Magazine article Sojourners Magazine

Why Does the Father of the World's Richest Man Think We Should Tax the Rich? the American Experiment Is Rooted in a Suspicion of Concentrated Wealth and in the Rejection of Aristocracy

Magazine article Sojourners Magazine

Why Does the Father of the World's Richest Man Think We Should Tax the Rich? the American Experiment Is Rooted in a Suspicion of Concentrated Wealth and in the Rejection of Aristocracy

Article excerpt

William Gates Sr.--whose son is Microsoft founder Bill Gates--joins with co-author Chuck Collins to argue that the wealthiest among us have an obligation to pay their fair share.

In the last several years, Congress has debated whether to eliminate the federal estate tax--or "death tax"--our nation's only levy on accumulated wealth. The paltry debate over elimination of the tax has not grappled adequately with the negative consequences of repealing the estate tax.

One hundred years ago, during the first Gilded Age, we had a rigorous debate about the dangers of concentrated wealth in a democracy. The debate over the estate tax goes to the heart of the question of "what kind of country do we want to become" and ethical questions about society's claim upon the accumulated fortunes of the wealthy.

Ten years ago, a number of wealthy families--including the heirs to the Mars and Gallo fortunes--began bankrolling a campaign for wholesale repeal of the tax. Instead of revealing the true beneficiaries of repeal--households in the top 1 percent of wealth holders--they put forward a media campaign representing farmers and small-business and owners as injured parties to the tax. Much of this mythmaking, however, has obscured the dangerous impact of eliminating the tax.

Proponents of repeal argue that the estate tax is un-American, that it punishes success and discourages parents from passing on wealth and businesses to their children. They successfully included elimination of the estate tax in President Bush's Tax Relief Act of 2001, through which the estate tax would gradually be phased out and then repealed for one year in 2010. Now repeal advocates are pressing to permanently eliminate the estate tax.

WHY PRESERVE THE ESTATE TAX? The tax generates substantial revenue to pay for government. These funds are raised from those most able to pay--households in the richest 1 percent. Between now and 2009, the amount of wealth exempted prior to paying the tax will rise to $3.5 million. Based on recent IRS data, that means that only about 6,000 estates a year will pay the tax, with an average estate valued at more than $21 million. Eliminating the revenue from the estate tax will shift the tax burden off those most able to pay onto everyone else or lead to cuts in services for those most in need.

Many states have state-level inheritance or estate taxes that are linked to the federal estate tax. Repeal of the federal estate tax may lead to a severe drop in revenue for states--an estimated $5 billion--at a time when they can ill afford the loss. Almost every state in the country is grappling with severe budget deficits and many are cutting lifeline social programs for low- and middle-income people.

The estate tax serves as a catalyst for charitable giving. Many people give to their religious congregation, community organizations, and other charities regardless of the tax advantages. But evidence suggests the estate tax encourages wealthy households to give even more, particularly households with wealth higher than $20 million. Bequests motivated by the estate tax go toward creation or capitalization of foundations, medical and research organizations, and religious organizations. A U.S. Treasury Department report estimates that charitable giving will drop by $6 billion a year without an estate tax incentive.

The estate tax is part of our country's historic response to excessive inequality. The American experiment is rooted in a suspicion of concentrated wealth and power and in the rejection of aristocracy. The estate tax was established in 1916 as a populist response to the excesses of the Gilded Age. At a time when the gap between the very rich and everyone else is once again at historic levels, it seems un-American to eliminate the one tax that discourages the build-up of dynastic wealth holdings.

SOCIETY HAS AN enormous claim upon the fortunes of the wealthy. …

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