Noblesse Oblige

Bill Gates Sr. comes to town to spread the "billionaire backlash" against repealing the estate tax.



The irony of having his efforts, name and considerable clout used in the fight to restore the estate tax isn't lost on Bill Gates Sr., father to the wealthiest man on Earth, Microsoft founder Bill Gates.

"I suppose 'ironic' is a word that's applicable to the situation," says Gates, a retired business attorney and co-chair of the Bill and Melinda Gates Foundation, the world's largest philanthropic foundation. "But I think another word that might be used is 'reasonable.'"

Gates explains: "What the estate tax does is smother the creation of giant pools of wealth among the few, most fortunate families in our country. We are a healthier and happier place with the estate tax, with less disparity of wealth and fortunes among everyone."

His multi-billionaire son, Gates adds, is in complete agreement. "My son feels the same way that I do," Gates says. "He has a very strong sense that his financial success has as much to do with the society in which he lives as anything he did personally."

The estate tax was a much-debated topic even before President George W. Bush and Congress created more than $1.3 trillion in tax reductions in 2001. A repeal of the tax of assets gained through inheritance was passed by Congress in 2000, but later vetoed by President Bill Clinton. Bush, who refers to it as the "death tax," worked to repeal the tax in the 2001 cuts, but a stipulation in the legislative process only allows the estate tax to be gradually reduced until 2010. That year, the estate tax will be totally eliminated, but after that year, it will return to 2001 levels after 2010, barring Congressional action on the issue before then.

Prior to 2001, inheritances were exempt up to $675,000. As it stands now, taxes are levied on estates above $1 million for individuals and $2 million for couples at rates that range between 18 percent and 55 percent, depending on the size of the estate. The percentage taxed is reduced annually under the current plan, and by 2009, the exemption levels will have increased to $3.5 million for individuals and $7 million for a couple.

Yet, the glaring fact that, after 2010, the issue returns to square one keeps the estate tax a high priority in Congress. The House of Representatives has twice passed legislation creating a permanent repeal, most recently this past summer, but the Senate has yet to act.

Co-author of the House bill for the permanent estate tax repeal is Rep. David Vitter (R-Metairie). "I'm strongly in favor of a full repeal (of the estate tax)," says Vitter, who during his tenure in the state legislature successfully authored a 1995 bill that gradually eliminated Louisiana's estate tax. The repeal takes full effect next year.

"The number one thing is that this tax is fundamentally unfair," says Vitter. "It's double taxation, in that it taxes assets that have been built up over a lifetime, during which people paid income taxes on these assets every step of the way. Number two, it's economically counter-productive. It's especially hard on farms and small businesses; it makes it difficult to pass down even a business from one generation to the next.

"When Dad dies, families have to sell the farm or business just to pay the tax man," Vitter says.

While Vitter says the ultimate goal is to make the entire tax package of 2001 permanent, the estate tax could be considered on its own. Vitter and most Capitol Hill observers predict action will be taken on the issue before the 2004 elections.

Gates became involved in the estate tax issue as part of what was dubbed "the billionaire backlash," a petition signed by roughly 1,300 wealthy, influential citizens in support of the estate tax. The group was organized through the Boston-based group Responsible Wealth, self-described as "a national network of businesspeople, investors and affluent Americans who are concerned about deepening economic inequality and are working for widespread prosperity."

Gates says reform of the estate tax is necessary, stating that the exemption level should be kept at $3.5 million,. He says that would affect less than 1 percent of the population, because the $675,000 level "affects way too many families." Gates also notes that special legislation could be enacted to help farmers and owners of small businesses. Yet, he believes the tax is nothing less than vital to our democracy.

"People at the top in this country have way more personal wealth than has historically been true," Gates says. "When the Fortune 400 list started in the early 1980s, the average net worth on that list was $400 million. Twenty years later, it's $2.4 billion. Think of the implications of that. That's extreme personal wealth, and taxes of that are a significant revenue source. That's why this is a proper tax."

"We are a healthier and happier place with the - estate tax," says Bill Gates Sr.
  • "We are a healthier and happier place with the estate tax," says Bill Gates Sr.

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