A new Social Security shell game

Congressional Democrats and those seeking their party’s presidential nomination are proposing all manner of tax increases in the run-up to the 2020 election. From multi-trillion dollar proposals like Medicare For All and the Green New Deal, to smaller examples of picking our pockets like the airline passenger tax, liberals give the impression that they simply are not content unless they are contriving new ways and reasons for taking money away from the people who earn it. 

The latest example comes courtesy of Sen. Chris Van Hollen (D-Md.) who wants to increase the estate tax. Just two years after Congress and the Trump administration provided tax relief by lowering the estate tax, Van Hollen wants to repeal those tax cuts. His bill takes a page from the Clinton-era playbook of former Rep. Barney Frank (D-Mass.), who floated a plan in 1999 to keep estate taxes high in order to help fund prescription drugs in Medicare. Today, Van Hollen says he wants to raise the estate tax to “strengthen” Social Security by depositing the proceeds of this tax hike into the Social Security Trust Fund. In truth, it’s a new twist on an old shell game. 

Setting aside the moral questions associated with raising the tax burden on grieving families after the death of a loved one, or forcing farmers, ranchers and small business owners to sell their family legacy in order to pay this death tax, Van Hollen is banking on public ignorance to sell his proposal in Congress. 

Raising the estate tax under Van Hollen’s plan will not shore up the Social Security Trust Fund. What it will do is provide a little more money for Congress to spend on things other than Social Security benefits. Few Americans understand that the Social Security Trust Fund (frankly, a misnomer) has essentially transformed into a congressional piggy bank and has exactly zero money in it. As the financial website Motley Fool puts it, the Social Security Trust Fund has, “not a red cent in cash.” That’s because Congress has already spent nearly $3 trillion from the trust fund and replaced that money with IOUs from the federal government. 

This is not a new development. The late Charles Krauthammer brought this to light nearly a decade ago. He observed that as early as 2000, the Office of Management and Budget reported that Social Security Trust Fund deposits, “Do not consist of real economic assets that can be drawn down in the future to fund benefits,” and described the fund’s balance as a “book keeping device.”  Van Hollen’s proposal will not strengthen Social Security; it will give Congress access to more money by further burdening survivors who have just buried a family member. 

Another problem with this newest tax scheme is that it’s not cheap to tax widows, orphans and other family members in mourning. According to a 2016 report by the non-partisan Tax Foundation, “The estate and gift tax, which will only collect approximately $20 billion in federal revenues this year, has a compliance cost of $19.6 billion.” If somebody tried to invent a way of getting a lower return on investment for a tax hike, they would be hard pressed to do so. 

Van Hollen casts his proposal in ‘soak-the-rich’ language, promoting his legislation as the “Strengthen Social Security by Taxing Dynastic Wealth Act.” What Van Hollen calls dynastic wealth is, in reality, generations of families working the land, mending the fences, stocking the shelves, herding the livestock, and teaching the next generation to continue doing this profitably. While there are exemptions on how much of an estate can be taxed, there is no fairness in punishing hardworking families who, by dint of labor, sweat and smarts made a nice living for themselves, a way of life for their families and a secure legacy for their descendants. 

When Congress in 2017 reduced the tax burden faced by families who have just lost a loved one, the United States had the 4th highest estate tax in the industrialized world. Returning to the days of higher estate taxes is wrong and counter productive. 

Jim Martin is the founder and chairman of 60 Plus, representing five million seniors.