I'm a Genetic Lottery Winner--Tax Me!
The Estate Tax: A Critical Source of Revenue at a Time When Our Nation Needs it Most
By Judy Pigott
Distributed by OtherWords, Oct. 25, 2010
I am one of those lucky Americans who won the genetic lottery. That is, I was born rich. And believe it or not, my family's business success happened because of--not in spite of--our country's progressive tax system.
My great-grandfather, William Pigott, founded the Seattle Car Manufacturing Company in 1905. It has evolved into PACCAR, one of the largest heavy-duty truck manufacturers in the world. Although my great-grandfather's ingenuity and ambition was key to his success, in many ways you could say Uncle Sam was his business partner.
Around the mid-20th century, PACCAR (then Pacific Car and Foundry Company) acquired the Peterbilt Motors and Kenworth Motor Trucks companies. The trucks PACCAR manufactures would have nowhere to travel without the roadways, highways, bridges, and tunnels that the government builds and maintains. Not to mention the plows, streetlights, and police that keep these streets safe and passable--all paid for with tax revenue.
In essence, public structures supported by our tax revenue paved the way--literally--for my family's business success.
That's why I find anti-estate tax rhetoric so mind-boggling, especially coming from those who achieve business success because of government-created policies and structures. My great-grandfather and many others like him managed to accumulate enough wealth to pass on to younger generations during a time when taxes on the wealthy were far higher than they are now. I get more than a little frustrated listening to all of the misinformation that seems to cloud the debate surrounding the estate tax. So let's set a few things straight about the estate tax.
Much of the wealth subject to the estate tax has never been taxed. For wealthy Americans like me, the paycheck earned from the jobs we work is only a tiny portion of our wealth. Most of our income comes from watching our stock portfolios grow. Indeed, the majority of the one-quarter of one percent of American households who even qualify to pay the estate tax--that's one out of every 500 families--earn the majority of their wealth from accumulated assets, not earned income. If not for the estate tax, in many cases this wealth would avoid taxation entirely.
The estate tax is a critical source of revenue at a time when our nation needs it most. The one-year lapse in the estate tax this year will cost the U.S. Treasury roughly $25 billion in uncollected estate tax revenue. That's money that could be directed towards the significant challenges facing our country: an economy in shambles, structural and social needs going unmet, and a mounting federal deficit. Instead, $25 billion dollars is sitting in the bank accounts of wealthy heirs who didn't lift a finger to earn it. I, for one, am not interested in hoarding money that I didn't work to earn when it could be put to work to make our communities stronger.
The estate tax is an incentive for very wealthy individuals to engage in charitable giving and use their wealth for the greater good. As the recent "billionaire's pledge" demonstrated, the estate tax encourages people with wealth to support nonprofit services that are meeting critical needs in our communities. Repealing the estate tax entirely would provide no incentive for wealthy families to donate their wealth to the greater good, and could put the nonprofit sector in serious jeopardy.
Many pundits say the estate tax is shaping up to be one of the hottest debates of the year. That may be true, but to me the issue is very simple. Our tax code should reflect our collective values.
Preserving the estate tax will allow our government to support the public structures that keep our communities strong. It will provide revenue needed to pay down our federal deficit so our nation can return to secure financial footing. It will pave the way for future generations to access the same opportunities to succeed in business that my great-grandfather had more than 100 years ago.
And--most importantly--it will help us focus on what sort of a nation we wish to be.
Farmers Watch Estate Tax Deadline
By Bill Teeter
This column was published in the Waco Tribune-Herald on Sunday, October 17, 2010
Farmers are growing apprehensive as New Year’s Day aproaches. At midnight on Jan. 1, 2011, a 10-year-old suspension of 2001
federal estate tax rules runs out.
Congress is discussing its options on the estate tax, which include a new tax with an increased exemption and lower percentage rate.
Farmers hope legislators find an answer that will either eliminate or hold down the estate tax before the deadline.
Family farms are at ground zero of the debate, farmers and others involved in agriculture said. Such farms would be greatly affected in the inheritance process after the death of an owner who has willed the property to descendants or others, they contend.
Farms often have values in the multi-millions and descendants would be forced to sell all or part of the property to take care of the estate tax bill, said Steve Pringle, legislative director for the Texas Farm Bureau.
“You are left in the position of having to sell assets to pay the government the tax that’s due,” Pringle said.
Tax law passed under President George W. Bush in 2001 provided for a number of significant tax cuts and decreased estate taxes for large estates until the estate tax was repealed for 2010.
Affecting other cuts
The other tax cuts, including reductions for households making less than $250,000 a year, also were enacted under Bush and will expire at year’s end without action by Congress.
If Congress does not act before the Jan. 1 deadline, the estate tax will return to its 2001 status, with an exemption for all estates valued at $1 million or less and a 55 percent tax rate for all value above that, Pringle said.
