Gates Sr. and Collins balance readability, policy-wonk detail in estate-tax book
Special to The Seattle Times
In 1981, as Washington's revenue director, I lobbied behind the scenes against a proposal to reduce the tax that the state levies on the heirs of personal fortunes. I lost the debate, and my boss, Gov. John Spellman, put forth a plan that voters approved at the 1981 general election, despite a severe recession and state budget cuts.
I didn't forget the experience. What struck me was that a majority supported axing a tax whose impact was felt only by the wealthiest 7 percent of families.
Last December, I shared my 1981 encounter for the first time in years — with Bill Gates Sr., chairman of the State Tax Study Committee. He was presenting its report, and I was event moderator. As we visited at lunch, Gates expressed his opposition to repeal of inheritance and estate taxes.
Here was a moment to remember: the father of the world's richest man arguing passionately against the unrestricted transfer of inherited wealth. Gates so strongly opposes repeal of taxes on accumulated fortunes that he's co-authored a book, "Wealth and Our Commonwealth" (Beacon Press, $25) with Chuck Collins, head of Boston-based United for a Fair Economy, a group that tracks issues of economic inequality. Prominent endorsers of the book include former Federal Reserve Board Chairman Paul Volcker and President Jimmy Carter, winner of the 2002 Nobel Peace Prize.
In a 140-page text, Gates and Collins strike a nice balance between readability and policy-wonk detail. Their critique of the estate tax is offered in a larger policy context. Recent and proposed income-tax cuts would give the top 1 percent of households half the relief, after two decades when almost half the gains in real income went to the same households.
Add to that ballooning deficits and the looming challenge of baby-boom retirement, and the authors see a collision that makes neither economic nor moral sense.
Even among those with no objection on principle, one concern about taxing estates has resonated widely: Owners of family businesses fear their heirs will be forced to sell the property in order to pay estate taxes.
On this theme, Gates and Collins devote three pages to the "passionate and committed" role of Seattle Times publisher Frank Blethen in organizing owners of independent newspapers nationwide. "He has marshaled his considerable energy and resources to the cause. The fact that repeal efforts have advanced as far as they have is a credit to his talents and tenacity," the authors note ruefully.
They say that full-page ads run in The Seattle Times "were full of distortions and misinformation" about the devastating effect of the estate tax on family businesses and the benign effect that repealing the tax would have on federal finances.
By contrast, Gates and Collins argue that insurance and planning enable an estimated 77 percent of heirs to pay the tax without borrowing money, let alone losing the family business. The authors cite 1997 reforms that offer a deduction when a business is more than 50 percent of an estate and, in every case, allow the tax to be paid over 14 years at below-market-rate interest.
They add that, over a decade, repeal would cost the U.S. Treasury $850 billion and charities $60 billion in lost receipts.
Some of Seattle's best minds have been drawn to both sides of the estate-tax battle. As his lobbyist, Blethen enlisted George Duff, for 20 years the quietly effective president of the Seattle Chamber of Commerce. Like Gates, Duff is on the short list of people who have helped Seattle be a smart city.
Consistent with his side of the argument, Gates walks the talk as co-chairman of the $25 billion foundation funded by his son's wealth. That's in the great tradition of Andrew Carnegie, who urged the very rich to give their fortunes away during their lifetimes; John D. Rockefeller, who did so to the tune of $540 million ($6 billion in today's money); and Henry Ford, who left the bulk of his estate to a foundation that a half-century later ranks among the top three.