Published on 17 December 2009 on City Brights.
By Drummond Pike, Founder and CEO of Tides.
The Wall Street Journal reports that the effort to extend the current Estate Tax regime through next year has failed. As part of the Bush tax cuts, the exemption, above which taxes are due, has been slowly rising. The Conservative plan, put in place in 2001, phases out the tax entirely next year, and then, in the following year, reverts to the 2001 rates and much lower exemption. They couldn’t make it permanent then, as they wanted to do, because it simply cut too much revenue out of the equation, even for the then-dominant Republican leadership on both ends of Pennsylvania Avenue.
Beneath the din of the healthcare debate, and Joe Lieberman’s stunning profile in cowardice and betrayal of his constituency, the inexorable process of displacing taxes from the super-wealthy to the middle class continues its stealthy pace. It is stunning to me that in these particularly dire economic times, the progressive majority in both the House and Senate has squandered the opportunity to extend current year provisions into next year. Neither the House nor the Senate could muster the will to adopt the extension. Lieberman-type leadership at its best?
And the conservatives – wow, they are a whole other kettle of fish. Cynical beyond measure, they figure a bankrupt government is better than no government at all. (Remember that stellar statement by neo-conservative, Grover Norquist: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” So helpful in tough times.)
But this Estate Tax matter is really serious for the non-profit sector – not that you’d really understand that from the way many in philanthropy have used their considerable resources. The Council on Foundations, for instance, does support making permanent the current estate tax regime, though the matter shows up way down their list of public policy priorities, and one has rarely if ever heard the Council’s leadership making the case for the Estate Tax. Even with the more broadly-based, and often far more insightful, Independent Sector, this issue has not really achieved traction with the membership despite the best efforts of its leadership to remind us all of its importance.
Best estimates suggest that the sector will lose $25 billion each year, if the estate tax is abolished. The incentives for the creation of new foundations or the making of very large testamentary gifts to churches and non-profit organizations shift from financial to purely altruistic. In other words, without the tax deductions, people give less. And it means that if a billionaire expires during the next calendar year, she will pass down that entire fortune to her children or other beneficiaries intact. No taxes. No obligation to share with the society that enabled the accumulation of that fortune in the first place. As Bill Gates, Sr. has often commented, these huge fortunes are not easily assembled in other parts of the globe. The infrastructure, educational systems, regulated financial markets (okay, so we still have some work to do!), transportation systems, and everything else that contributes to the creation of successful businesses needs to be supported somehow, and the Estate Tax is a valuable tool for this.
Even more compelling to me, though, are the tragic social and economic consequences evolving from the advent of a new, permanent Upper Class. Declining family size almost ensures that fortunes of $100 million or more can become self-perpetuating fiefdoms in economic terms. In a manner similar to the nobility of the Middle Ages, who reigned over their lands with impunity through primogeniture (i.e. the oldest son gets the whole thing), the new economic elite will become sequestered and insulated from the broader society. Taxes on the income or realized gains from a large fortune will hardly dent its ability to be self-perpetuating. I just fail to see how this benefits society, this diverse and dynamic set of economic and social forces that has created so much in the world. In Kevin Phillips’ Wealth and Democracy, the author draws out the inextricable tie between social equity and the vibrancy of our democratic practice. The fact is inescapable – government must dampen the accumulation of “super-wealth”, and use the proceeds to create opportunity for “the many,” for, after all, the latter is what has always produced the best that America has achieved.
We need your help to preserve the estate tax. Please call the Capitol Hill switchboard at (202) 224-3121 and tell your Senators that they cannot allow the federal estate tax to expire in 2010.
If Congress takes no action before the end of the year, the estate tax will expire for 2010. Let them know NOW that you support the tax, and that you are against tax breaks for multi-millionaires and billionaires.
Thanks for your support,
Chuck Collins, Alison Goldberg, Scott Klinger, Ann Manning and Bill Lyons
Wealth for the Common Good
BACKGROUND on the estate tax:
The U.S. House voted on Dec. 3 to permanently extend the estate tax at its current level. The Senate should do the same or at least pass a one-year extension of the estate tax. Sen. Baucus has implied the Senate may adjourn before addressing the estate tax, and return in early 2010 and retroactively impose it.
