"Tax me, please," say some wealthy Americans

Tax Me, Please

Originally posted in The Best Revenge blog, Forbes.com, Oct. 6, 2010

Warren Buffett - Image via Wikipedia

It’s not just billionaires like Warren Buffett and Bill Gates who say that there should be an estate tax, but just plain old rich folks are speaking out too.

More than 2,000 wealthy Americans who have paid or expect to owe estate taxes have signed a call to preserve the estate tax that was put out by United for a Fair Economy’s Responsible Wealth project. The signers include professors, farmers, small business owners, and lawyers, says Lee Farris, the estate tax policy coordinator for UFE. Some signers have a few million dollars, others tens of millions, but they are united in the words of the call: “We believe that permanent repeal of the estate tax would be bad for our democracy, our economy, and our society.”

The signers of the Responsible Wealth estate tax call are not just outliers, and some are billionaires. They include Forbes 400 members David E. Shaw, Julian Robertson, Jr., George Soros, John Sperling, and Ted Turner. All six children of David Rockefeller, the oldest Forbes 400 member, have signed too.

For more about how billionaires are duking it out over taxes, check out the story, Billionaire Tax Battle, that Janet Novack and I co-wrote in the October 25th issue of Forbes.

A consequence of the Bush tax cuts, the estate tax has lapsed for 2010, and it’s set to come back on Jan. 1, 2011, with a $1 million per person exemption and a top rate of 55%. In 2009, the exemption was $3.5 million per person and the top rate was 45%.

The Responsible Wealth groupies want to see an estate tax reinstated at 2009 levels, or with an even lower exemption and higher top rate. It’s unclear whether Congress will come to a decision on the estate tax in the lame duck session following the elections.

For the Responsible Wealth folks, the estate tax is only one tax fairness fight. They advocate progressive taxation at the state level. In what they see as their most urgent business recently, they have been calling on members of Congress with local business people in tow, arguing that the Bush tax cuts shouldn’t get extended.

I chatted with 82-year-old Edward Anderson, a retired managing partner of Tweedy Brown, who lives in San Diego and pegs his wealth in the low 8 figures. He remembers when the top federal income tax rate was 90%. “Now we’re told the world will come to an end [if taxes go up to 40%],” he says. Anderson is in favor of letting the Bush tax cuts expire (the top income tax rate would increase from 35% to 39.6%). And he has signed the Responsible Wealth call to preserve the estate tax, although an estate tax would mean less for his two sons and five grandkids at his death.

Anderson’s message to his peers is this: “It’s an amazing thing when people say, ‘You support the estate tax! Won’t that affect you?’ and the answer is ‘Yes and Yes.’ I don’t understand where people’s heads are. There’s a moral obligation of returning your wealth to society.”

To read the “call” (and sign it if you’re so inclined), click here.

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Billionaires Duke It Out Over Taxes

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How Billionaires Are Fighting Over Taxes
By Janet Novack & Ashlea Ebeling
This column appeared on Forbes.com, Oct. 7, 2010; printed Oct. 25, 2010

Has there ever been a time when so many Forbes 400 members have been involved in so many tax fights--on both sides? And not just in Washington, D.C., where epic battles rage over the future of the federal estate tax, income tax rates for the rich and whether the earnings of private equity and hedge fund managers should be taxed at 15% or 35%.

In Washington State, for example, Microsoft Chief Executive Steve Ballmer and Amazon founder Jeff Bezos have given $100,000 each to defeat ballot initiative 1098, which would slap a 5% tax on income over $400,000 per couple and a 9% levy on income over $1 million. On the other side is the nation's richest man, Microsoft cofounder Bill Gates--not surprising, since his dad is promoting the new tax, which would fund education, health care and other tax cuts. Gates Sr., 84, has given $500,000 to the 1098 campaign and even filmed a comic "soak the rich" ad for it, which ends with him dropped into a dunk tank.

Gates Sr. readily concedes he's in the minority among the highly affluent. "It's quite natural for people who are well-to-do to resist paying more taxes. In fact, it's quite natural for every person, everywhere, of whatever means, to resist paying more taxes," he says. "The interesting side," he adds, "is the number of people who are well-to-do who feel that this is something that should happen and that taxation should be progressive." (Washington State now relies on real estate and sales taxes, which hit the less wealthy harder.)

