As a first step, Congress may extend the estate tax. There are faster methods, too.
Via Reuters TV/Reuters/File
Before America had state sales taxes or a federal income tax, this sentiment echoed through the halls of Congress: Hit the "bloodsuckers of Wall Street." The federal estate tax was born – in 1913.
In the recent debate on the fate of that tax in the House, the language was usually tamer. The sentiment, though, was often similar: How can the United States tax more substantially the billionaires and multimillionaires of the financial industry, people often blamed for the market crisis and the "great recession"?
Britain is levying a one-time "supertax" on large bonuses for bankers. Other nations may follow. But these moves may not raise much revenue. A steadier, slower way would be to tax the heirs of the very rich with a solid estate tax.
On Dec. 3, the House voted to make permanent this year’s rates – 45 percent on estates over $3.5 million for individuals and $7 million for couples. Now the future of the estate tax lies with the Senate. Its members need to act quickly. Under the 2001 Bush tax cuts the estate tax will disappear entirely for 2010, and then reappear in 2011 at a higher rate – 55 percent for estates of more than $1 million.
But with 46 to 68 millionaires in the Senate (the count hangs on whether one uses minimum or maximum net-worth numbers), will the chamber vote to maintain a tax that could damage its members’ own estates? Because 22 senators own at least $3.5 million and 14 own at least $7 million, should they recuse themselves from a vote that so directly affects their interests? The Center for Responsive Politics calculates the average wealth of US senators in 2008 at $13.9 million.