One of the provisions of president Bush’s tax plan is the eventual elimination of the estate tax. When one considers that the government (state and federal) can take over 50 percent of your earnings and then turn around and take another 54 percent of that in the form of the estate tax, eliminating the double taxation of dividends seems like peanuts compared to this double taxation of wealth.
Strangely enough, there are a few well-heeled souls who strongly oppose president Bush’s proposal. One leading advocate of this opposition is none other than the father of the wealthiest man in the country — Bill Gates, chairman of Microsoft. According to Forbes magazine, Gates the Younger is worth an astounding $43 billion. One might expect that Gates the Elder would object to his son’s potential estate tax of over $20 billion based on current law. (If the tax were eliminated, Gates Jr. could add another $20 billion to the foundation he runs with his wife). So, a recent article about why Gates Sr. opposes the president’s plan to eliminate estate taxes takes on added interest.
Gates Sr.’s explanation of his opposition couldn’t be simpler: “There are some things that are right, and some things that are wrong. And it’s more right to have an estate tax. Really, it’s a valuable tool of democracy. Its repeal would be a disaster.” Don’t you just love how some patricians take the moral high ground with statements like “…it’s more right”? What is more right? Is taking over 75 percent of an individual’s wealth through the income and estate tax and spending it on a variety of politically motivated objectives more right? It seems to me more wrong than right.
Gates Sr. goes on to say the following: “In theory, any mode of taxation that minimizes huge fortunes is good public policy.” His use of the term “minimizes” should concern hard-working Americans as many totalitarian regimes implemented programs to confiscate wealth from society on the grounds that it was good public policy. If Gates Sr. had his way, the ability to accumulate wealth would be problematic. If that quote doesn’t scare you, how about this one: “…which is part of why we don’t want so many wealthy people. We don’t want ridiculously wealthy people in this country, particularly people who have inherited their wealth.” Yikes!
Gates Sr. then goes on to attack one of the all-stars of the corporate world — Jack Welch, the previous head of General Electric: “The executive pay in this country is a disgrace. The greatest example is the Jack Welch case. He’s a wonderful man, but what possible argument could anybody make that his exit package was a corporate act in the interest of the shareholders of the General Electric company? That’s just pure, unadulterated bulls***.” This thinking is well beyond the bounds of normalcy.
Reading further into this article, I found that Gates Sr., also a co-trustee of the Bill & Melinda Gates Foundation ($24 billion), espouses the value of private savings. When asked about the role of foundations in general, he points out what “wonderful things the Ford Foundation has done.” On the one hand he advocates government confiscation of wealth through estate taxes to shrink the number of wealthy people, but then he recognizes the social value of foundations that are created by many of these same wealthy individuals. If the government eliminated estate taxes, my guess is that we would have a lot more private foundations that would do wonderful things.
What I find ironic is that Gates Sr., who argues for the transfer of wealth from mega-millionaires to society via the tax system, finds himself as co-trustee of a foundation with a value of $24 billion that dribbles out a small portion of that value to “subjectively determined” worthwhile causes. If Gates Sr. believes in what he says, the foundation should be liquidated and distributed to needy causes. Why wait?
From another perspective, isn’t this family foundation the equivalent of the wealthy entrepreneur or family, except that it doesn’t pay taxes? Many individual taxpayers who have to fork out 30 percent and more of their earnings to Uncle Sam each year exist in a world where a $24 billion foundation pays zero taxes. If Gates Sr. is so high on wealth redistribution, maybe he should be advocating a tax on foundations. Fat chance, of course. As a matter of fact, Gates Jr. may have avoided millions — if not billions — of dollars in taxes by the very creation of the foundation in the first place.
The bottom line is that Bill Gates the Elder’s advocacy against the repeal of the estate tax is a thinly veiled manifestation of the old classic “do as I say, don’t do as I do” philosophy, with a little moral subjectivity thrown in for effect. Fortunately only a few wayward polemicists who share this view support his wealth-redistribution schemes. Amen.
*This is the title of an interview that appeared in Trusts & Estates magazine, May 2003.
— Tom Nugent is Executive Vice President & Chief Investment Officer of PlanMember Advisors, Inc., and an investment consultant for Wealth Management Services of South Carolina.