Last week Hillary Clinton announced a proposal to hike the estate tax. The Sensible Estate Tax Act could accomplish that. GovTrack.us Follow Oct 3, 2016 · 4 min read

Few issues highlight the economic differences between Hillary Clinton and Donald Trump like the estate tax. An estate is everything a person owns at their time of death. Under current law, any estate for an individual worth at least $5.45 million — or for a couple worth at least $10.9 million — gets taxed at a maximum 40 percent rate before it is allowed to be bequeathed to children or other heirs.

Hillary Clinton is calling for that tax to be broadened to encompass more estates and for tax rates to be raised. And a bill in Congress could accomplish a similar goal.

Clinton’s plan and what the bill does

Clinton has proposed lowering the threshold at which the estate tax kicks in from the current $5.45 million down to $3.5 million. She also wants to increase the federal estate tax rate from a top rate of 40 percent to 50 percent for an individual estate worth at least $10 million, 55 percent for one worth at least $55 million, and 65 percent for one worth at least $500 million. It would be the highest federal estate tax rate since 1981.

The Sensible Estate Tax Act of 2016, H.R. 4996, is the Democrats’ main estate tax bill in this Congress, similar though not identical to Clinton’s plan. Introduced by Rep. Sander Levin (D-MI9), the bill would lower the threshold to $3.5 million for an individual or $7 million for a couple, just as Clinton’s would. It also increases the tax rate to 45 percent across all levels — an increase, to be sure, though less than the 65 percent Clinton proposes. (Clinton’s top rate was likely influenced by her goal of winning over skeptical Bernie Sanders supporters; Sanders proposed a 65 percent top rate on the campaign trail.) This bill would return to the rates of 2009.

Under either plan — Levin’s 45 percent rate or Clinton’s 65 percent (or Rep. Jim McDermott (D-WA7)’s 55 percent plan — see below) — the rate would still be lower than it was for most of the 1930’s through 1970’s.

What supporters say

Supporters argue that raising the estate tax and broadening the scope of those affected ensures that the top income bracket pay their fair share when many in the middle class and lower class are hurting. The Joint Commission on Taxation estimated it could bring in $161 billion in revenue over the next decade.

“Over the past decade, fewer and fewer estates have been required to pay the estate tax, further exacerbating the growing issue of wealth inequality in our nation. This disturbing trend is yet another stark example of how broken and unfair our tax code is, which is why we have to take action,” House lead sponsor Levin said in a press release. “Requiring more of the wealthiest estates to pay the estate tax and raising the estate tax rate are common sense steps we can take toward making our tax code fairer.”

What opponents say

Most Republicans don’t want to raise or even maintain the status quo on the estate tax — or, as many of them prefer to call it, the “death tax.” They want to eliminate it. Opponents argue that the bill is punishing success.

The Republican-led House passed legislation last year to repeal the estate tax through the Death Tax Repeal Act, H.R. 1105. Only three Republicans voted against and only seven Democrats voted in favor. The bill has yet to receive a vote in the Senate.

Trump has couched his opposition to it in populist terms: “We are going to get rid of the regulations that are driving the farmers out of business. We are going to get rid of the estate taxes that are making the farmers sell their farms. I understand it.” (Democrats counter that the narrative of the estate tax hitting middle class farmers and families is false, as the current estate tax threshold only applies to the top 0.2 percent of households.)

Odds of passage

The bill has attracted eight cosponsors, all Democrats, and has not yet received a vote in the House Ways and Means Committee. Given that the committee — and indeed, the entire House — voted to repeal the estate tax entirely just a year ago, don’t count on this passing this year. 2017, though, could be another story.

Another Democratic bill called the Sensible Estate Tax Act of 2015, H.R. 1544 — identically titled except for the year — was introduced last March by Rep. Jim McDermott (D-WA7). That bill would have lowered the threshold for triggering the tax, thus expanding the number of estates that qualified under the tax, to include all those worth at least $1 million. Any estates worth $1-$10 million would have been taxed at 41 percent, increasing to 55 percent for any estate worth more than $10 million, and indexing those numbers to inflation. The legislation attracted no cosponsors and never received a vote in the House Ways and Means Committee.

This article was written by GovTrack Insider staff writer Jesse Rifkin