WASHINGTON - New legislation from Sen. Patty Murray targets a legal loophole that lets the wealthiest Americans avoid paying taxes on money they pass down to their heirs, at a time when wealth inequality is at its highest point in decades and the federal budget deficit is nearly $2 trillion a year.
The Washington senator will introduce the bill on Monday, joining a growing number of Democratic lawmakers with proposals to generate revenue to fund their priorities a year after Republicans passed sweeping legislation that cut taxes across the board but disproportionately benefited the very rich. In an interview, Murray told The Spokesman-Review her bill is about fairness.
"What we have right now is a loophole in the estate tax," she said, "that is being used by the ultra-wealthy to keep from paying their fair share, at a time when we need revenue. We need to make sure everybody is participating, whether that revenue is used for deficit reduction or for healthcare or for childcare."
The Fair Trusts for Fiscal Responsibility Act would create a new tax withholding system that would apply only to assets worth at least $50 million held in certain kinds of trusts, with annual tax brackets starting at 1% and ratcheting up to 3% for assets above $1 billion. The bill exempts charitable trusts and others that aren't commonly used in estate planning, and it includes limits to ensure that only those who use trusts to avoid paying the existing estate tax would be subject to the new withholding.
Murray's office estimates the bill could generate $675 billion over 10 years, enough to pay for universal childcare and restore the health insurance subsidies that Republicans allowed to expire at the end of 2025. But Republicans in Congress have consistently opposed efforts to tax wealth, and advocates of taxing the richest Americans say proposals like Murray's are likely to face both technical and legal challenges.
According to the latest data from the Federal Reserve, the richest 1% of Americans hold nearly a third of all wealth in the country, with 14.5% of all wealth held by just the top 0.1%. In contrast, the richest 1% held about a quarter of all wealth and the top 0.1% held 9% at the end of 2002, a year after Republicans in Congress began a series of reforms that have decreased the share of Americans subject to the tax from about 2% to less than 0.1% today.
After the latest of those reforms, in the One Big Beautiful Bill Act that President Donald Trump signed into law in July, only individuals with more than $15 million in assets and married couples with over $30 million are subject to the estate tax. More than 99.9% of Americans don't have enough wealth to be subject to the estate tax, according to the nonpartisan Congressional Research Service.
"If people knew that only the super-rich paid the estate tax, I think we'd be having a different conversation in this country," said David Kass, executive director of Americans for Tax Fairness, a group that supports Murray's bill.
"The purpose of the estate tax is obviously to make sure that the super-rich don't get so rich that they take over everything, and that some of that money is used to invest in schools and healthcare and all the things that make life affordable for the rest of us."
Murray's bill targets the fewer than 0.1% of estates that are supposed to pay the tax but avoid it by putting their assets in certain kinds of trusts, including one that Congress created in 1990 in an attempt to close a different estate tax loophole. Nike founder Phil Knight, for instance, used such trusts to avoid taxes on nearly $10 billion in assets he will pass down to his heirs, according to reporting by Bloomberg Businessweek in 2021.
Bob Lord, a retired tax lawyer who now serves as senior vice president for tax policy at the advocacy group Patriotic Millionaires, originally identified those transactions by Knight and helped Murray's team craft the new bill. In an interview, Lord said the legislation is a realistic response to the reality that the richest Americans can largely dodge the estate tax.
"Right now, we have a very weak wealth transfer tax system," he said. "And it's weak not because the taxes are never paid as much as it is because they're deferred."
Cerulli Associates, a wealth management research company, estimates that $124 trillion in wealth will be transferred by 2048, with most of those assets coming from the wealthiest 2% of households.
Polling conducted in March by the Searchlight Institute and Tavern Research found wide majorities of Americans think low- and middle-income people pay too much in taxes while high-income people and corporations pay too little. In reality, the federal income tax is already quite progressive, with the top 20% of earners paying more than 70% of income tax while the bottom 50% of earners paid just 3.3%, according to an April analysis of 2023 IRS data by the National Taxpayers Union Federation.
But while a high-income doctor or lawyer may pay the highest federal tax rate of 37% - which applies to individuals who earned over $626,351 in 2025 - the wealthiest Americans often collect small salaries and choose to be compensated in stock and other assets that are subject to much lower tax rates. The capital gains tax rate for 2025 is no higher than 15% for most individuals, and the complex federal tax code provides ample opportunities for the wealthiest Americans to reduce their tax liability.
Reporting by ProPublica in 2021 found that some of the richest people in the United States pay just a fraction of what the average American pays each year in taxes, relative to their net worth. From 2014 to 2018, Amazon founder Jeff Bezos paid an effective tax rate of less than 1%, while Elon Musk - who could soon become the world's first trillionaire - paid an effective rate of just over 3% in that period.
Opponents of taxing wealth argue that such policies will discourage saving and investment. Patrick Fleenor, a tax policy fellow at Americans for Prosperity, a group founded by the billionaire Koch brothers that advocates for lower taxes, said that even if a tax is levied on a narrow group of people, it affects others indirectly.
"Do people really want to discourage people from saving money and, in fact, encouraging conspicuous consumption?" he said. "Because that's what's going to happen if you just basically told everyone, 'At the end of your life, the government's going to take 100% of what you've saved.' "
Fleenor, who didn't review Murray's bill and was speaking generally, said while no one would support a tax that would put their employer out of business, it's impossible to know how many businesses aren't created because of excessive taxation.
But even some tax policy experts who support efforts to tax the wealthiest Americans warn that Murray's approach could run into technical and legal hurdles.
Ben Ritz, a tax expert at the center-left Progressive Policy Institute, said assessing the value of assets - including unrealized gains - is much harder than simply taxing capital gains or the value of an estate.
"The current estate tax is Swiss cheese - Congress has dramatically increased the exemptions so that hardly anybody pays it," he said. "Figuring out what the right basis is in a given year for a recurring annual levy, that's a complicated and messy area of tax policy, and that's why we've generally preferred to look at taxing these assets at the points of sale or inheritance rather than these recurring annual levies."
Andrew Lautz, director of tax policy at the Bipartisan Policy Center, said the Supreme Court's Republican-appointed majority signaled in a 2024 ruling that it is likely to oppose taxing assets that haven't yet been sold or inherited.
"There's this general principle that Congress and administrations have tried to avoid significant taxes on unrealized gains up to this point, and anytime you introduce that into the system - and this is just one of several comprehensive proposals that would do so in a significant way - you are potentially inviting legal challenges that, especially with this Supreme Court makeup, might be struck down or deemed unconstitutional."