I am not now, nor have I ever been a socialist, let alone a communist; I normally declare this as patently self-evident.
Yet now that I ruminate, there was that one moment in 1979…
My mother said: if you aren’t a communist in your 20s and a conservative in your 40s, you’re not normal, honey. When the hash-up that makes up the civilized world dawns on young minds, it’s natural to look for utopian solutions. As you wise up with time, you see the idealists are fantasists, or worse, tyrants behind smiling masks, and your voting patterns turn bourgeois. Take my mom’s word, that’s a good thing.
In my teenage youth, I was attracted to Prince Peter Kropotkin’s serene brand of anarchism, socialism and studying bees – a confession that shouldn’t disqualify me from holding high office or a platinum credit card.
There was, I’m afraid, a brief, ill-advised journey into Trotskyism. Leon hated Stalin, so that made him OK, I guessed for a blinkered moment. That, and I liked the local Trots’ newspaper, The Daily Worker, because it covered labor news and Central America, the red-hot dot of the day; plus, it was free. And then, there was Linda.
Whenever I strolled through Dupont Circle, DC’s hub for outsiders, I’d try to get the latest Worker from Linda. During my recruiting session at the town’s reddest pizza joint in pre-gentrification Adams Morgan, Linda allowed her left hand to stray onto my thigh, encouraged me to join, make glorious revolution together.
Linda, it turned out, was dating Trotsky’s American stand-in, the local party’s charismatic leader, Rick. Tall, bearded, with a fearsome jump shot. He worked for Amtrak – a bona fide proletarian! Try as I might, I could not split their faction or defend his spin move. I should have switched majors to finance right then.
Listening to the party’s lectures smartened me up: a frosting of freedom was hiding a cake of iron brutality. Setting weak honey traps with your comeliest comrade is dirty class struggle, to boot – unliberated, I would have called it. I downed tools and returned to the capitalist camp, and here I am. What can I say? I simply don’t like purges.
Hence, as a rule, I don’t much stomach socialists. Yet Senator Bernie Sanders, a pinkish-red from Vermont, is an agreeable figure – without a violent bolshie bone in his frame. Bernie’s teamed up with party colleague, Senator Sheldon Whitehouse, to sponsor a bill, the “For the 99.5% Act.” Let the class struggle softly commence.
In tandem, Senator Chris Van Hollen, D-Maryland, is co-sponsoring the STEP Act, which I’ve written about regularly. Both bills, if enacted, would radically alter the tax code, upsetting the estate planning efforts of decades and the digestion of America’s wealthiest citizens.
Whether these bills can get passed is an open question, and I hope you’ve been following the story, clinched in close counsel with your estate planning team. If not, the slow wheels of Congress are your ally, at least for a few more sun-filled summer days. But please, get on your horses.
Let’s take a gander at where the bills, if hammered out, might swing their sickles.
A lot of Washington legislation is cosmetic; Senator Sanders – not prone to violence, but no puller of punches – is proposing radical surgery. His bill would cut the estate tax exemption from today’s $11.7 million to $3.5 million per individual, indexed to inflation. The maximum federal estate tax rate is now 40%. The 99.5% Act would raise it to 45% for estates worth north of $3.5 million; 50% for estates of $10 million or more; 65% for everything over $1 billion.
Today, if you die with an estate worth just under the exemption, no taxes would be owed. If Sanders’s bill passes, the tax hit would be nearly $5 million, all else equal, assuming certain loopholes (like the estate passing to a spouse or a charity) aren’t filled.
Tax-free gifting would face new limits. The lifetime gift exemption would be limited to $1 million, quite a cut from today’s $11.7 million. Lifetime gifting strategies, a longtime cornerstone of honest tax avoidance for major estates, would go the way of the Romanovs. Gift-giving rules would be changed, thereby limiting the traditional estate planning roles of trusts, irrevocable life insurance trusts in particular.
I’ve written before on how Van Hollen’s STEP Act would eliminate the step-up in basis of inheritable assets at death. This could be costly enough, but if the bill becomes law, gain recognition would be required on property transferred via lifetime gifts, in trust or directly, and some forms of trust would need to pay regular capital gains taxes. The wealthy might need to think twice about dying.
Other traditional rules would change at passage, like those currently supporting estate-planning trusts, such as GRATS. Traditional strategies that work wonderfully today could wind up on history’s ash heap.
Since before the election, I’ve been warning it was time to get ready for tectonic changes to traditional estate planning. The good news is this: estate planners say customers have responded. Planners report being swamped with consultations and their own work to prepare alternative scenarios to protect client estates, should the bills pass.
What are the chances – could the 99.5% and STEP Acts sail through Congress? There’s a strong Republican contingent Senate-side that might muster the votes to block passage, but Congress is about horse trading and thoughts of electoral consequences.
If I had to wager, I’d say ‘da’ to Senator Sanders – higher taxes on rich folk don’t raise that much ire – and ‘nyet’ to Van Hollen. Congress tried to axe the step-up in basis in the 1970s, and failed miserably. If that ghost drags its chains down the cold Senate hallways, members might balk. I wouldn’t go Vegas, though – my bets are hardly a lock.
We know one thing for sure: while Congress dallies in caucus and committee, there’s still time for ordinary citizens – if the point-five percenters don’t mind this plebeian appellation – to ready themselves for change.