In California, too, The Forbes 400 vote is split. Rich lister and former eBay chief Meg Whitman is running for governor on a platform that includes killing the state's capital gains tax, now as high as 10.55%. That could save a bundle for those of her rich list backers who live in-state, including Scott Cook, Craig McCaw, Charles Munger, A. Jerrold Perenchio, Thomas Siebel and Jerry Yang. Yet California's richest man, Oracle Chief Larry Ellison, backs Democrat Jerry Brown, who supports the tax.

Then there's the epic battle over the future of the estate tax, which (thanks to the Bush tax cuts) is defunct for 2010 but comes roaring back in 2011. Some rich listers, including Charles and David Koch and the Mars family, have long bankrolled lobbyists and/or organizations advocating an end to the "death" tax.

Meanwhile, the list of rich folks openly supporting the tax has grown. Warren Buffett told Congress that a progressive estate tax is needed to keep the nation from moving "toward a plutocracy." Hedge fund billionaire Julian Robertson recently opined that the fairest way to get more deficit-closing revenue is "to tax the least deserving recipients of wealth, which are the inheritors." He and rich listers David Shaw, George Soros, John Sperling and Ted Turner have signed a "Responsible Wealth" project statement calling for the tax to be preserved. So have the six children of David Rockefeller, the oldest member of the 400. "If there weren't estate taxes, we might be in a position to inherit a great deal more, and I don't think any of us wishes that was the case," says daughter Neva Rockefeller Goodwin, a Tufts economist. "I recognize the danger of fortunes piling up and creating huge concentrations of wealth,'' she adds.  [emphasis & links added]

Splits among the rich on taxing the rich aren't new. "Some rich folks have always advocated positions against their own economic interests,'' says Clint Stretch, managing principal for tax policy at Deloitte Tax. In an 1889 essay Andrew Carnegie argued estate taxes are needed to prevent spoiled heirs and to put wealth to use for the common good.

Still, Gates Sr. says, the redistributionists (though a small minority) are more organized and seem more numerous than when the current estate tax debate got rolling in the mid-1990s. He notes, too, the recent campaign by his son and Warren Buffett to persuade other billionaires to pledge half their wealth to charity. "That's brand-new, to have a halfway-organized effort,'' he adds.

Then, too, tax battles are center stage these days, raising the profiles of participants and the temperature of the rhetoric on both sides. In August Blackstone Group Chairman Stephen Schwarzman had to issue an apology for comparing the Obama Administration's attempts to increase taxes on private-equity managers with "a war . . . like when Hitler invaded Poland in 1939."

Have the nation's dire fiscal situation, the current historically low tax rates on the rich and the growing concentration of wealth also influenced some rich folks? Perhaps.

Peter G. Peterson, another Blackstone billionaire, has been funding efforts to bring the federal deficit threat to the fore. Some liberal bloggers claim he's simply out to savage Social Security. But in a statement to FORBES Peterson said he believes tax hikes for the rich must be part of the solution, too. "Fortunate Americans like me have more than enough and should be willing to take on higher income tax rates, a progressive consumption tax and reduced benefits." He added that the "large and growing" disparity of wealth "threatens the basic ideals of fairness."

Then there's Tom Golisano, the billionaire founder of Paychex and antitax gadfly who ran for New York governor three times. After New York raised its top income tax rate last year, he moved his legal residence to income-tax-free Florida. He fought the tax assessment on his Mendon, N.Y. estate, won in court and last month held a seminar for 650 of his Rochester, N.Y.-area neighbors on how to challenge tax assessments.

Golisano doesn't think the estate tax is a good thing. "Philosophically, I don't believe in the concept of the estate tax. I call it the 'grave robbery tax,'" he says. Still, he seems weary of this particular war. "If we have to have it,'' he says, "I wish we'd come up with a set of rules and stay with it." He adds: "How do you do estate planning when you're constantly concerned about changing rules?"

