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InsiderOnline Blog: December 2010

Defining Wealthy Down

According to Senator Bernie Sanders, the difference between the Democrats’ estate tax plan with a 55 percent top rate and the Republican/White House estate tax plan with a 35 percent top rate amounts to a difference in principle, and he cites Teddy Roosevelt’s arguments for a progressive estate tax as support for the Democrat plan.

Here’s a reality check, from Kenneth Gould, writing at The American:

The president and Republicans’ proposal is closer to Theodore Roosevelt’s principle than that of the Democrats, since it has a higher exemption and therefore affects only wealthier estates. But it starts the top tax rate at only 172 times average income, while the 1916 structure put the top bracket at more than 3,500 times average income. And it places the top rate at 3.5 times that of the 1916 structure. Further, this proposal does not impose its graduated tax schedule only for the truly large fortunes that Theodore and Franklin Roosevelt stressed.

But the Democrats’ proposal is even farther from the Roosevelt principle. It starts its high tax rate at only 156 times average income, versus the 3,000 times of 1916 or the 38,000 times of Franklin Roosevelt’s pre-WWII policy. And its top rate, while only 58 percent of the peak of 77 percent for Franklin Roosevelt, is 4.5 times the 1916 level. Taken as a whole, the Democrats’ proposed structure is far more regressive than either the 1916 structure or that of Franklin Roosevelt. And, like the president and the Republicans’ proposal, the Democrats’ proposal also does not impose its graduated tax schedule only on truly large fortunes.

Posted on 12/20/10 05:58 PM by Alex Adrianson

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