Conservatives call it the death tax. Lawyers call it the estate tax. I grew up hearing it called the inheritance tax. And therein lies a story of wealth and power.
After a 10-year campaign hatched by a small group of wealthy families, Congress repealed the tax in the year 2000. Their crusade climaxed with a PR campaign that made it seem the estate tax was about to kill off the family farm.
The law repealing the tax was delivered to the White House on a bright red tractor but President Bill Clinton wasn't buying. He vetoed the bill and the estate tax continued. No sooner had George W. Bush reached the White House, however, than he made repeal of the tax a big priority and Congress of course was happy to oblige. The day after he signed its repeal the President was out in Iowa talking about it.
[CLIP OF PRESIDENT BUSH SPEAKING IN IOWA]
But the story doesn't end there. There's a campaign to restore the inheritance tax. And it's being led, believe it or not, by some of the country's richest people including Bill Gates, Sr., the patriarch of the Gates family who heads the Bill and Melinda Gates Foundation, and Chuck Collins, an heir to the Oscar Meyer fortune who founded the organization called Responsible Wealth.
They've written this new book arguing for the inheritance tax. It's called WEALTH AND OUR COMMONWEALTH. And they're here to talk about it with me now. Thank you very much.
True or false: many family farms must be sold off to pay for the Federal taxes due on them when the owner dies.
COLLINS: That's false. A number of investigative reporters have gone out to the midwest, they even went to Iowa, and they asked the American Farm Bureau, one of the proponents of repeal, to produce a single example of a farm that had been lost to the estate tax and they could not find one.
And they...the president of the Farm Bureau even sent out an urgent e-mail across the country saying, please, send us examples -- but produced none.
MOYERS: What about that rancher or farmer on that red tractor that delivered the bill to the White House in 2000?
COLLINS: That's an interesting case, because that rancher from Montana, we looked up his name and we found that over the last five years he's received $450,000 in farm subsidies from us the taxpayers. We the taxpayers have been an enormous investor in the Cornwall Ranch in Montana.
MOYERS: That's his ranch.
COLLINS: We are...we're sort of joint partners if you will.
And when he passes that farm on upon his death, we think that the taxpayer should have a claim back on that. It's just, this notion that we did it all ourselves, that is the great big myth here. And that's not to dismiss individual efforts; it's more that we just don't look enough at the role that society plays in helping people create wealth.
MOYERS: True or false, Bill Gates, Sr.: the estate tax is a form of double taxation because you pay when the money is earned and again when you die.
GATES: Well, we do that all the time. You know, double taxation, or the elimination of double taxation, is not an axiom of tax law.
The cardinal example of course is the home I live in in Seattle. I've been paying taxes on that home for 40-some years, year in and year out. And that's not double taxation. We tax property, we tax it regularly. We tax transactions.
The passage of an estate from one generation is a transaction. And that's the proper way to look at it. It's in effect an excise tax. And we tax gifts, we tax sales, we tax transactions ...but that's not double taxation; that's just the way it works.
MOYERS: Why are you doing this? I mean, haven't you declared class war on yourselves in a sense?
GATES: Well, you know, it just...to my eye, it's just a question of fairness. It disturbs us, for example, that here we have a significant ingredient of the Federal revenue stream which people are taking away at the very time that our government is going to need revenue at a level that is unprecedented. We're talking about $200, $300 billion deficits now.
And the notion of repealing a tax in the midst of that situation leads inevitably to the proposition that some other tax is going to have to take its place.
MOYERS: And your case in the book is that if the wealthy don't pay their share, then working people have to pay a larger share.
GATES: That's it exactly.
MOYERS: But isn't it the problem you're up against, that is, that wealth is increasingly concentrated in the top one percent of this population and they're the ones making the largest and most consistent contributions to the political class, so you've got a system that is being...against what you're trying to do.
GATES: Bill, that's precisely true.
COLLINS: We should be concerned about the estate tax repeal precisely for the reason we have an estate tax, which is to prevent the wealthy and powerful from writing the rules and changing the rules of our culture and society.
MOYERS: Was there a moment of "a-ha!"? A moment when you said, I mean, you're a private man, a taciturn man. Was there a moment, though, when something happened that caused you to say, I've got to go public on this?