Read this column on Forbes.com

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Tax Policy and Your Bank Account

As the tax policy debates come to a head in Congress, many folks want to know how the proposed changes will boil down to their bank accounts. A new tool created by the Tax Policy Center takes the debate out of abstraction and brings it into reality, allowing you to see how the numbers would play out for your household. 

Simply enter your information by family status (single, married, over 65, etc.) and your household income. You can use your actual information or borrow a pre-created hypothetical household situation. Either way, the calculator outlines what different families would pay if the current Bush-era tax cuts are all extended, extended only for families earning over $250,000, or all allowed to expire.

This will arm you with the information you need to jump in the ring and join the debate on tax policy. Look out, world!

Image by Phillip on Flickr.

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Economic Inequality: What We Think vs. What's Real

head scratchingIn Slate last month, Timothy Noah discussed gaps. Not the "enthusiasm gap" among voters that the mainstream media has so enthusiastically wasted air time on, but something much more disconcerting.

But, while we're on the enthusiasm gap, let's sidebar. The American political system hasn't given us much to be enthusiastic about in recent years. While voting and other forms of democratic participation are critical to the future of our economy, we should also be considering what it's going to take to build a more engaged electorate. One answer is organizing. But, to build a base that's in it for the long haul, we'll need more education.

Noah wrote about the gap between what Americans think versus the reality of wealth inequality in the US. He recounts a time when the top 1% of American earners were taking home 18% of the nation's total income. That was in the early 20th century, and an insurrection of the working class seemed near. That figure has risen by 33% in the past eight decades, with the top 1% accounting for nearly a quarter of all US income, and we've not yet witnessed an uprising. On the contrary, many of us seem to be sleepwalking.

Noah cites a survey in which participants were asked to share their best guesses about wealth distribution across quintiles (fifths of the population) in the US. When surveyed about the holdings of the wealthiest quintile, participants on average undershot their estimates by 31 percent. (The top quintile accounts for 84% of all wealth in the US.)

U.S. Wealth Distribution: Actual vs. Estimated vs. Ideal

US Wealth Distribution - Real vs. Estimated vs. Ideal
Source: Michael Norton and Dan Ariely, "Building A Better America–One Wealth Quintile At A Time" (pdf)

The outcomes of this study may offer a glimpse into why we've not yet seen that uprising: we're not fully aware of the severity of inequality in the US.

There is a silver lining here though – one that gives us hope for what could be. When asked to select an ideal wealth distribution among three options, 90% of respondents chose more equitable distributions (see below) than we have in the US today.

Wealth Distribution Preferences: US vs. Sweden vs. Equal

Wealth Distribution - US vs. Sweden vs. Equal
Source: Michael Norton and Dan Ariely, "Building A Better America–One Wealth Quintile At A Time" (pdf)

One part of UFE's mission is to raise awareness of the dangers of concentrated wealth and power. These findings suggest that we've got our work cut out for us, because, evidently, too many Americans are still in the dark about how truly unequal our country has become. But, as more light is cast on the truths behind inequality, our movement for justice will grow stronger.

Read more: David Cay Johnston digs deeper into Norton and Ariely's study.

If you'd like to help counter this pandemic of unawareness, check out UFE's workshop, "The Growing Divide: The Roots of Economic Insecurity," or our book, Teaching Economics As If People Mattered, and consider hosting an educational event for folks in your neighborhood.

If you work with a community-based organization and would be interested in attending or co-hosting a future UFE Training of Trainers Institute (ToT), send a note to info@faireconomy.org mentioning "ToT inquiry" in the subject line.

Also, join our mailing list, tell your friends, family and colleagues to do the same, and we'll keep you up-to-date with the latest news on economic justice.

Photo above by PhotoJohnny on Flickr.

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Mountaintop Removal is an Economic Injustice

coal is killing usWhat do coal mining and tax cuts for the wealthy have in common? Both are economic injustices that favor the wealthy, burden low-income people, and add to the imbalance of our economy.

Last week, nearly 2,000 protesters traveled from Appalachia to Washington, D.C. to demand an end to the mountaintop removal, including Kentuckians for the Commonwealth (KFTC), a member of UFE’s Tax Fairness Organizing Collaborative.

