Clinton’s, Sanders’, and Trump’s Estate Tax Reform Proposals

June 14, 2016

Clinton’s, Sanders’, and Trump’s Estate Tax Reform Proposals

Report reveals how each plan would impact the economy and revenue, and why

Washington, DC (6/14/2016)—The estate tax has received a lot of attention in the last year, with multiple presidential candidates proposing ideas on how to reform the current structure. Bernie Sanders is seeking to increase the progressivity of the tax, Hillary Clinton has proposed returning the rates to 2009 levels, and Donald Trump has argued for eliminating the tax entirely.

Today, the nonpartisan Tax Foundation has released a report that provides an overview of the estate tax’s current structure, details how each of the candidate’s proposals would impact the economy and federal revenues, and explains the lessons that tax-reforming policymakers in Congress can learn from the analyses.

“The candidates have proposed policies that span the spectrum of producing economic growth and increasing federal revenues. Our analysis provides an important lesson for policymakers about the tradeoffs they have to make when reforming the tax code,” said Tax Foundation Economist Alan Cole. “The estate tax raises a small amount of revenue, but its effect on the economy is relatively large. As Congress pushes forward with tax reform, it’s crucial that they understand this kind of relationship between how much revenue and how much economic growth they stand to gain or lose from each policy.”

The report’s key findings include:

  • The estate tax's marginal rate greatly exceeds its average rate, which makes its disincentives to save relatively strong for the small amount of revenue collected.
  • The estate tax's base includes most capital goods, encouraging the reallocation of economic production from capital goods to consumption goods, reducing productivity.
  • Hillary Clinton proposed reducing the estate tax's exemption and slightly increasing its rate, from 40 percent to 45 percent, which would increase the distortionary incentives of the tax, reducing economic output, but also increase the revenues from the tax.
  • Bernie Sanders proposed reducing the estate tax's exemption and substantially increasing rates, to a graduated system with a top rate of 65 percent. This would substantially increase the distortionary incentives of the tax, greatly reducing economic output.
  • Donald Trump proposed eliminating the estate tax, which would remove distortionary incentives from the tax code and increase economic output.

Full report: Modeling the Estate Tax Proposals of 2016

The Tax Foundation’s analyses of these proposals can also be found in a new book, Options for Reforming America’s Tax Code, which examines the impact of nearly 100 commonly proposed tax reform options (press release).

Media Contact:
Richard Borean
Communications Director, Tax Foundation

The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.