GATES: Well, actually there was. I was on an elevator in an office building in Seattle and I had a friend who was...I was not aware of, but a friend who had been working on this for some years in the Congress who made the statement to me, he said, Bill, I'm about to bring to fruit of many years of effort. I think the Congress is about to repeal the Federal estate tax.
And I felt as if I had been hit in the chest with a baseball bat. I just thought, oh, no! That is just ridiculous. So...
MOYERS: Why did you think it was ridiculous?
GATES: It's just such a fair tax. I mean, it's just such an opportune, appropriate time to have repaid from the people who have benefitted more than anyone else from the circumstances that this country makes available, from the conditions that make it possible to become....
There's nowhere else in the world, nowhere else in the world, that people can accrue the kind of fortunes that happen here. And that's because of the kind of country we have.
And the kind of country we have is a function of the taxes that we pay to provide security, we have a stable market, you can predict next week will be pretty much like the week before.
We have the most immense investment being made by our government in advancing businesses by supporting the enormous research industry that's going on in this country. And it's that piece of government expenditure that which has everything to do with the health and robustness of our economy.
COLLINS: We believe that people who accumulate great wealth also have been lucky, have had the benefit of growing up and living in the United States, and have benefitted from this enormous public investment.
One of our leaders in Responsible Wealth was standing next to President Clinton when he vetoed the repeal of the estate tax and he said, look, I grew up in New York City, I went to public schools and public libraries and museums. Someone else paid for those.
I went to a college; someone else paid for that. I went into the technology field, a whole infrastructure that had been built with public investment that someone else had paid for. I started a company and I hired professional people who had been trained through a subsidized education system. And I made $40 million. And you're telling me society doesn't have a claim on my wealth? You know...
MOYERS: You gave away much of your fortune, didn't you, when you were a young man?
COLLINS: I did when I was 26, and I...it partly was just out of this sense that I needed to make my own way, and that too much inherited wealth was actually maybe an impediment to my own...making my own way in life.
And I think we're a country that's better off when there's less great concentrations of inherited wealth and more real equality of opportunity where everybody can have a shot at the starting gate of life to make a difference.
MOYERS: Why shouldn't you be able to direct your money to where you want it to go in your will or however you want to do it? I mean, you earned it.
GATES: "You earned it" is really a matter of "you earned it with the indispensable help of your government."
You earned it in this wonderful place. If you'd been born in West Africa, you would not have earned it. It would not have occurred. Your wealth is a function of being an American.
GATES: The huge disparity in wealth that's happening, is something that is, I think, really dangerous.
GATES: Wealth is power, Bill. And it just is not a good situation. And the examples of the aristocracies of Europe are so clear. We don't want to have a country like that. Who was it that said, it was Louis Brandeis who said...
MOYERS: Justice of the Supreme Court...
GATES: Yes, indeed. And he said, you know, we can either have a situation where we have a small number of people with a huge amount of wealth or we can have a democracy. But we can't have both. That's clear wisdom.
MOYERS: Are we living in a new gilded age...do you fear that we're living in that kind of time again?
GATES: I do. I do. You know, the data is very clear. We have this enormous accretion of wealth in the top levels, and it's hugely out of balance. The disparity is very disturbing.
COLLINS: The establishment of the estate tax in 1916 was in a sense a response to the excesses of the first Gilded Age a century ago, that there was a social movement of farmers and workers, people like Andrew Carnegie and Teddy Roosevelt who said, we should have an estate tax because too much concentrated wealth is going to backfire and create an American aristocracy.
So both that and the circumstances of World War I led to the push for an estate tax. And here we are entering the second Gilded Age, a period of incredible dizzying inequality and also new obligations in terms of defense and security spending.
It's unprecedented to think about repealing a tax on the very wealthy in such a circumstance, and yet that's what is being talked about.
MOYERS: And do I understand correctly that you're not advocating that the government take everything that somebody passes on to children?
GATES: On the contrary. No, we're not. We're saying, for example, that if the exemption were three and a half million dollars or $7 million for a family, that.... And the rate was say, 50 percent just as a for instance, then whatever dad and mom leave in excess of $7 million, and half of the rest, still there for the children.