In either scenario, your Senator needs to hear from you. According to the Center for Budget and Policy Priorities, if the estate tax were to expire, family farms and small businesses would actually be worse off.
Here’s an op-ed by Bill Gates Sr. and Chuck Collins: Stephen King meets the estate tax.
Posted on The Huffington Post on December 17, 2009
For eight years I have spoken to anyone who would listen about the importance of creating a strong estate tax, and there is no more critical time for action to be taken by Congress on this matter than now.
In a few days the Senate will break for their holiday recess and if they do not act the estate tax will disappear in 2010. The House of Representatives recently cast a 225-200 vote in favor of Rep. Earl Pomeroy’s estate tax proposal, which makes 2009 estate tax law permanent, with a $3.5 million exemption ($7 million for married couples), and a 45% tax rate. If the Senate agrees, the result will still be a loss of $391 billion over 10 years, although that is better than no tax.
Letting the tax disappear entirely will be even more devastating and will cost upwards of a trillion dollars in lost revenue; revenue that supports vital public systems — including transportation and energy infrastructure, education and healthcare — that are the foundation of our broad-based prosperity and economic stability.
This is why I believe we must do more and strengthen this levy, which is our county’s only tax on inherited wealth and applies to less than 1 percent of American families. The estate tax raises substantial revenue from those with the greatest capacity to pay.
If abolished or weakened, there are only three ways to make up the resulting shortfall: cut spending, raise taxes on the middle class, or pile it on to the national debt and leave it to our children and grandchildren who will inherit the consequences of the decisions we make now. This why I and thousands of other wealthy individuals have joined a campaign led by United for a Fair Economy to call on Congress to strengthen the estate tax.
A common, and misguided, criticism of the estate tax is that individuals who work hard and save their money should be entitled to pass on the fruits of that labor to their family. I am not against working hard, saving money, or taking care of your family.
However we must acknowledge that the person who accumulates wealth in this country was not able to do that independently. The simple fact of living in America, a country with stable markets and unparalleled opportunity fueled in part by government investment in technology and research (something my family has plenty of firsthand experience of), provide an irreplaceable foundation for success and have created a society which makes it possible for some men, women and their children to live an elegant life.
I attended the University of Washington under the G.I. Bill, and then became a lawyer enjoying a successful career that allowed me to provide well for my family so that they in turn were able to create their own wealth. So I believe that those of us who have benefited so greatly from our country’s investment in our lives should be asked to give a portion of our wealth back to invest in opportunities for the future.
Society has a just claim on our fortunes and that claim goes by the name estate tax.
Distributed by McClatchy-Tribune News Service on 17 December 2009.
By Bill Gates Sr. and Chuck Collins
Imagine a story about tax policy created by horror writer Stephen King. A fictional Congress, divided between anti-tax ideology and fiscal responsibility, amends the inheritance tax on the very wealthy so that it disappears entirely one year and then returns at steeper rates the following year. Over the “zero year,” death rates skyrocket in the nation’s most affluent ZIP codes. Seemingly robust and healthy billionaires perish in mysterious accidents. Lexus wheels fall off from Bloomfield Hills to Scarsdale to Beverly Hills. Sailboats and yachts inexplicably crash in calm coastal and Caribbean waters. Tainted champagne wipes out clusters of prosperous alumni at class reunions from dozens of elite prep schools from Groton to Choate.
Meanwhile, thousands of infirmed elders take their own lives in organized rituals called “legacy sacrifices.” Pledging unlimited inheritances to their heirs, these multi-millionaires die with smiles on their faces knowing theyve outfoxed Uncle Sam one last time.
If only this were a fiction.
We could actually see these scenarios play next year, unless the real U.S. Congress takes action and prevents one of the more bizarre twists in tax legislation in history from coming to pass.
In 2010, the estate tax, our nation’s only levy on inherited wealth, is set to disappear completely. Then in 2011 the tax returns to 2001 levels, with substantially lower wealth exemptions and higher rates. Talk about perverse incentives.
The stage was set for this scene in 2001, when President Bush and conservative tax cutters tried to abolish the estate tax. They didn’t have the Senate votes, however, for permanent repeal, nor could they afford to lose the hundreds of billions of dollars the estate tax would generate over the subsequent decade.