Congress is looking at options that include an amendment to tax legislation that would allow for an exemption up to $3.5 million of value and a 45 percent tax rate for value above that. Over 10 years, the exemption would gradually increase to $5 million and the tax rate would drop to 35 percent.
Congress will resume legislative work Nov. 15. U.S. Rep. Chet Edwards, D-Waco, has been trying to reduce the estate tax impact, said Josh Taylor, an Edwards aide.
A written statement from Edwards’ office this week said the congressman has backed permanent repeal of the estate tax, as well as exclusions for family farms and businesses with value of as much as $10 million.
Sen. John Cornyn, R-Texas, opposes any estate tax, said Cornyn spokesman Charles Chamberlayne.
Cornyn could still vote in favor of an estate tax that had bipartisan support and minimized the impact on farms and businesses, Chamberlayne said.
Closer to home, Justin Young co-owns an eastern McLennan County farm with his father, Paul Young. Farmers pay taxes on farm income produced by the land and to tax it upon an owner’s death is wrong, Justin Young said.
“It really needs to be completely done away with,” he said. “It’s not a good deal for farmers. We’re taxed on it and then we die and they turn around and tax us again.”
But support for high estate taxes, Pringle said, can be found among wealthy and low-income groups.
One organization, United for a Fair Economy, argues that steep taxes on inherited wealth is important for the economic health of the country.
Wealth is increasingly concentrated with a tiny percentage of individuals and estate taxes help combat that concentration, said Mazher Ali, the group’s communications director.
The Boston-based organization backs legislation calling for larger exemptions of $3.5 million for single people and $7 million for couples, with tax rates set on a sliding scale from  to 55 percent, he said.
Single people’s fortunes of more than $500 million and couples’ fortunes of more than $1 billion would be taxed at rates of 65 percent, Ali said.
The taxes are an investment that helps employees and entrepreneurs, Ali said. They help pay for administrative and physical infrastructure, such as the U.S. Patent Office and highways, so they ease the way for business, he said. [emphasis added]
The National Farmers Union backs estate taxes, but also wants them moderated from what existed in 2001.
The group hopes for a tax rate of 45 percent that increases on a sliding scale as value of the estate increases. The tax would have an exemption of $4 million for individuals and $8 million for couples.
Reducing the deficit
The Farmers Union statement said 1.6 percent of farms would have been affected by the pre-2010 version of the tax. The group contends that revenue from estate taxes would reduce the national deficit, cut the harmful effects of a weak economy and invest in future prosperity for the middle class.
Bill Reichenstein, a Baylor University professor of finance, said he doesn’t think estate taxes work well as government revenue sources.
Wealthy families often legally protect their money from estate tax collection through special trusts, Reichenstein said. The only ones making any money are attorneys who set up trusts, which typically cost around $30,000 to create, he said.
“What do we get for the estate tax? Is it really worthwhile when we’re getting next to nothing for it?” he said.
Justin Young’s father, Paul Young, put the worth of his farm at around $3 million. That means if nothing is done by Jan. 1 and it were passed on through an inheritance, taxes of more than $1 million would be placed on the estate.
Paul Young said he doesn’t believe the idea of redistributing wealth by such means works.
“If you took all the wealth in the country and divided it up evenly between everybody, it would just go back to where it is today,” he said.
Black Unemployment Rate Slower to Recover
By Ann Belser
Originally published in the Pittsburgh Post-Gazette, Oct. 10, 2010
Photo h/t Pan-African News Wire via Flickr
Think it's hard to get a job?
Try being a young black man with an electronic monitoring bracelet on his ankle for a felony conviction. That's Brian Scott.
But Mr. Scott, 24, of the West End, has some things other young black men with a resume that includes a stint in the Allegheny County Jail don't: He has two suits for interviews, he wears a tie and he has the support of Leroy Hayes and Michael Rogers, co-coordinators of the Young Fathers Program at the Hill House Association in the Hill District.
The two men have taught Mr. Scott a truism he had not heard before: Clothes may not make the man, but they can unmake him.
In this Great Recession, black men have been hit particularly hard. On Friday when the U.S. Bureau of Labor Statistics released the unemployment numbers for September, the overall population was suffering an unemployment rate of 9.6 percent.
Unemployment in the black community was 16.1 percent. And while unemployment for black women dropped from 13.2 percent to 12.6 percent, the rate for black men rose from 17.3 percent in August to 17.6 percent in September. There are now 1.4 million black men out of work nationally.
The numbers look even worse for black teenagers. While the overall teen population had an unemployment rate of 26 percent, the white teen population had 23.4 percent unemployment and black teens had 49 percent, up from 45.4 percent in August. Unemployment rates based on race are not broken out for the Pittsburgh region.
To call economic conditions in the African-American community a crisis is to understate the problem because the situation black men are finding themselves in could follow them for the rest of their careers.