For years, state and federal policies have allowed wealthy coal companies to use explosives to remove the tops of mountains to extract coal. In Appalachia, wealthy coal companies are literally moving mountains to access the precious resources beneath them, leaving life-long residents of the surrounding communities with barren fields and dried up streams.

In response to these unjust practices, citizens of the Appalachian region descended upon Washington, D.C. to demand an end to the harmful mountaintop removal practices that are irreversibly destructing their natural resources. Although the protest was peaceful -- a celebration of Appalachian culture and natural resources -- over 100 protesters were arrested in front of the White House for civil disobedience.

Mountaintop removal is an all-too-common example of how, when a low-income community and a wealthy corporation go head-to-head, the corporation with the biggest bank account wins almost every time. Just as our tax policies have been designed to favor the wealthy, our environmental policies are too often crafted with little concern for the well being of low-income communities.

Does this sound eerily familiar to the slash-and-burn approach of our big banks?  

Our economic and environmental issues cannot be dealt with in a vacuum. Creating a fair economy means taking a holistic approach to designing policies that allow all people to flourish, despite the size of their bank account. This means being able to make ends meet and trusting that the natural beauty of ones’ local environment will not be destroyed in the name of short-sighted corporate greed.

Just as mountaintop removal causes devastation to our natural resources, an imbalanced economy means our that our schools suffer, local infrastructures crumble, and the middle class struggles while the wealthy minority sit atop bloated bank accounts. Like the people of Appalachia, we must feel empowered to demand better from our policymakers.

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This Letter Won't Write Itself: The Estate Tax

As the battle in Congress over the estate tax heats up, it is critical to make your voice heard. The estate tax doesn’t just impact wealthy billionaires. Policies that favor the rich affect everyone.

That's right -- if you rely on your paycheck each month to make rent, you have a stake in the estate tax.

Over the past decade, we have seen a massive transfer of wealth from hard-working middle class people to the rich. Today, the richest one percent of Americans own a whopping 36 percent of the wealth in this country. That’s more than the combined wealth of the bottom 90 percent of American households. 

Our economy is no accident; it’s not like a hurricane or tornado that just occurs naturally. Our economy is the direct result of deliberate policy decisions made in favor of the rich and at the expense of the middle class. And if you think that’s unfair, it’s time to make your voice heard.

So get mad, grab a computer, and start writing! Compose a letter to the editor to tell your neighbors, friends, and community why a strong estate tax is both a common sense solution for addressing our nation’s budget woes and a critical part of a fair and equitable tax system.

Here are a few talking points, phrases, and tips to help you write a zinger of a letter.

First, a few need-to-know points about the estate tax:

  • It only affects those who can afford it
    In 2009, you only had to pay the estate tax if your individual estate was more than $3.5 million or $7 million for a couple. Only 1 in 500 estates were expected to pay the tax in 2009 (that’s just 5,500 per year). This overwhelmingly does not include family farms and small businesses (only 110 each year in the entire nation would qualify).
  • It encourages charitable donations
    Getting rid of the estate tax would devastate our non-profit sector by removing the tax incentive to give. Experts predict that charitable donations would decrease between 23 and 40 percent.
  • We can’t afford NOT to tax millionaires and billionaires
    Talk about irresponsible financial management -- permanent repeal of the estate tax would cost over $1 trillion dollars in the first decade, which includes lost revenue and interest payments on our ballooning national debt.

Second, a few phrases to help you drive the point home:

  • Millionaires and billionaires should be giving to charity, not getting it.
  • We should be making a down payment on our national debt rather than taxing our children to create tax giveaways for the wealthy.
  • Politicians who think the rich aren’t rich enough have been spending too much time with lobbyists, bankers, and CEOs – or getting too much campaign money from them.
  • More economic demand is what creates jobs, not tax breaks.  More tax breaks for dead multi-millionaires do not create jobs.

