Estate Tax Statement from John Bogle

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.

John Bogle "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.