"People should get ahead on their own merit, not based on the wealth of their parents," said Lee Farris, a senior organizer on estate tax policy at United for a Fair Economy. "And that's a core principal on which the American nation was founded: a belief in a meritocracy, not the belief in people who win the genetic lottery."
Watch video of this report on FoxNews.com.
Expiring Estate Tax Resurrects Congressional Tax Standoff
FoxNews.com, December 23, 2009
"For the super-wealthy -- or the merely very rich -- struggling to cope with their lavish lifestyles, 2010 may indeed prove, in morbid terms, to be a "good" year to die.
That's because the top tax rate for estates valued at more than $7 million, which is currently 45 percent, drops to zero next year. In 2011, it will be resurrected at the higher rate of 55 percent for estates valued at more than $1 million. [...]
Each year, some 5,500 people in America are subjected to the estate tax. But next year, changes in the capital gains tax will further complicate estate planning as will likely congressional action.
The House has passed an extension of current law and the Senate is set to take up the issue next year.
Democratic leaders, who support the estate tax, could make a new law retroactive to January 1 -- a move likely to lead to legal challenges. [...]"
Read the full article on FoxNews.com.
Estate Tax Statement from Richard Rockefeller, M.D.
The following statement was delivered on Responsible Wealth's 12/11/12 Estate Tax Teleconference (printed here from transcription):
Thank you very much and it’s delightful to go after the three of you and hear how much concurrence there is in points of view and maybe I have a couple of more things to add.
Just quickly by the way, I was Chair of the Rockefeller Family Fund. I currently chair the Rockefeller Brothers Fund but the rest of this you have correct. I’m also a great grandson to John D. Rockefeller and I’m a father and a grandfather myself, so the tradition continues.
To me, the reasons for maintaining the federal estate tax are simple but they’re really compelling and some days I just don’t get it why this isn’t clear to everybody including people with wealth. The first reason that moves me is a personal one and has to do with my own children and my grandchildren. I care about their inheritance of course, but I don’t look upon that inheritance as a purely material thing. The quality of the world they grow up in will contribute as much or more to their well-being as any amount of money and possessions that I could bequeath. That is to say if the world I leave them is one of gated communities and growing inequality and misery among the have nots and downward mobility for the middle class and the degraded environment and a rotting social and physical infrastructure, then their inheritance will be a shabby one no matter how much money they get. I don’t see any way around that argument unless people like living in gated communities.
So anyway, a strong federal estate tax will reduce inequality and prevent the rise of our hereditary aristocracy, help maintain the social and physical infrastructure that supports us all, and by doing so will provide as much to my descendants as I could provide them on my own just by passing money to them.
The other reason I support the federal estate tax is that as Abigail said, it encourages individuals and families of wealth such as mine to direct significant portions of their estates to philanthropy and by a little more personal background, I do currently Chair the Board of Directors of Rockefeller Brothers Fund. I’m former chair of the advisory board, not the board of directors, to Doctors without Borders. I’ve served on a number of other boards. Have founded and run three non-profits and my heritage and these roles keep me keenly aware of the importance of private philanthropy to addressing a host of societal humanitarian and environmental needs which neither the business nor the government sectors can meet nearly as effectively.
There is moreover bipartisan agreement in the US that the non-profit sector contributes importantly to the health of our society and to our democracy. Foundations and non-governmental organizations can generally think more creatively and take greater risks than can those in government. Incentives in the non-profit world encourage NGOs to think and act with broader perspectives and longer time horizons when businesses generally can’t constrained as they are by the requirements of short term earnings report.
Donating money philanthropically results in 100 cents on every $1.00 going to the cause that a donor chooses. A strong federal estate tax would only allow $0.50 on each $1.00 or so to go to our heirs, and the difference between those two provides a great incentive to philanthropy.
So again in closing, I just want to emphasize that as a great grandson of John D. Rockefeller, I’m perfectly happy that a portion of the wealth he made goes with each succeeding generation towards paying the estate tax, and this is echoing what others have said, that our family’s fortune would never have been made in the first place without the foundation of public laws, public education, and material infrastructure that underpinned the American industry in my great grandfather’s time and continue to do so today. So, far from resenting a system which asks us to help pay for this infrastructure from one generation to the next, I believe that a strong estate tax makes sense for me and for the causes I support and for my children and my grandchildren and my country. Thanks.
The following statement was pre-recorded and delivered on UFE's 12/15/09 Estate Tax Teleconference.
"My name is Richard Rockefeller. I am a family physician living in Falmouth, Maine.
I happen also to be the son of David Rockefeller, and great-grandson to John D. Among other philanthropic activities I currently chair the Board Directors of the Rockefeller Brothers Fund as well as the Advisory Board to Doctors Without Borders-USA. My heritage and these roles keep me keenly aware of the importance of private philanthropy to addressing a host of societal, humanitarian and environmental needs, which neither the business nor the government sectors can meet nearly as effectively.