Finally, a few writing tips:

  • KISS your letters (keep it simple, stupid). A concise, clear letter is easier for your readers to comprehend. Crank it out and send it off.
  • Refer to something specific that was printed in the paper the past few days. Explain why you agree or disagree with the writer.
  • Give your letter a local flavor by including how many estates in your state paid the tax. Find out here (pdf).   
  • Tell your story; make it personal. How do tax cuts for the wealthy like the estate tax impact your life?

Once you’re done, zip it off to your local paper (you can find the email here) and email it to United for a Fair Economy at info@faireconomy.org. And then keep the pressure on. After all, tax policies won’t change themselves.

Image by c. cich on Flickr.

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History in the Making: One Nation March on Washington

One NationThis October, tens of thousands of Americans will gather at the Lincoln Memorial in Washington, DC for a mass expression of solidarity for the progressive social change all of our communities desperately need. 

One Nation Working Together is a call for people from all walks of life to march as one – to put our workforce back in good jobs, for quality and affordable education and healthcare, and for equality of opportunity for all.

Now that Glenn Beck's disgusting misappropriation of the anniversary of the March on Washington, led by Martin Luther King, Jr., has come and gone, it's our turn.

On Saturday, October 2, 2010, Beck's message of fear and hate, and gimmicks posing for real solutions will be replaced by a collective voice for the common good.

We hope you will participate in this inspiring and historic event!

Click here for details and transportation options for the One Nation march.

If you'd like to march alongside other UFE supporters, please contact Kathy Lique at klique@faireconomy.org for details on where to meet in advance of the march.

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Robert Frank Blogs in WSJ about Responsible Wealth and Taxes

‘Tax Me More’ Says Wealthy Entrepreneur

By Robert Frank - WSJ Blog - Sept. 20, 2010

As Congress and President Obama fight over the Bush tax cuts, a small number of left-leaning rich people have come out in support of paying higher taxes. The most famous are the members of the Responsible Wealth Project, who say they pay too little in taxes and want to address inequality.

They may be an eccentric minority, or (in the view of conservatives) a lunatic fringe. But a Quinnipiac University poll this year showed nearly two-thirds of those with household incomes of more than $250,000 a year support raising their own taxes to reduce the federal deficit.

So not all of the wealthy are angry about tax hikes. But that doesn’t mean they just want bigger government. What they want is better government – and investment in growth.

An op-ed piece in the Los Angeles Times by Garrett Gruener, an entrepreneur and venture capitalist, makes two important points about taxing the rich. (Mr. Gruener founded Ask.com and is the CEO of Nanomix and is a co-founder of Alta Partners, so he’s got street cred.)

First, he says tax rates don’t make or break the success of an entrepreneur – or the jobs he creates. He says he’s paying the lowest rates of his working life. But “if you want the simple, honest truth, from my perspective as an entrepreneur, the fluctuation didn’t affect what I did with my money. None of my investments has ever been motivated by the rate at which I would have to pay personal income tax,” Mr. Gruener writes.

History, he says, shows that “modest changes in the tax rate for wealthy taxpayers don’t make much of a difference if the goal is to build new companies, drive technological development and stimulate new industries.”

Second, an economy built only on the rich – who account for the lion’s share of income and spending – is unsustainable.

“What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn’t just need investors; it needs people who can buy the goods and services businesses create.”

He says the tax hikes for the rich should be invested by government in infrastructure and research. Preserving his tax rates won’t lead him to start new companies in the U.S.

“What will change my investment decisions is if I see an economy doing better, one in which there is demand for the goods and services my investments produce. I am far more likely to invest if I see a country laying the foundation for future growth.”

Do you think entrepreneurs make their start-up decisions based on tax rates?

Read Robert Frank's blog on the Wall Street Journal and post your own comments.

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Abigail Disney Calls for Strong Estate Tax in NPR Story

Showdown Over Bush Cuts Revives Estate Tax Fight

Excerpt of original report by Yuki Noguchi, National Public Radio - September 11, 2010

Click here to view the full story and listen to the original audio on NPR.

The estate tax typically hits a tiny fraction of the wealthiest Americans, but it often generates debate among a much larger segment of the population. And this year could be no exception, though it's the first and probably only year there are no federal estate taxes on the books.

