered efficient when it can collect an adequate amount of revenue in a reliable manner. Property taxes are considered highly efficient because property is a large, fixed tax base which can be relied on year after year to deliver a solid revenue stream to local governments. The estate tax on the other hand relies on old rich people dying off to raise revenue, which is not something that can be relied on with consistency. In addition, due to numerous loopholes and deductions, and the fact that anyone with an estate over $5.5 million is bound to have a pretty good tax lawyer, the estate tax raises very little revenue. In 2016, the federal government collected only $21 billion in revenue from the estate tax. Total receipts that year were worth $3.268 trillion. You do the math.
Most OECD countries recognize this. Only three countries have higher estate taxes than the U.S., those being Japan, South Korea, and France. Since 2000, eleven countries have repealed their estate tax, including Sanders’s favorite Scandinavian paradises, Sweden and Norway. Finland’s rate is less than half of ours at 19%, while Denmark’s is even lower at 15%.
Furthermore, the Tax Foundation estimates repealing the estate tax would increase the U.S. capital stock by 2.2%, boost GDP by 0.8%, and add 139,000 jobs. This is not important to Sanders however, who sees vilifying the wealthy and demagoguing to his base as a higher priority than economic growth.
The lesson here (and this lesson does not only apply to Sanders) should be that simply because someone is screaming a big number and is red in the face does not mean they know what they are talking about — at all.