Sen. Chris Van Hollen, D-Md., introduced a bill Tuesday that would increase the estate tax to shore up Social Security's two trust funds.
The bill, the Strengthen Social Security by Taxing Dynastic Wealth Act, would return the estate tax to 2009 levels, including raising the top estate and gift tax rate to 45% from 40%. The federal estate tax applies to the transfer of property at death, while the gift tax applies to transfers made while a person is living, according to the Urban-Brookings Tax Policy Center. The tax applies only to the portion of the estate's value that exceeds an exemption level. The 2017 Tax Cuts and Jobs Act doubled the estate tax exemption to $11.2 million for singles and $22.4 million for married couples, but only for 2018 through 2025, according to the Tax Policy Center.
The bill would also combine Social Security's two trust funds — one that covers retirees and their families and one that covers disabled workers and their families — and deposit all revenues raised from the bill into the combined fund.
"I can think of no better way to use that revenue than to strengthen Social Security," Mr. Van Hollen said in a statement. "This program has been under attack in recent years, and we must fight to protect it. With this new legislation, we can ensure all hardworking men and women have financial security in their later years — not just the wealthy few."
The latest Social Security trustees' annual report from April projected the two trust funds will be out of money by 2035. On the retirement side, if no changes are made by 2034, Social Security revenue will cover only 77% of benefits promised, the report said.
In April, Mr. Van Hollen, along with Sen. Richard Blumenthal, D-Conn., introduced the Social Security 2100 Act. That bill, first introduced in the House by Rep. John B. Larson, D-Conn., chairman of the Ways and Means Subcommittee on Social Security, aims to shore up Social Security while implementing an across-the-board benefit increase for current and new beneficiaries and improving cost-of-living adjustments, among other provisions. The added benefits would be paid for by gradually increasing the contribution rate beginning in 2020 so that by 2043, workers and employers each would pay 7.4% toward Social Security, instead of the 6.2% today, according to Mr. Larson's website. The bill would also tax payroll income above $400,000 at a 12.4% rate.