That means a potentially huge windfall for the heirs to the George Steinbrenner estate, reportedly worth more than $1 billion. If Congress does not try to collect a retroactive estate tax this year, it means his heirs won't have to pay the 45 percent tax on everything over $3.5 million that would have applied last year.

This quirk in the tax code is the result of the Bush tax cuts, which started phasing out estate taxes a decade ago. Next year, if Congress does nothing, the taxes will go back up to their pre-2001 levels.

The Estate Tax

Under President George W. Bush, Congress gradually increased the amount exempted from the estate tax and reduced the top estate tax rate. The estate tax was repealed for 2010 but is scheduled to reset at pre-2001 levels.

And that has reignited debate over whether — or how big — estate taxes should be.

Estate taxes affect a small segment of the wealthiest Americans. Last year, only a quarter of a percent of those who died paid any.

Abigail Disney benefited greatly from a big inheritance but believes the estate tax should come back, at least to their levels last year.

"I take this position because I love my country," says Disney, the granddaughter of Roy Disney, who helped build the Walt Disney Co. empire. "And the fact is, my grandfather could never have built his business anywhere else."

Disney, a filmmaker and philanthropist, spent a lot of time shooting a film in Liberia. She says there, unlike the United States, there are no safe roads or schools and therefore no safe investments. And she says those who make money in a secure society like the U.S. also owe the society a debt.

She joined a group of wealthy individuals called United for a Fair Economy in part, she says, because she felt wealth is fundamentally unfair.

"It's absolutely an accident of my birth. And that's sort of the point — that there shouldn't be dynasties built around the simple good luck of being born related to somebody very wealthy," she says.

Warren Buffett and Robert Rubin are also members of the group and share the same philosophy. But not even Disney's family agrees with her. And she and her sympathizers face a mountain of money lobbying on the other side, including from the Chamber of Commerce and the National Federation of Independent Businesses.

Without any estate tax, Williams says, charitable giving could fall by up to a third...

Click here to view the full story and listen to the original audio on NPR.

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Take Action to End the Bush Tax Cuts - Send a Letter to the Editor

Money, money, money
The battle over the expiring Bush tax cuts is really heating up in Washington DC. Last week, President Obama reiterated his support for ending the Bush era tax breaks for top earners. This weekend House minority leader John Boehner (R-OH) signaled his willingness to compromise on the issue for the first time. We need to keep up the pressure. 
You can help right now by writing a letter to the editor of your local paper TODAY saying you support restoring the top two tax rates to their pre-Bush levels for households over $250,000 income.  With President Obama and others speaking about the tax cuts for the wealthy, now is an ideal time to write a letter to your paper.  The voice of upper-income people who would be affected is particularly powerful, as is the voice of small business owners – if you you fall into either of those categories, please include that fact in your letter.
Here are some talking points that might be helpful:
  • Congress should extend the tax cuts for working and middle class families, and not hold them hostage to tax cuts for the wealthiest 2%.
  • Households in the top 5% received almost half of the Bush tax cuts since 2001 – a total of about $980 billion.
  • Congress should end the tax cuts for households in the top 2%. If your household income is over $250,000 ($200,000 for an individual), include the fact that your income is in the top 2%.
  • Returning the top tax rates to pre-Bush levels (36% and 39.6%) for just the top 2% would result in $690 billion in much-needed revenue over the next 10 years ($830 billion counting interest on the debt), and would generate $80 billion in just the next two years alone.
  • People in the top 2% are not likely to spend their tax savings, so extending the cuts would not result in significant job growth or benefit to the economy. Again, if you are in the top 2%, please include that fact.
  • It is a myth that small businesses would bear the brunt – only 3% of small businesses would be affected at all, and many of those 3% are law firm partners, real estate partners, or hedge fund managers, not really small businesses.
  • If you are a small business owner, please state that, as a small business owner, I resent being used as a poster child for a cause that would not benefit me and I do not support.   
Here are a couple other tips on writing letters to the editor:
  • Keep it short and sweet; make it personal to your knowledge and experience, crank it out and send it off; send us a copy if you can.
  • Most papers have an email address where you can submit your letter.
  • Letters should refer to something specific that was printed in that paper in the past few days - there have been many stories in the news recently about President Obama's position on the Bush tax cuts and on Congressional wavering.
Thank you for taking the time to write a letter.  If you have a moment to send us a copy, please email it to us at info@faireconomy.org.
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Bush Tax Cuts: What We're Up Against

Letting the portion of the Bush tax cuts that benefit the top tax brackets expire was a key part of candidate Obama's platform in the 2008 Presidential election. It was one of the key differences between his proposals and the proposals of John McCain.

