Impervious Piles of Wealth
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Last week, I was invited to a reception in Boston where I met Bill Gates Sr., father of the richest man in the world and one of the founding members of an organization called Responsible Wealth. This a group of millionaires and billionaires who believe in the biblical adage: To whom much is given, much is required.
Responsible Wealth made headlines on Valentine's Day 2001 when the New York Times published a front-page article about its campaign to oppose the Bush push for wholesale repeal of the estate tax, which he initiated by signing into law the Economic Growth and Tax Relief Reconciliation Act of 2001.
Among other things, the act reduces the feds' claim on estate taxes until the year 2010 when the law calls for the long-time levy to be completely repealed.
Gates was in town to promote a new book, "Wealth and Our Commonwealth," which he co-authored with Chuck Collins, the program director of the Boston-based think tank United for a Fair Economy.
A must-read, the book makes the case for why estate tax repeal is an economically and morally bankrupt proposal, and puts forward some alternative policy recommendations.
As it stands, the estate tax only affects the richest 2 percent of America's fortune makers. So why should the rest of us be concerned? And why did Gates and Collins write an entire book devoted to the analysis of a single provision of the tax code?
Former Federal Reserve Chairman Paul Volcker provides an eloquent explanation in the forward of the book: "From the days of our founding fathers...the concept of equality of opportunity and dispersion of wealth and economic power has been part of the American psyche.
"The inheritance of huge fortunes, far beyond any reasonable need for education, for medical care, and for a comfortable -- even luxurious -- standard of living has never rested easily with that political philosophy."
After the schmooze session at the Community Church on Boylston Street, we walked over to the Boston Public Library where Gates and Collins presented the core ideas of their book to an audience of several hundred.
Disinformation was dispelled. For example, repeal rebels claim the estate tax hurts "family farmers." But Collins pointed out that when curious reporters searched for these alleged victims, not one could be found. In fact, the pro-repeal American Farm Bureau Federation -- the largest farm organization in the country -- couldn't point to a single case of a family farm lost due to the estate tax.
The canard that the estate tax is "double taxation" was also thoroughly debunked by Gates who, when asked about it said, "Well, I've been paying taxes on my house in Seattle every year for the past 43 years."
He went on to insist that society has a moral claim to a portion of the money of the super-rich. The wealthy, he said, have an "implicit obligation" to pay a higher share of taxes, acknowledging that "there's no such thing as a self-made millionaire."
Gates said that it's one thing to argue about what the size of the federal government should be, but the fact remains: "The government is the biggest venture capitalist there is," reminding us that Uncle Sam foots the bill for the essential research upon which the wealthy build their fortunes. For instance, "There would be no Internet without federal government research money."
Revenue from the estate tax today generates about $30 billion, or about 1 percent of federal revenue. But that amount will skyrocket in the coming years because of an unprecedented intergenerational transfer of wealth.
"The estimated size of the intergenerational transfer of wealth between 1998 and 2052 ranges from a low estimate of $40.6 trillion, based on a modest two percent growth rate, to a high estimate of $136.2 trillion, based on a 4 percent growth rate...
"A meaningful estate tax imposed on these wonderfully successful people's wealth...could generate, at an effective tax rate of 30 percent and an exemption of $3 million, $278 billion over the years between now and the demise of the last survivor!"
The rationale for estate tax repeal is that if you give billionaires even more tax breaks, they will invest and create jobs. I thought about that on my way home. Stopped at a long red light in Boston traffic, I picked up "Wealth and Our Commonwealth" and thumbed to page 14.
"One cartoonist illustrated...a politician speaking at a banquet, bragging that his administration had created millions of new jobs. The waiter at the banquet observes, 'Yes I know, I have three of them.'"
My laughter was cut short by a beeping motorist who seemed bothered that I didn't speed off at the split second the light turned green. Maybe he was in a rush to get to one of several jobs he's forced to work in order for his ends to meet -- no doubt, thanks to tax cuts that really only adds to what Gates calls "impervious piles of wealth."
Sean Gonsalves is a Cape Cod Times staff writer and a syndicated columnist. E-mail him at email@example.com.