William H. Gates, Sr. and Chuck Collins, Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes.
This book is an able attempt to convince Americans to reconsider the total repeal of the estate tax and the resulting impact that such repeal will have on our economy and our society. The authors assert that the estate tax is needed to prevent the creation of a group of super-wealthy so that there will not be an erosion of political and economic power within our society. Stated differently, the authors argue that, without an estate tax on the wealthy, our society will evolve into one where only the very wealthy will gain political power as a result of enhanced economic power. This transformation translates into one that exacerbates the existing disparity between the haves and have-nots, which will further deprive many of our citizens from having the ability to take part in society on their own behalf. The authors' book is a joint appeal to get Americans to understand the reason for the existence of the estate tax in the first place and the consequences of a reality in which no estate tax is levied on the very wealthy.
The authors are two very prominent citizens among a group of very wealthy and influential taxpayers who have openly (by signing and advertising their objections to outright repeal of the estate tax in newspapers across the country) objected to the repeal of the U.S. estate tax. Bill Gates, Sr. is the chair of one of the largest foundations in the world, while Collins is the cofounder of United for a Fair Economy and Responsible Wealth.
The book consists of five, fairly short chapters, a foreword by Paul A. Volker, an epilogue, notes, and a selected bibliography. In addition, while much of the book is based on the authors' beliefs about why the estate tax should remain, there are many parts of the book that are supported with data and facts so as to achieve high level of objectivity. This is especially true in Chapters 3 and 4, which address most of the highly charged questions and issues surrounding the estate tax.
The authors begin with the premise that, for the really wealthy, paying estate taxes is a necessary outcome as their accumulated wealth is partially the result of their fortuitous opportunities and by the virtue that they have been allowed to operate in a free society enjoying the benefits that government provides (in the way of property rights and the enforcement of these laws). In addition, they believe that, because wealth was created in such an environment, one-quarter to one-third of a wealthy decedent's total estate is a fair price to pay, even expected to pay, for the opportunities provided by our free society. Further, our government should have every right to expect payback in exchange for the cost of these privileges.
While the authors point out that the estate tax contributes needed revenue for the federal government coffers, albeit a small share, and point out that the amount will become an increasingly larger portion of the overall budget plan, the real value of this book lies in the persuasive manner the authors apply in convincing the reader that it is simply the duty of wealthy Americans to pay an estate tax.
The strengths, and hence the real value of this book, are twofold: first, in providing a comprehensive discussion of the history and development of the estate tax, and second, in addressing critically the most frequently asked questions about the estate tax.
The authors add a rich discussion of the development of the estate tax and its history as part of the basis for insisting that the estate tax repeal not be sustained. The discussion captures the mood and political realities during the 19th century and the social and economic conditions that helped form the debate and passage of the original estate tax. The authors rely on this history to persuade readers for the need of a serious dialogue and debate about the current status of the tax. They do a good job of referencing many of their statements and provide an array of sources for the reader to conduct further research. The authors also do a worthy job of providing factual data when addressing some of the more pressing issues related to the estate tax, such as whether it is really necessary to provide special breaks for small businesses and family farms. They present statistics and facts that cause the reader to question these long-standing preconditions and arguments for eliminating the estate tax. The authors' arguments are quite convincing and are woven throughout the text with the underlying premise that the wealthy in fact should face an estate tax.
While the authors believe the estate tax is a necessary part of the overall revenue raising landscape, they do espouse the need for the tax to be levied only on the very rich. The authors discuss and provide some data to suggest who should actually be subject to the tax. They are fully in favor of a fairly high exemption level so that most estates do not face the tax at all, and they favor a fairly progressive tax rate so that the effective rates still provide necessary revenues for the government.
In Chapter 3, the authors do an admirable job of addressing the usual volatile questions about the estate tax and do so, for the most part, with data and some statistics. One telling example deals with the rancher who drove his tractor to deliver the estate tax repeal bill for Clinton's signature to emphasize the "alleged plight of farmers facing the estate tax" (p.73). Through research, the authors point out that this very same farmer, over a period of five years, received over $400,000 in direct cash farm subsidies. This amount did not include a very sizable indirect subsidy in the form of grazing rights for the same farmer's cattle. The authors use this example to help justify why very large farms should not be exempt from the estate tax. They assert that. without the support and aid of government and society in general, certain wealth could not be attained.
The authors speculate that one adverse outcome of not having an estate tax is that charitable giving will decline by drastic amounts. They provide evidence that the super-wealthy contribute large amounts to charities, including large foundations, and that this giving will be affected negatively if the estate tax is not present to provide the incentives for such giving. What they do not address, however, is the impact of economic, political, and social power that large foundations supported by such giving possess. Indeed, Gates is a trustee of the world's largest foundation. Under the current situations, contributors to and trustees of these larger foundations have a great deal to say about how such wealth gets redistributed to their own causes. The book would have benefited from addressing such concerns and the fallout for these foundations should the estate tax continue beyond 2011.
In conclusion, this book is a must read for anyone interested in learning more about the estate tax but is a particularly useful read if you want to gain insight as to the basic reasoning for the authors' support for the estate tax. This book would be useful as additional reading for any tax graduate student studying the estate tax as well as elective reading for undergraduate in senior level tax classes. The authors have done a good job of trying to present a somewhat objective dialogue to encourage more debate about the impact of repealing the estate tax. Beware that the authors admittedly take a pro-estate tax stance, but they do so in an effort to educate and inform society about the necessity of having the tax and try to back it up with facts.
ARTHUR D. CASSILL
|Printer friendly Cite/link Email Feedback|
|Author:||Cassill, Arthur D.|
|Publication:||Journal of the American Taxation Association|
|Date:||Mar 22, 2004|
|Previous Article:||Scott M. Estill, Tax This! An Insider's Guide to Standing up to the IRS.|
|Next Article:||John E. Karayan, Charles W. Swenson, and Joseph W. Neff, Strategic Corporate Tax Planning.|