I am here today to attest that the Federal Estate Tax encourages individuals and families of wealth such as mine to direct significant portions of their estates to philanthropy.
The estate tax is of enormous benefit to the philanthropic community, and its loss would be commensurately harmful. A 2004 study by the Congressional Budget Office found that complete repeal of the estate tax would have reduced total annual philanthropic giving by between $13 and $25 billion in the year 2000, an amount roughly equal to all foundation giving in that year.
Let me illustrate why the estate tax provides an incentive for wealthy people to make philanthropic gifts. Let’s say my wife and I knew we were going to die soon, which we don’t fortunately, this is just a “for instance”. And imagine that we had an estate of $27 million. Our combined exemption would be $7 million, leaving a taxable amount of $20 million.
Every dollar of that $20 million that we direct to tax-exempt organizations would go 100% to those organizations. Meanwhile, every dollar we choose to direct instead toward our children would be taxed at 45%, so there’s a strong incentive for us to give more to charity and less to our children once we get beyond the exemption.
In any case, the $7 million exemption is already a hefty amount to give to our children, tax-free, and they’ve already received a lot of gifts and other advantages in their lifetime.
Let me close by saying that as the great-grandson of John D. Rockefeller, I am perfectly happy that a portion of the wealth he made goes with each succeeding generation toward paying the estate tax. The Rockefeller fortune could never have been created without the foundation of public laws, public education and infrastructure which undergirded American industry in my great-grandfather’s time and continues to do so today. Therefore, far from resenting our tax system, which allows this infrastructure to remain strong, I believe that a strong estate tax makes perfect sense."
"In a Dec. 17 letter to senators, Americans for a Fair Estate Tax said the decision to let the tax expire was 'incomprehensible.' It said the tax’s elimination would be a boost to the wealthy that would negatively affect charitable giving and hurt government coffers.
'Repeal of any weakening of the tax would result in significant loss of revenue for vital public programs and infrastructure, and would benefit only the largest one in 500 estates that are subject to the tax at its current level,' said the group, which includes a number of labor organizations and left-leaning groups.
Only estates larger than $7 million per couple or $3.5 million for individuals are subject to the estate tax.
Democrats warn those under that threshold will be hit by a higher capital gains tax because of Congress’s inaction.
Under the rules set to go into place on Jan. 1, a capital gains tax of 15 percent would apply to estates above $1.3 million. The tax would be calculated based on gains accrued since the estate was purchased.
'The people that are most likely to be hurt by this are the people who have an estate between $1.3 million and $7 million,' said Lee Faris, of United for a Fair Economy, which wants to extend the estate tax."
Read the full article by Ian Swanson in The Hill.
"Opponents of the estate tax face a worthy adversary in their fight to extend Bush-era policies that favor a few rich families. Members of United for A Fair Economy--a group that includes the father of the Microsoft founder and one of the richest men in the U.S., Bill Gates Sr.; Vanguard Fund founder John Bogle; the great-grandson of John D. Rockefeller, Richard Rockefeller; along with SEIU's Anna Burger--are calling on the Senate to act to extend the current estate tax before the holiday recess."
Read the full blog on SEIU.org
Estate Tax Teleconference 2009
Thank you for your interest in our December 15, 2009 Estate Tax Teleconference, featuring Bill Gates, Sr., Vanguard Founder John C. Bogle, Richard Rockefeller, SEIU International Secretary/Treasurer Anna Burger, Lee Farris (UFE), moderated by Mike Lapham (RW/UFE).
We thank all of our speakers for their support and the wonderful and unique contributions they made, and all those who joined as participants on the call.
The teleconference was attended by journalists from the Associated Press, Newsweek, the Wall Street Journal, Bloomberg News and many others.
Written statements from our featured speakers:
Listen to the teleconference (M4V 72.7MB)
IF YOU ARE A MEMBER OF THE PRESS and would like to speak with UFE staff or the other speakers about the estate tax, please contact Mazher Ali at firstname.lastname@example.org or 617-423-2148 x101. For other inquiries regarding the estate tax, please contact UFE’s Estate Tax Policy Coordinator, Lee Farris, email@example.com or 617-423-2148 x133.
Thank you again for your interest in this event, and keep checking our website for news updates on the estate tax.
Estate Tax Statement from New York City Mayor Michael Bloomberg
December 17, 2009
“Congress should act immediately to extend the estate tax at its 2009 levels. If Congress doesn’t act – and act soon – the estate tax will disappear completely in 2010, costing the federal government critical revenue at a time it desperately needs it. Extending the 2009 levels for a year would also give Congress time to develop a fair, permanent solution next year.
