In December 2017, while it was still pending, I wrote a post about the competing versions of the GOP tax law with regard to federal estate tax. The House bill would have eliminated it entirely. The Senate version, which ultimately passed, doubled the threshold for taxation to $11.2 million for individuals and $22.4 million for married couples (as of 2020, the estate tax threshold is now at $11.58 million). At the risk of getting too political, I made my pitch as to why an estate tax is important in terms of equity and democracy.
Why Millennials are “Screwed”
Continuing that risk, I have since learned a new reason to support an estate tax, also having to do with equity and democracy. In an article on Huffington Post, “Millennials Are Screwed,” Michael Hobbes compares the financial situation of millennials—those born between 1982 and 2002—with that of their parents—the Baby Boomers born between 1946 and 1964. He talks at great length about how the economy has changed over the past several decades in ways that make it harder for most workers to make a living. One hallmark of the change in the economy is that many companies outsource their jobs to contractors who don’t pay the same wages and benefits as the companies do for direct hire employees. And, of course, the “gig” economy —Uber, AirBnB and Lyft—provides no salary or benefits. And health care and health insurance costs are much higher now than they were when Baby Boomers were young. And what about renting an apartment or buying a house close to where you work, especially in places like Boston that have a strong economy and good jobs?
One interesting statistic: Baby Boomers had to work 306 hours at the then minimum wage to pay tuition at a four-year public university. Millennials have to work 4,459 hours on average to get the same degree.
But, perhaps what’s most disturbing is how the changes in the economy have exacerbated racial inequities. By 2020, the median white household is expected to have 86 times the wealth of the median black household!
In a radio interview I heard, Hobbes was asked whether a lot of the financial difficulties millennials are facing will be ameliorated by the coming transfer of wealth from their parents. According to a study by the accounting firm Accenture, Baby Boomers ultimately will pass on $30 trillion to their heirs. Hobbes pointed out that this will continue to concentrate wealth and economic opportunity for white Americans since whites constitute 81% of the Baby Boomer generation and 56% of the millennial generation. Assuming an even distribution of wealth, this would mean four fifths of wealth would then pass to a bit more than half the population, but matters are worse since white Baby Boomers own a lot more than their proportionate share of the national wealth.
The Estate Tax as a Piece of the Solution
Hobbes describes a number of structural changes that have made life more difficult for millennials than for their parents and he suggests a number of policy initiatives we could take to improve the situation. He does not mention estate taxes. But taxing the estates of those with wealth and using the money to pay for programs that help all citizens should be part of any program to reduce the financial and racial inequities in our society. It’s the least we Baby Boomers can do.