by Mitch Kokai
Senior Political Analyst, John Locke Foundation
… [H]e’s proposing a sweeping program of wealth redistribution, one that would raise estate taxes to their highest level in decades in order to put the money in accounts for children from households that make up to five times the poverty level. (The higher the household income, the lower the yearly deposit.) Booker is touting this idea as a way of boosting saving — but on a national level, it can only reduce saving, since it diminishes the incentive to save.
If you’re rich, the estate tax is a reason to invest in economically unproductive estate planning or to spend the money rather than hand it on. Booker’s 65 percent rate — a significantly higher rate, by the way, than any advanced country levies — would be a much stronger reason to do either than today’s 40 percent rate. (The effective rate would be even higher than 65 percent because of other changes Booker proposes.) Because that rate would apply only to the very largest estates — for married couples, it would kick in at $100 million — it would affect the behavior of a small slice of the population, it is true; but it is the slice that does a disproportionate amount of the country’s saving. A lower rate of national saving will in the long run mean a smaller economy, with lower wages, than we would otherwise have had.