In recent weeks President Trump rolled out his big tax reform plan, and it’s about as bad as what we expected. The plan includes eliminating the federal estate tax, a massive cut exclusively targeting the wealthiest households in this country. Thanks to a career on Wall Street, I am a member of this high net worth group that could be impacted by the estate tax. I’m here to say to Mr. Trump, no thanks.
At a time when thousands of families are struggling to recover from Hurricane Maria and other disasters, the idea that we as a country would choose to give a massive handout to the wealthy is not just absurd. It’s morally repugnant.
While the Trump tax plan is a long, complex series of changes to the tax code, the elimination of the federal estate tax ranks high among the most egregious ideas.
The federal estate tax was established about a hundred years ago with two basic ideas in mind: to generate revenue from those most able to afford to contribute to the public good and to put a check on the growing concentration of wealth. Those two goals remain as relevant today as ever. What’s changed is the power structure of our government.
The 20 wealthiest Americans, a group small enough to fit in a Gulfstream G-6 jet, owns more wealth today than the bottom half of the country. In fact, the top one percent owns a greater share of the nation’s wealth than anytime since the last Gilded Age of the 1920s. And if we could account for the wealth hiding in offshore tax shelters and “family offices” inequality is likely at its greatest point ever.
This extreme concentration of wealth has transformed our political system into a representative government for the wealthy, by the wealthy. For evidence, remember back to the first half of the 2016 presidential election, the period during which just 158 people gave half of all political donations. The growing impact of big money on our elections is well documented. Less understood is what big money interests want in exchange for their campaign contributions, but make no mistake that tax cuts for themselves are at the top of the list.
For further evidence, consider the cabinet assembled by President Trump, the folks in charge of putting his agenda in action. This group, who together own more wealth than 100 million Americans combined, is the wealthiest presidential cabinet in history. This immense wealth insulates them from concern over the basic issues facing ordinary Americans.
I have a bit of insight as to how folks in this economic strata think. What I often hear from wealthy friends are stories about deservedness. “I work hard, and I deserve what I got. Others coulda, shoulda, woulda worked harder.” This iind of thinking, a canard we’ve all heard before, does have a kernel of truth. A lot of rich people had to miss their kids’ sports games, spend long hours toiling at their desks, or take immense risk to get where they are. That is true.
It’s also true that immense fortunes are not created without significant help from society at large. The public schools that educate our children and our employees, the public roads and bridges that enable us to get around, the judicial system that protects our property, and so on. In other words, nobody truly did it alone.
And that is the basic idea underlying why the estate tax matters. It’s not telling wealthy people they need to hand over all their assets when they die. It’s asking those who’ve done phenomenally well to pay it forward. Contribute back to the system that enabled you to generate your fortune.
Consider the tradeoff.
The revenue generated by the estate tax, more than a quarter of a trillion dollars over ten years, is more than the government spends on the Women, Infant, and Children (WIC) program that provides nutrition assistance to over half of all infants born in the United States and Head Start, which provides early childhood education to nearly a million children, combined.
Who needs the money more, millionaires like me or low-income infants?
President Trump, as well as his colleagues in Congress, have tried to scare the American people by dubbing the federal estate tax the “death tax.” This denomination is wrong.
A better moniker is the “inheritance tax” since that is really what we’re talking about: a tax on the inheritance of immense fortunes. No one is arguing that parents should not be enabled and encouraged to care for their children. That is why there is an exemption to the tax of $11 million, more than enough and more than anyone could rightfully spend in a lifetime. Fewer than 2 out of every thousand households are subject to the tax, that’s less than a quarter of a percent.
What’s at stake is whether the children of today’s upper crust should be enabled to hoard resources at the expense of children born to less fortunate circumstances. Were every child to be able to succeed in this country regardless of their family circumstances, perhaps concern over concentrating wealth would be unfounded. That is unfortunately not the case.
One out of five children in the United States lives in poverty, a figure that should be heartbreaking to everyone. The United States is the wealthiest country in the world, yet the way we care for those born to low-income families is atrocious.
Social mobility, the ability for children to do better financially than their parents, has been on steady decline for decades. A recent study showed that children born in 1940 had a 90 percent chance of earning a higher income than their parents. Kids born in 1980 had just a 50/50 shot.
The estate tax is a program that works to counteract that trend. By taxing only the assets of those at the very top, and investing that revenue in expanding the opportunity of the rest of the country, we could halt the rise of growing inequality.
It’s not too late for Mr. Trump to reverse course. As a businessman who has generated a significant fortune, he perhaps more than anyone in this country has benefited from the public social, economic, and physical infrastructure made possible by tax revenue. He could come forward with groups like the Patriotic Millionaires, of which I am a proud member, and say enough is enough. I’m not optimistic he will, but I remain hopeful.