Congress structured the law to gradually phase out the tax, allowing it to expire in 2010. Then, in a gimmick to mask the real cost of the tax cut, the law sunsets in 2011, reverting back to its 2001 levels.
Tax cutters in 2001 were confident they would return in subsequent years to finish off the estate tax. But the nation’s fiscal situation immediately began to deteriorate and Republicans lost their majority in Congress. In October of this year, the organized wealthy families that spent millions in lobbying Congress to save billions finally conceded they lacked the votes to get rid of the estate tax forever.
You have to remember that the estate tax – at its 2009 level – affects only one in 500 estates. Over the last eight years, the law has been revised so the wealth exemption level rose from $1 million to where it is today, at a generous $3.5 million or $7 million for a couple. Rates declined from 55 percent in 2001 to 45 percent today. This exclusive tax cut for multi-millionaires and billionaires cost hundreds of billions of dollars in lost revenue, a cost added directly to our national debt.
Two weeks ago, the U.S. House of Representatives voted to freeze the federal estate tax at this current level. This is a positive and responsible step. Now the Senate must act.
The Senate could pass legislation that mirrors the House version and settle the issue for years to come. Or they could freeze the tax at its current level for one year – and take it up next year. What they shouldn’t do is further weaken the estate tax by passing proposals such as those introduced by Sens. Jon Kyl, R-Ariz., and Blanche Lincoln, D-Ark.
Without the estate tax, we could lose almost $1 trillion in revenue over the next two decades. There are only three ways to fill that gap: cut spending, raise taxes on the middle class, or – our current favorite – pile it onto the national debt. Instead of leaving prodigious amounts of debt for the next generation, we should retain a meaningful estate tax.
During a time of war and economic crisis, the idea of further tax breaks for multi-millionaires and billionaires is unseemly and unfair.
Bill Gates Sr. is a retired Seattle attorney and author of “Showing Up for Life.” Chuck Collins is co-founder of Wealth for the Common Good (www.wealthforcommongood.org). They are co-authors of “Wealth and Our Commonwealth: Why America Should Tax Accumulated.”
We are partnering with Growth & Justice in St. Paul, Minnesota to host two events in the Twin Cities on the role of wealthy individuals in progressive tax reform.
For more information, contact Ann Manning at ann@wealthforcommongood.org
Published in Oneida Daily Dispatch on 1 December 2009
By Bill Gates Sr. and Chuck Collins
A century ago, President Theodore Roosevelt expressed alarm about the dangerous concentration of wealth and power in the U.S., and called on the incoming 60th Congress to establish a federal estate tax on large fortunes. Its primary objective, Roosevelt said, “should be to put a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate.”
One hundred years later, after a 12-year assault, the federal estate tax is here to stay. The anti-tax organizations and wealthy families that spent millions in lobbying funds to avoid paying billions in taxes have conceded they don’t have the congressional votes to abolish the tax. But that doesn’t mean they’ll stop trying to erode it.
In fact, Congress must act in the next month to discourage a year of mysterious deaths in affluent households and prevent further deterioration of the nation’s fiscal situation. Bush-era tax cuts suspended the estate tax in its entirety for the year 2010, creating a bizarre incentive for wealthy people to prematurely die. Then, in 2011, the estate tax reverts back to its 2001 rules. A one-year patch is needed—if not permanent reform—to avert this fiscally and morally problematic scenario.
With health care dominating the political calendar, Congress may not have the bandwidth to engage in a robust debate about the future of estate tax, but inaction isn’t an option. There’s a serious risk that estate tax opponents will attempt to permanently gut the law further, enabling additional loopholes for wealthy families.
The current estate tax generously exempts the first $3.5 million of a person’s estate and $7 million for a couple. One option before Congress is to freeze the tax at these 2009 levels and index it to inflation. Other options include establishing a progressive rate structure so that smaller estates pay lower rates, while larger estates—those with over $50 million—pay higher rates. Whatever Congress does, it shouldn’t dilute the tax from its 2009 level.
