Riches in the Balance

Book cover
Wealth and Our Commonwealthby By William H. Gates Sr. and Chuck CollinsBeacon Press. 166p $25

The tax code, according to a former I.R.S. commissioner, embodies all the essence of life: greed, politics, power, goodness, charity. Everything’s in there. With the estate tax, everything is magnified dramatically.

In Wealth and Our Commonwealth, William H. Gates Sr. and Chuck Collins make a forceful case for retaining the estate tax. Mr. Gates, an accomplished attorney with a long history of civic involvement, co-chairs the Bill and Melinda Gates Foundation. Mr. Collins is co-founder and program director of United for a Fair Economy and Responsible Wealth.

Advertisement

Despite their own financial fortunes, the authors believe that the estate tax is an essential instrument of public policy. They are particularly concerned about the negative impact of concentrated wealth on democracy, the economy and justice. Given the startling fact that the United States is the most unequal of all the industrialized nations, and given the even more startling fact that inequality in the United States has reverted to levels not seen since the 1920’s, the debate over the estate tax takes on an even timelier significance.

So what is the estate tax, why do we have it, and why is there such a concerted effort to repeal it?

The estate tax is a so-called transfer tax that is imposed at the time of death on large fortunesso large, in fact, that only 2 percent of all estates are covered. As a matter of public policy, it plays a key role in the funding of public services, in charitable giving and in broad social matters of wealth, power and equality.

Supreme Court Justice Louis Brandeis once wrote that the United States can have concentrated wealth in the hands of a few or can have democracy, but we cannot have both. It was largely this perspective that drove many reformers to advocate policies like the estate tax in the first place. The inequalities of the Industrial Revolution and the Gilded Age (or the Robber Baron Era, depending on your historical preference) led rural populists and urban progressives to propose reforms ranging from the income tax and the direct election of U.S. Senators to antitrust legislation and the organized labor movement. Andrew Carnegie and John D. Rockefeller took personal steps to limit the growth of an economic aristocracy by establishing significant philanthropies. And President Theodore Roosevelt, concerned about malefactors of great wealth in 1907, contended that most civilized countries have an income tax and an inheritance tax.

The contemporary opposition groups, according to the authors, present a case study of narrow special interest politics. A number of very wealthy individuals, and major campaign contributors, are leading the abolitionist forces. By cleverly dubbing the estate tax the death tax, opponents have spun tales of farmers, disabled widows and others who are allegedly victimized by this tax. Unfortunately for the opponents, the authors puncture this picture with a dose of fact-based reality, showing how virtually all such stories are undocumented.

Moreover, advocates of repeal seem to think that individual achievement occurs in a vacuum, without acknowledging the broader role of society in enabling individuals to lead successful lives. Indeed, proponents of repeal conveniently forget public schools, libraries, museums, the G.I. Bill and other assistance programs, and charity. Repeal advocates also overlook a broad array of specific taxpayer investments, like roads, airports, seaports and scientific research.

As a matter of social and economic justice, the estate tax also speaks volumes about the public good. Noting that many opponents of such anti-poverty measures as food stamps seem to be in the forefront of the repeal effort, the authors cite the investor Warren Buffett’s observation that an untaxed estate is like having a boundless supply of privately funded food stamps based on an accident of birth, which strikes at my idea of fairness.

The estate tax also has had a profound impact on charitable giving. Indeed, the investor George Soros believes that the estate tax is a primary incentive for philanthropy, and that its repeal would have a damaging effect on nonprofit organizations. His opinion is borne out by research forecasts that envision reduced contributions if the tax is abolished.

Readers of America may be particularly interested in the religious dimension of the estate tax debate. The authors review the Jewish tradition of tzedakah (in which property owners care for people in need because wealth is a gift from God) and the Islamic mandate of zakat, along with the voluntary notion of sadaquh (in which individuals are part of a broader community).

The authors also highlight the Christian perspectives of stewardship and wealth balanced by moral limits. They cite the 1986 pastoral letter Economic Justice for All, in which the U.S. bishops reminded us that there is a social mortgage on capital, because no one has the right to unlimited accumulation of wealth or is justified in keeping for his exclusive use what he does not need, when others lack necessities. Moreover, the bishops argued, wealthy individuals must remember that they have benefited from the work of many others and from the local communities that support their endeavors.

Finally, there is a curious irony in White House support of faith-based initiatives on the one hand, and its desire to end the estate tax on the other hand, particularly because the estate tax is a key public policy instrument for promoting private philanthropy.

Oliver Wendell Holmes wrote that taxes are the price we pay for civilization. If that is true, then the estate tax, as the authors conclude, is fair tribute to a society that has created the conditions that enable some individuals to become wealthy and prosperous.

Comments are automatically closed two weeks after an article's initial publication. See our comments policy for more.

Advertisement

The latest from america

Musician Billy Joel performs during his 100th lifetime performance at Madison Square Garden on Wednesday, July 18, 2018, in New York. (Photo by Evan Agostini/Invision/AP)
Steven Hyden says he is not a religious person, but he is fervently devoted to the music that he grew up with.
Maurice Timothy ReidyAugust 14, 2018
A much-needed biography of Paul Hanly Furfey (1896-1992): priest, sociologist and urban revolutionary theorist.
Jack DowneyAugust 10, 2018
What happened to Egypt's popular uprising?
Ryan RichardsonAugust 10, 2018
A memoir that includes historical analysis as well as biographical narrative tells the tale of four Mexican-Americans unsure if they belong any longer in their adopted country.
Vivian CabreraAugust 09, 2018