COLLINS: This has been kind of framed as an all or nothing debate, and I think that's been part of the challenge. It's either keep the estate tax as it is or get
rid of it. And for the last few years people have put forward reform proposals.
President Clinton said he would have signed a proposal that would have raised the exemptions immediately to about $3 or $4 million. The problem is that the forces of all or nothing repeal have blocked those proposals. They voted against them because they understand that if those exemptions are raised they're not going to be able to find telegenic farmers and small business owners who are going to be able to stand up, they're going to be...they're hard enough to find now, and they're going to have a very hard time making the case that this is a tax that really does reach down and
injure small entepreneurs.
MOYERS: What do you think is the social harm that comes from a large concentration of wealth?
GATES: I just don't think that my son's children or any other wealthy person's children are benefitted by being handed a quantity of money that's so great that they and their offspring will be really rich for that generation and for generations to come. That's not a good thing for a human being, to be in that situation.
And then more to the point, it's not a good thing for society.
COLLINS: I have a six year old daughter, I don't want her to grow up in a society where we have essentially an aristocracy of power and privilege. That would undermine the quality of life for everybody.
So we're not trying to sound like selfless people here; it's what kind of country do you want to live in? What kind of world do we want to live in?
MOYERS: What do your two daughters think about this? I mean, in effect, you're going to cost them something when you're gone!
GATES: Well, I think I can fairly describe them as being understanding of what's happening here.
MOYERS: So you are in effect penalizing them because of your principles.
GATES: That is correct, but I'm doing the right thing.
MOYERS: But isn't it true that wealth helps create wealth? I mean, some rich people do very good things with their money. Andrew Carnegie built all of those libraries. I served on the board of the Rockefeller Foundation, they're helping to nurture the Green revolution. The Bill and Melinda Gates Foundation crusading for public health around the world. I mean, would you be able to do that if your money were confiscated by the government?
GATES: Well, as you know, Bill, that choice is available to everyone. We're not arguing about something that would change that whatsoever. The charitable gifts will be still be a deduction in computing estate taxes. So a wealthy person has an absolute choice as to whether they pay the tax or whether they give their wealth to their university or their church or their foundation.
COLLINS: Actually, on the other side, if you...if we eliminate the estate tax, we think that there will be...we know from the research there will be a tremendous decline in charitable bequests and giving. And that's not to say that people give simply because of the tax code, but for a wealthy household with $20 million or more, the estate tax is a major incentive. Some $8 to $9 billion a year will be lost from the charitable sector if the estate tax is repealed.
MOYERS: So what's the strategy? What happens now?
COLLINS: Well, in the coming months the proponents of eliminating the tax will try to once again bring up legislation to make repeal permanent.
And they need 60 votes to do that. And we estimate they have about 57. So we're going to be out there basically making the case that we've made here, during a time of tremendous budget deficits, we should not eliminate the most progressive tax we have.
And we're going to try to pull back and win over new allies, people who maybe under different circumstances voted for repeal but under the new current fiscal situation will vote against it.
MOYERS: Who are the swing votes?
COLLINS: There's some key people, the Senators from Maine, Senator Snow and Senator Collins, voted for repeal. Senator Arlin Spector voted for repeal.
MOYERS: Three Republicans.
COLLINS: Senator Ron Wyden from Oregon...
COLLINS: ...a Democrat, voted for repeal. We've identified about a dozen Senators. Senator Voinovich from Ohio, voted for repeal but he's somebody who's been a governor, he's been a mayor, and he knows how hard it is to deal with fiscal issues. He's making noises that he's rethinking this issue.
MOYERS: If someone was to get in touch with the organization, Responsible Wealth, how do they do it?
COLLINS: They can visit us on the Web at responsiblewealth.org.
We have an online petition that people can sign supporting reform but not repeal of the estate tax. And ..we have over 1,000 people who would have to pay the estate tax who have signed it saying it should be preserved. And I think that's an interesting story.
MOYERS: Thank you very much, Chuck Collins and Bill Gates, Sr., authors of WEALTH AND OUR COMMONWEALTH.
COLLINS: Thank you, Bill.