The facts are clear: The estate tax raises substantial revenue from those with the greatest capacity to pay. Abolishing the estate tax would cost more than $1 trillion over the next two decades. There are only three ways to fill that shortfall: cut spending, raise taxes on the middle class, or, the current favorite: pile it onto the national debt.
Instead of leaving a prodigious national debt for our children and grandchildren, we should retain a robust estate tax, avoid the unprecedented interest costs of that debt, and make long overdue investments in education and job creation.
The myths have now been exposed: the estate tax hasn’t put family farms out of existence, nor destroyed family businesses. At current levels, the tax is paid exclusively by the heirs of multimillionaires and billionaires. It affects only one in every 500 estates across the country.
A prudent estate tax policy won’t happen unless we change our attitude about taxing inheritances. No one accumulates a fortune without the help of our society’s investments. The moral justification for an estate tax is that some of us have disproportionately benefited from the fertile economic soil we have cultivated together.
How many billionaires land on the Forbes 400 list courtesy of our technological and scientific commons, including the Internet, airwaves, biotechnology, and mechanical advances? How much wealth would exist without America’s unique property rights protections, public infrastructure, and academic institutions?
The estate tax should be celebrated as an “economic opportunity recycling” program. A progressive estate tax serves as an intergenerational pact between the wealthy at the end of their lives and the next generation, who may not be born wealthy. Previous generations made investments for us and it is our turn to pass on the gift.
Bill Gates Sr., father of Microsoft founder Bill Gates, is a retired Seattle attorney and author of “Showing Up for Life.” Chuck Collins is co-founder of Wealth for the Common Good:
They are co-authors of “Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes” (Beacon Press).
Hello friends,
Progressive taxes are back in the news this week, with a new Associated Press poll showing support for taxes on upper-income Americans to pay for health care. Fifty-seven percent of respondents said they favored a tax increase for individuals earning more than $250,000 a year.
Meanwhile, Congress is considering the idea. The House health care bill would create a 5.4 percent income tax surcharge on households making more than $1 million, and we’re seeing reports that Senate Majority Leader Harry Reid may try to raise the payroll tax on incomes above $250,000, to increase Medicare funding.
What do you think of these proposals? We’d love to have your feedback. Please take a moment to answer our survey on progressive tax proposals.
And elsewhere in the world
Business leaders and wealthy individuals are organizing – and making a pitch to government for progressive taxes. A group of Germans have proposed a 5 percent wealth tax for two years. It could raise 100 billion Euros, they say, and help the country out of the financial crisis.
Here’s a quote from their petition, which was submitted to Chancellor Angela Merkel.
“The path out of the crisis must be paved with massive investment in ecology, education and social justice.
Those who had “made a fortune through inheritance, hard work, hard-working, successful entrepreneurship, or investment” should contribute by paying more to alleviate the crisis.
LISTEN to Wealth for the Common Good co-founder Chuck Collins discussing the proposal on PRI’s The World.
Stop tax haven abuse
We’re getting ready to launch our second campaign petition, calling for an end to overseas tax haven abuse. Responsible businesses are at a competitive disadvantage when other firms hide assets in tax havens and avoid paying their fair share of taxes. Working closely with our partner Business for Shared Prosperity, we’re mobilizing a business and investor voice to support the “Stop Tax Haven Abuse Act” (S506, HR 1265). Stay tuned for the petition launch.
In the meantime, Wealth for the Common Good is still gathering signatures for our petition to reverse the Bush-era tax cuts for households over $235,000, since we know this debate is going to heat up in the coming months. If you haven’t already, please sign the petition.
Events and workshops
Wealth for the Common Good is teaming up with Minnesota-based Growth & Justice to sponsor several conversations about state and federal tax issues in early December. To learn more, contact Ann Manning at ann@wealthforcommongood.org.
And last week we had the opportunity to participate in the annual Making Money Make Change retreat for young donors in Falls Village, Conn. Throughout the past year, we’ve worked closely with Resource Generation (one of the retreat’s co-sponsors) to hold workshops on taxes for young people with wealth in cities across the country.
We’re inspired by a younger generation’s commitment to truly progressive reform and the role young people are playing in the campaign. For information about upcoming workshops, contact Alison at alison@wealthforcommongood.org.