I happen to support the estate tax. Not only do we need the revenue, I think Warren Buffett gets it right when he argues that a meaningful estate tax puts a check on dynastic wealth, promoting the value of meritocracy in the process.”
"If [the estate tax is] abolished or weakened, there are only three ways to make up the resulting shortfall: cut spending, raise taxes on the middle class, or pile it on to the national debt and leave it to our children and grandchildren who will inherit the consequences of the decisions we make now. This [is] why I and thousands of other wealthy individuals have joined a campaign led by United for a Fair Economy to call on Congress to strengthen the estate tax.
[W]e must acknowledge that the person who accumulates wealth in this country was not able to do that independently. The simple fact of living in America, a country with stable markets and unparalleled opportunity fueled in part by government investment in technology and research (something my family has plenty of firsthand experience of), provide an irreplaceable foundation for success and have created a society which makes it possible for some men, women and their children to live an elegant life. [...]
I believe that those of us who have benefited so greatly from our country's investment in our lives should be asked to give a portion of our wealth back to invest in opportunities for the future.
Society has a just claim on our fortunes and that claim goes by the name 'estate tax.'"
Read the full op-ed by Bill Gates, Sr. on HuffingtonPost.com.
Estate Tax Statement from John C. Bogle, Founder of the Vanguard Group
The following statement was delivered on UFE's 12/15/09 Estate Tax Teleconference.
"Thank you and good morning everybody. First, to explain my biases, I should tell everyone, and make it very clear, that I am a life long Republican a dedicated member of a Republican party. Maybe not quite today’s Republican Party but certainly the Republican party of Theodore Roosevelt and the party of Abraham Lincoln.
And if you want some enlightenment, Theodore Roosevelt gave a wonderful speech called the New Nationalism back in 1910, in which he quoted Lincoln at some length. So you can pick up both of their philosophies about how America should work and the burden that should be bourn by those most able to bear it and things of that nature.
So I’m a classical Republican, classic Republican [sic] and just trying to explain how my Republican values fit into my demand as much as I can demand that we continue the estate tax at substantial levels as long as we can and into the future. I have made nice money in my day. Although I’ve never made any capital gains or anything out of Vanguard because when I created the firm Vanguard it was truly a mutual fund company, which is actually owned by the Vanguard shareholders. So my only participation in our profits is as a shareholder in the funds at the reduced costs we offer. That has been a very enlightened response that has served investors, our Vanguard shareholders, extremely well.
I speak, in a sense, this morning from the heart because I had my first attack in 1960 and had a heart transplant in 1996. So I now had almost 14 extra years of life. So I, like most people who have had modest wealth, which is kind of my category compared to the giant grown up money that sits up there. I got time to plan my estate with some care. And I’m taking care of my wife of course first, and I’m taking care of my children, I have 6 children and those 12 grandchildren which were mentioned in my introduction. And I’m leaving a substantial amount to Philanthropy. But I’m still left with a very substantial estate tax of what remains and I’m proud and pleased to pay it. And I think it’s a fair amount, it’s in the multi-millions of dollars.
But I have had a blessed life and I have benefitted from something that hasn’t been mentioned so far, and that is in my retirement plan, which I have been dollar averaging in since 1951. It’s my largest asset and 100% of that return is tax differed! So I’ve gotten a great advantage from the lack of taxation on those earning, which will have to be paid on my death/debt. So that’s why much of that is going is going on my philanthropy. But I’m going to have a substantial inheritance tax on it and I’m happy to pay it.
Even though this modest wealth, this wealth at large that I’ve accumulated, it wouldn’t be there, as Mr. Gates said, if I had not been born in the USA. It’s not only what Bill Gates said about all the advantages our society creates, it goes all the way back to fundamentals like the Declaration of Independence, the Constitution of the United States of America and the Bill of Rights. This is a nation founded on preserving domestic tranquility and justice for all. And we’ve all benefitted from it.
I’ve known many people in the financial business who’ve said, ‘I’m really proud because I did it all myself.’ And when someone has the temerity to say that to me, and a lot of people do, the first thing I say is ‘isn’t that wonderful, you did it all yourself. And I think that’s terrific, I don’t know many people who’ve done that. But how did you arrange to be born in the United States of America?’ - the very point that Bill Gates made just a moment ago.
Our first right has created enormous wealth and stability of property and for us to think, us who owe these taxes that we don’t want to pay our fair share of the cost of running this nation. When our young citizens, let us not forget, are dying in wars out there trying to protect democracy and the nation that we’ve built up. And it seems to me, for lack of another word, quite outrageous.
I haven’t even tranced on the fact in these comments on how I so strongly favor the inheritance tax and the estate tax that we, who are privileged to pay the taxes, that we should. If we don’t, someone else will. And they will pay it either through a burden on the middle class, far less able to bear that burden than we are, or be shifted in terms of inflation, to those even less able to bear it, if we don’t keep this tree-influx of revenues.
