Former Starbucks Prez Says: Don't Gut Estate Tax

By Howard Behar, AlterNet. Posted August 3, 2006.

The estate tax is still on the agenda within the halls of the U.S. Congress.

In our nation's capital, after Congress failed by several votes in June to abolish the federal estate tax, the Senate will soon consider a bill to gut the law and dramatically reduce the tax.

This change would be a mistake. Our federal inheritance taxes raise substantial revenue exclusively from those most able to pay -- the heirs and heiresses of multimillionaires and billionaires. The federal tax will raise over $1 trillion in the coming 15 years.

Paying an estate tax is one of the ways that those of us who have accumulated wealth in our society re-fertilize the garden of opportunity that we have benefited from. As an individual and former executive at Starbucks, I know the hundreds of ways our society's investments have helped my company and me. None of us exists on an island -- and no wealth can be created without a society that provides a fertile ground of opportunity.

I don't sympathize with the wealthy families that have spent millions to abolish the estate tax. Passing on unlimited inheritances is not only bad for our children but also unhealthy for a democracy to tolerate concentrations of hereditary wealth and power. It is more important to give our kids educational opportunities and encourage them to make their own way in the world of work. I have a moral responsibility to all the children in our society, not just my own, to ensure access to quality education.

The advocates of repeal talk about how the tax threatens family farms and small businesses. A responsible reform of the federal estate tax will assist closely held family businesses and farms that might be squeezed by the tax. It is irresponsible, however, to let a few hundred households drive a debate over our state and national tax systems.

In the coming week, the U.S. Senate will likely vote on an estate tax proposal that will effectively gut the federal estate tax. This proposal will probably raise the amount of wealth exempted from $4 million for a couple to something like $10 million, and significantly cut the rate from its current level of 46 percent. This kind of proposal would cost hundreds of billions of dollars over the decade following repeal, and would closely approximate the negative budgetary effects of full repeal.

National anti-tax groups are exerting enormous pressure on U.S. senators who oppose gutting the tax. Such tactics have no place in a dignified and honest dialogue about an important policy matter. Their proposed law change includes pairing an estate tax cut with popular tax breaks that expired last year. Tying the extension of these unrelated tax cuts to the estate tax is but a form of political pressure. Hopefully we will be able to see through the subterfuge to understand the vital issues at stake.

The key question is, why now? With an $8.5 trillion federal debt, it seems an odd time to give the super-haves another tax break. How would we replace $774 billion in lost revenue? What will this do to our investments in equality of opportunity?

When we eliminate or dramatically reduce the most progressive tax in our state and federal systems, we effectively shift the tax burden from the wealthy to others. The estate tax should be responsibly reformed, but not gutted. We should preserve the fundamental framework of the tax -- and the substantial revenue it generates.

I agree with Bill Gates, Sr., that the estate tax is a "gratitude" or "grateful heirs" tax. Financially fortunate individuals like myself have a responsibility to pay back society in many forms, including charitable giving. But we also have an obligation to pay an inheritance tax. When the revenue is linked to important services like education and health care, the matter is crystal clear.

Howard Behar is the former president of Starbucks International. These are his own personal views and do not represent those of Starbucks.

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