Featured signer
Rachel Durchslag, Executive Director, Chicago Alliance Against Sexual Exploitation
“Put simply, I believe in progressive tax reform because it is socially just for people to give according to their ability and receive according to their need.”
Aired on 12 November 2009. Linked from The World.
Germany’s new conservative ruling coalition is proposing steep tax cuts to help end the economic crisis. That’s sending Germany’s deficit soaring, so a group of very rich citizens says it wants to help bridge the growing fiscal gap. The World’s Gerry Hadden reports.
Wealth for the Common Good co-founder Chuck Collins weighs in on the importance of this movement.
Transcript:
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.
MARCO WERMAN: The European Union today warned countries using the Euro they’d better reduce their debt. German officials say the way to do that in their country is through a drastic tax cut, which would stimulate personal spending. In the short term that means the government might have to borrow. And a group of rich Germans wants to help avoid that, as The World’s Gerry Hadden reports.
GERRY HADDEN: Germany’s conservative Chancellor, Angela Merkel, led Germany over the last five years in what was called the Grand Coalition. That was a euphemism for being forced to govern with the left. And it meant that Merkel couldn’t cut taxes, as she wanted to. Now she can.
ANGELA MERKEL: [TRANSLATED TO ENGLISH] The new government keeps to their word, that becomes clear in their coalition agreement. We’ll focus on growth and tax relief. We are deeply convinced that this is the premise for work paying off and also to create an incentive. But also the promise for coping with the extraordinary situation the new coalition finds itself in. To get out of the financial crisis stronger than before.
GERRY HADDEN: Merkel formed a new coalition last month with the like-minded Free Democrats. Together they’re proposing to slash income tax by about 36 billion dollars a year beginning in 2011. The hope is to spur spending and growth. But Germany’s budget deficit is already predicted to be over six percent next year. That’s twice the allowable amount under European Union rules. So, Germany’s mega-rich. Its moguls and barons, its scions of family fortunes, say they want to bridge the gap. Their solution, that Merkel raise their taxes, not cut them. The group’s leader is Dieter Lehmkuhl.
[SOUND CLIP]
GERRY HADDEN: Lehmkuhl explains how the plan would work. For the next two years any individual income exceeding 750 thousand dollars a year would be hit with an additional five percent tax. So someone earning a million dollars would end up paying an extra 50 thousand. Lehmkuhl says if the tax were implemented it would generate about 150 billion dollars a year, but it would come with strings. The group wants the money earmarked to improve healthcare and social programs, programs that could face cuts due to the crisis.
[SOUNDS CLIP]
GERRY HADDEN: When we tax the rich and narrow the gap between rich and poor, he says, we have the chance for a fairer, freer and more democratic development. And that should be beneficial to everyone including the rich. Ordinary Germans, like art therapist Agnes Zander, like the idea. She says the rich may want to pay more to assuage a certain amount of guilt. But she says that’s just fine.
AGNES ZANDER: I have to admit my first reaction is disbelief. I think we all still believe that behind a good fortune there are criminal acts and there’s not the kind of generosity you’d expect like this act here. So for me it means hope. Let’s start in Germany and let’s do it all over the world.
GERRY HADDEN: Actually, efforts are under way in different parts of the world. In France, England, and the U.S. Chuck Collins lives in Boston. He was the heir to a large meat packing fortune. He helped start Wealth for the Common Good. It’s an organization that also lobbies for higher taxes on the wealthy.
CHUCK COLLINS: We celebrate the roll of individual effort, and creativity in wealth creation. But we also see how critical it is that we live in societies that make public invests in education and healthcare and infrastructure that help create the fertile ground for wealth creation. And without those public investments, which are paid for by our tax dollars, we wouldn’t be able to create the kind of wealth and business opportunities that we have.
GERRY HADDEN: Collins says Wealth for the Common Good has had what it considers modest successes. For example, helping to maintain the federal inheritance tax. The group is currently fighting for congress to let some 800 billion dollars in Bush era tax deductions expire next year. The United States has more millionaires than any other country, an estimated two million of them. Next is Germany with nearly 800 thousand. But Dieter Lehmkuhl’s organization is still small potatoes compared to Collins’ group. It’s drawing a lot of media attention these days, but it’s only collected about 50 signatures for its tax increase proposal. For The World I’m Gerry Hadden
Published in Summer 2009 in the National Committee for Responsive Philanthropy publication. Linked from NCRP online.