President Obama has been in office for more than a year and a half, and the time has come for Congress to act on his signature tax proposal. But now, a powerful lobbying campaign is underway to sway the debate and hand out new tax breaks to top earners.

The same leaders that pushed through the Bush tax cuts - with their lopsided benefits for the rich - in the first place are mobilizing the same people to make the same arguments now to keep them in place. They were wrong ten years ago when the first of the Bush tax cuts was passed. Our disastrous economy proves that. And they are wrong now.

They have a powerful lobby and plenty of funding, but we're here organizing to make sure that candidate Obama's pledge is upheld. The Bush tax cuts for the wealthy have been draining our economy for ten years too long already. It's time to end them now.

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OP-ED: Bring Back the Estate Tax NOW!

Bring Back the Estate Tax Now

By Robert Rubin & Julian Robertson
Column featured in The Wall Street Journal on September 1, 2010

Robert RubinJulian RobertsonWith a host of other issues behind it, Congress is finally turning its attention to the expiring 2001 and 2003 tax cuts. But there is one tax issue that should have long since been addressed: the federal estate tax. That tax expired at the end of last year, and there have been no estate taxes levied this year. If a new estate tax is not enacted as soon as Congress returns from its August recess, this void will continue until the end of the year.

We would recommend continuing 2009's regime, with a top rate of 45% and a $3.5 million individual exemption. Small businesses and family farms can be protected both through the exemption (which is $7 million for a couple) and through special deferred payment rules.

We both believe that the estate tax should be a component of any federal tax system. Our government is always going to collect and rely on tax revenues to pay for the activities that our citizens want and need government to perform. A key criterion in choosing taxes is to have the least negative impact on economic activity. The estate tax, in our opinion, meets that test.

An estate tax can provide revenue—with little, if any, adverse supply-side economic impact—to fund deficit reduction, additional public investment or added assistance to those affected by the economic crisis. Used for public investment that has a rapid spend out, or applied to assistance for economically displaced citizens, the net effect will be to increase demand. That's because roughly 100% of the funds would be spent, while part of any large inheritance is highly likely to be used for savings or debt repayment. And either deficit reduction or public investment will better position our country for future economic success.

We also share the view that the estate tax is grounded in powerful philosophical underpinnings. Our nation views itself as a meritocracy and a land of opportunity and we have a proud legacy of upward mobility. An estate tax helps us promote this legacy, by avoiding the accumulation of inherited economic—and political—power that is antithetical to this historical vision of our society and to the vitality and dynamism that has contributed so much to our success.

Failure to restore a permanent and strong estate tax for this year has already cost billions of dollars in federal revenue. But there is still time for Congress to take action for the current year. By acting immediately, Congress can, at a minimum, solve the revenue problem the lapse has created for the remainder of the year. It could also consider going further by making the change apply from the beginning of this year.

Ordinarily in tax matters, the effective date would not precede the date of enactment, or at least the date that a measure was introduced, because Congress knows that taxpayers make their plans based on the existing code. But in the case of the estate tax, presumably nobody's demise was affected in timing by the structuring of our tax laws. And importantly there has been notice—through the president's budget and statements by public officials—that a tax would be enacted earlier this year that would apply to the whole of this year.

The question of how to address the income and other tax cuts that expire this year is already eliciting many conflicting views. But action on the estate tax should not wait. Our country is losing revenue that, with its stressed fiscal conditions, it can ill afford to forego.

Mr. Rubin is co-chairman of the Council on Foreign Relations and former secretary of the U.S. Treasury. Mr. Robertson is chairman of Tiger Management LLC.

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