We need every penny we have to reduce the federal debt. So let me be very clear, I support the McDermott compromise, I think its reasonable. And I will be very happy to pay my share of whatever it takes when the time comes for me to go to my reward.
Estate Tax Statement from Bill Gates, Sr.
The following statement was delivered on UFE's 12/15/09 Estate Tax Teleconference.
"In the Fall of 2000, riding in an elevator in Seattle, I overheard a conversation between two fellow lawyers, one of whom was proudly proclaiming that they were 'very close to repealing the estate tax.' It hit me like a ton of bricks, and I decided at that moment to do something about it.
A century ago, President Theodore Roosevelt expressed alarm about the
dangerous concentration of wealth and power in the U.S. and called on the
incoming 60th Congress to establish a federal estate tax on large fortunes. Its
primary objective, Roosevelt said, 'should be to put a constantly increasing
burden on the inheritance of those swollen fortunes which it is certainly of no
benefit to this country to perpetuate.'
A century later, after a 12-year assault, the federal estate tax is here to stay. The anti-tax organizations and wealthy families that spent millions in lobbying funds to avoid paying billions in taxes have conceded they don’t have the Congressional votes to abolish the tax. But that doesn’t mean they won’t continue trying to erode it.
The estate tax cuts enacted under President Bush suspends the tax in its entirety for the year 2010 creating a bizarre incentive for wealthy people to prematurely die. Then in 2011 the estate comes back into effect under 2001 rules. Congress must act in this month to avoid such foolishness. The House of Representatives has acted by extending the 2009 rules through 2010. The Senate has just days within which to do something.
The current estate tax generously exempts the first $3.5 million of a person’s estate and $7 million for a couple. The option taken by the House is to freeze the tax at these 2009 levels. Other options include establishing a progressive rate structure so that smaller estates pay lower rates while larger estates —those with over $50 million — pay higher rates. Whatever Congress does, it should not dilute the tax from its 2009 current level.
A one year patch is required to avert this fiscally and morally
The facts are clear: the estate tax raises substantial revenue from those with the greatest capacity to pay. Abolishing the estate tax would cost more than $1 trillion. There are only three ways to fill that shortfall: cut spending, raise taxes on the middle class, or, the current favorite, pile it onto the national debt. A national debt which will register deficits expressed in trillions of dollars.
Instead of leaving a prodigious national debt for our children and grandchildren we should retain a robust estate tax and avoid the unprecedented interest costs of that debt.
Yet, a central criticism of the estate tax is the view that anyone who works hard and saves his money should be able to leave the results of his labor to his family.
Now I’m not against hard work, saving money, or taking care of your family—in fact I believe strongly in all of those things. But I also believe that the person who has worked hard, saved money and accumulated wealth to take care of their family was NOT able to do that independently.
A more careful look would disclose another fundamental factor in wealth creation—being born in America. (What Warren Buffett refers to as winning the game of ovarian roulette.)
What is so special about place of birth?
First off, economists agree that the presence of a stable market for goods and assets adds 30% to the value of everything we own—we have that in America, and that increases wealth.
Second, economists tell us that 50% of the annual growth in our economy is a function of the introduction of new technology—we have that in America, and my family knows first-hand about how new technology can increase wealth.
But the benefits of being an American don’t stop there.
In no other country in the world is the federal government spending more money on research. The United States spends some $96 billion every year on fundamental research in universities and laboratories all over this country.
And what comes of this research? Well for starters how about things like jet engines, integrated circuits, the human genome, or the Internet. Clearly the largest and most generous venture capitalist in the universe is Uncle Sam.
It is clear that the folks who have become wealthy from this significant social investment did not do it alone. I believe their estates owe something back to the society that enabled the creation of that wealth.
Lester Thurow sums it up well. He says: 'The payoff from social investment in basic research is as clear as anything is ever going to be in economics.'
So again, how do people manage to get so rich in this country? It is because:
- We have working and stable markets that maximize value;
- Our science and technology keep producing new products and ways to get things done;
- We have a government continuously and gratuitously injecting money into new and useful research;
- And this is all topped off with a work force of ingenious graduates from an education subsidized by our government.
Warren Buffett says it, as usual, so very well:
'I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. I will be struggling thirty years later. I work in a market system that happens to reward what I do very well—disproportionately well.'
Can there be any question about the rectitude of this society recovering from the heirs of its most successful citizens, a portion of the fortune they leave at the time of their death?
American society has made it possible for these men, women and their families to have an elegant life, first class education, and virtually unlimited options about where to go and what to do.
Society does have a just claim on these fortunes, and it goes by the name of the Estate Tax."