Published on 3 November 2009. Linked from In These Times online.
By Pete Redington
BOSTON—After hearing Ralph Nader discuss his new book, Only the Super-Rich Can Save Us, at an event here Friday night, a man expressed the concern many Nader supporters felt upon reading the book’s title.
Only the rich? A book about billionaires giving their time and money to charity? From “America’s first citizen”? Has Ralph Nader lost his faith in grassroots organizing and activism?
Not at all, the perennial third-party presidential candidate replied.
Only the Super-Rich Can Save Usis a utopian fantasy, not an ideological surrender. Its characters are real-life people (usually billionaires) like Warren Buffett, Bill Cosby, George Soros, Yoko Ono and Ted Turner, who are powerful enough to enact large-scale social change.
Nader imagines them acting on behalf of the American people, and wonders what would happen if society’s wealthiest were “not just interested in charity, but real change.”
It is, in essence, Nader’s dream. A dream where the “super-rich” realize they want more than multi-million dollar mansions and private yachts. Or well-endowed foundations memorializing their deaths. “Nothing fails like success,” Nader suggests. His billionaires want more, they want the deeply human satisfaction of civic responsibility. “They want to look their grandchildren in the eye proudly,” he writes.
And so Nader has written his first novel. “If I wrote it as nonfiction,” he quipped Friday, “nobody would believe me.” But he is quick to dispel the notion that his book harbors the secrets the progressive movement has been searching for. “There are no magic wands here,” he cautioned. “In fact, most of the rich are amateurs at social change.”
Instead, over more than 700 pages, the book outlines a blueprint for a progressive movement that is not only top-down, but also bottom-up. Money, argues Nader, is needed to put into effect all the good strategies and ideas that progressives have built. “There’s a difference between being concerned, and being serious,” counsels the always-serious Nader.
But expecting the rich to go against their own interests? That will never happen, challenged skeptics at the public forum in Boston’s Jamaica Plain neighborhood.
Except, as Nader pointed out, it already has. Wealthy Bostonians largely financed the abolitionists of the nineteenth century, including John Brown, “until the very end.” Likewise, decades later, the grassroots activism of the civil rights movement received financial support from America’s wealthy class. Nader suggests there’s no reason it can’t happen again. “If we stereotype the super-rich 100 percent,” he said, “we’re missing out on some who are as enlightened as we think we are.”
This process of aligning the wealthy with the grassroots causes they support is how Nader came to speak at the event. It was organized in part by an organization called Wealth For The Common Good, which works with “wealthy individuals…to promote shared prosperity and fair taxation.”
So there is realistic grounding for Nader’s fantastic visionary novel. And that’s as good a place to start as any.
If it is effective, Only the Super-Rich’s brilliance will lie in providing an image of a more just society, rather than in documenting the unjust system progressives are already exposing.
“We are living in the golden age of the documentary,” Nader notes, listing the political and corporate corruptions that have been so diligently exposed in print and on film, and the lack of societal change that they have resulted in. Today’s exposé studies, he suggested, have little chance of achieving the purposeful impact that a book like Rachel Carson’s Silent Spring did a generation ago.
For inspiration in writing Only the Super-Rich, Nader turned to the classic utopian novels of the past, like Edward Bellamy’s Looking Backward, and Thomas Moore’s aptly titled Utopia. He sees his newest offering as part of this important legacy.
Nader seems less concerned with where the money comes from, and more concerned with a vision of what to do if such funds were available. As anyone involved with social change knows, the only thing more difficult than raising money is deciding how to best use it.
Not surprisingly, Nader has a few suggestions.
Toward the end of the evening, long after receiving a standing ovation, Nader looked out over the packed congregation, full of activists who—like Nader—have experienced the frustration of organizing a great political campaign only to fall short of the ultimate goal. He implored attendees to push the limits of what they believe is possible, asking: “Is there anything in this book that can’t be real?”
He expressed that question as succinctly as possible while inscribing my copy of his book. He wrote, simply: “Imagine.”