"This high unemployment that blacks are facing is going to go on for years based on the current economic projections," said Algernon Austin, a sociologist with the Economic Policy Institute, a nonpartisan research center in Washington, D.C. "Blacks are going to have double digit unemployment until 2014."
Even as the recovery slowly takes hold, Mr. Austin said none of the projections call for unemployment among blacks to fall much below 10 percent. "It's a dire situation and unfortunately not many people are treating this as a crisis. ... Even college-educated blacks are facing high unemployment."
Some of the reasons for the intractable problems are a function of economics as much as they are the product of generations of discrimination.
For example, Mr. Austin said those living in a black community with high unemployment may have more problems finding new jobs because the people to whom they would naturally turn -- friends, families and neighbors -- are also experiencing high unemployment.
Black members of the middle class and upper middle class may also be hurt by a lack of depth of wealth. A study by United for a Fair Economy, a Boston-based research organization, showed that for every dollar of net worth that white families have, black families have 10 cents. [link and emphasis added]
Dedrick Muhammad, one of the authors of the report and a research associate for The Institute for Policy Studies, said a number of factors go into those numbers.
College-educated African Americans typically have higher levels of student loan debt because their parents don't have as much money to finance their educations; black homeowners in African-American neighborhoods have homes worth 10 percent to 15 percent less than comparable homes in white neighborhoods; and blacks at all levels of the income spectrum were targeted with subprime loans at a higher rate than whites.
"Any type of bump in the road can be really serious just because there is no wealth to back that up," Mr. Muhammad said. "Most people use their social network in times of crisis, but when your whole social network is in crisis, there's no ladder to climb out."
The recovery is also not helping blacks as much as whites. Whites tend to have more of their money in the stock market, which has regained some of its value, while blacks have more of their money in their homes, and the housing market has been slow to rebound. [...]
Stossel: If America is headed for bankruptcy, what can we do about it? Progressives say they have the answer: tax the rich – people like...me. And, joining us now from Boston is Mike Lapham, Director of...Responsible Wealth, an advocacy group that says, 'tax the rich more.' And, Mike, you include yourself?
Lapham: Indeed, indeed.
Stossel: You're rich?
Stossel: What do you mean by 'Responsible Wealth'? What's 'responsible'?
Lapham: Our members are people who are in the top 5% in terms of their wealth or income in the US. And, they are people who get that they don't need another tax break, that we should have an estate tax, that we need more corp. accountability, things like that.
Stossel: Alright, you don't think, though, that there is a risk that that will kill jobs? I think higher taxes make people work less. [...]
[video clip played]
Stossel: That's the risk...that more people will 'ride horses' instead of start businesses and create jobs.
Lapham: Well, that's the myth, anyway. That certainly sounds good, but the reality is – this has been proven over and over; United for a Fair Economy did a report on this a few years back – there is no real link between tax cuts and job growth. [...]
Meet the millionaire cofounder of Seventh Generation who is part of a growing movement of wealthy Americans urging Congress to let the Bush tax cuts expire.
Although Congress has decided to hold off on voting on the fate of the Bush-era tax cuts until after the November election, the delay has not slowed down the efforts of some wealthy millionaires. The 700 or so members of a Massachusetts-based group called the Responsible Wealth Project have spent the last several months courting politicians to make their case, arguing that the country simply cannot afford to keep tax cuts for the wealthiest Americans and that, as billionaires and millionaires, they hardly need that cash. NEWSWEEK’s Nancy Cook recently spoke with one of the group’s members, the cofounder of Seventh Generation, Jeffrey Hollender. Hollender talked about his disdain for the current tax code, the need for more compassion among the wealthy, and the way being rich often seems relative.
NEWSWEEK: So why do you oppose extending the tax cuts for families that make more than $250,000 a year?
Hollender: This is a time when the wealthiest Americans need to give back to the country. I know this well, as someone who has been financially successful, the vast array of benefits available to me that are not available to other people. It’s a moral question, but it’s also equally economic, because I don’t necessarily need everyone to agree with my morals and my perspectives. We can agree that the country can’t afford the tax cuts. This is the absolute wrong time, because where is that money going to be made up from? It’s going to come from social services. The government will have to reduce expenses, probably by providing fewer benefits for less affluent Americans. I can’t remember the government dealing with economic problems in a way that has inflicted pain on me, but that’s the not the case if you’re living below the poverty level.
Photo h/t Business Innovation Factory via Flickr
Tax Me, Please
Originally posted in The Best Revenge blog, Forbes.com, Oct. 6, 2010
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.
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?"
‘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?
Showdown Over Bush Cuts Revives Estate Tax Fight
Excerpt of original report by Yuki Noguchi, National Public Radio - September 11, 2010
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...
Bring Back the Estate Tax Now
With 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.