Published on Wednesday, February 14, 2001 in the New York Times

Dozens of Rich Americans Join in Fight to Retain the Estate Tax

Buffett, Soros and Gates's Father Call It Only Fair

by David Cay Johnston
 
SEATTLE, Feb. 13 — Some 120 wealthy Americans, including Warren E. Buffett, George Soros and the father of William H. Gates, are urging Congress not to repeal taxes on estates and gifts.

President Bush has proposed phasing out those taxes by 2009. But a petition drive being organized here by Mr. Gates's father, William H. Gates Sr., argues that "repealing the estate tax would enrich the heirs of America's millionaires and billionaires while hurting families who struggle to make ends meet."

The billions of dollars in government revenue lost "will inevitably be made up either by increasing taxes on those less able to pay or by cutting Social Security, Medicare, environmental protection and many other government programs so important to our nation's continued well-being," the petition says.

In addition to the loss of government revenue, the petition says, repeal would harm charities, to which many of the affluent make contributions as a way of reducing the size of their estates.

"The estate tax," it says, "exerts a powerful and positive effect on charitable giving. Repeal would have a devastating impact on public charities."

Mr. Buffett, the Omaha investor who ranks fourth on the Forbes magazine list of the richest Americans, said in an interview that he had not signed the petition itself because he thought it did not go far enough in defending "the critical role" that he said the estate tax played in promoting economic growth, by helping create a society in which success is based on merit rather than inheritance.

Mr. Buffett said repealing the estate tax "would be a terrible mistake," the equivalent of "choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."

"We would regard that as absolute folly in terms of athletic competition," he said. "We have come closer to a true meritocracy than anywhere else around the world," he said. "You have mobility so people with talents can be put to the best use. Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit."

The petition is to appear in an advertisement on the Op-Ed page of The New York Times this Sunday and later in other newspapers.

Among those signing it are Mr. Soros, the billionaire financier; the philanthropist David Rockefeller Jr., former chairman of Rockefeller & Company; Steven C. Rockefeller, chairman of the Rockefeller Brothers Foundation; Agnes Gund, a philanthropist whose family owns stakes in many companies, and Ben Cohen, a founder of Ben & Jerry's.

Mr. Buffett and the younger Mr. Gates have both said they will give away most of their fortunes in bequests at death. Many of the signers have longtime affiliations with causes that depend heavily on charitable gifts, including bequests, and they are concerned that outright repeal of the estate and gift taxes would lead to a sharp drop in charitable giving.

A number of the signers are Democrats, and some have contributed heavily to the Democratic Party. But the elder Mr. Gates said in an interview that the idea for the drive was his own and that the support he had received was nonpartisan. Mr. Gates, like his son, has consistently declined to align himself with either of the political parties, and he said he had never given a moment's thought to the party affiliations of those being enlisted.

The petition says that "repeal of the estate tax would be bad for our democracy, our economy and our society," although its backers add that adjustments may be needed to help families passing down farms and small businesses. "Let's fix the estate tax," the petition says, "not repeal it."

Estate taxes are assessed on the net worth of an individual at death. There is no tax on the first $675,000, and under current law that exemption is to rise to $1 million by 2006. (Farms and family businesses already enjoy the $1 million exemption.)

But amounts above that threshold are taxed at rates that begin at 37 percent and rise to 55 percent, the rate that applies to anything greater than $3 million. The estates of fewer than 48,000 Americans a year — 2 percent of annual deaths — pay the tax. Nearly half the total is paid by the estates of the 4,000 people who die each year leaving $5 million or more.

President Bush has made repeal of what he calls the death tax a part of his plan to cut taxes by $1.6 trillion over the next decade. His plan would also repeal the gift tax, which applies to gifts of more than $10,000 a year per recipient, and would permanently exempt from taxation all capital gains held at death.

Mr. Bush and Congressional Republicans who support the plan say that estate and gift taxes discourage savings and investment. Repeal, they assert, would increase economic growth by rewarding those who build great fortunes and creating incentives for them to invest more.

Mr. Bush says his plan would save those now subject to gift and estate taxes $236 billion over the next decade. Critics of the plan say this estimate of the cost to the Treasury is very low, because it does not take into account what tax experts have described as the new ways that repeal would give the wealthy to avoid income taxes.

The elder Mr. Gates, who gained affluence as a prominent Seattle lawyer, said he had not asked his son, the chairman of the Microsoft Corporation, to sign the petition.

"My son is sympathetic," he said, "but he wants to stay focused on three things: his family, Microsoft and world health," which is the main interest of the Bill and Melinda Gates Foundation.

The elder Mr. Gates said the money that Mr. Bush wanted to devote to repeal of the estate and gift taxes could be put to better use "to reduce other taxes, which affect the other end of the economic spectrum."

"Ever since I heard that somebody was trying to repeal the estate tax, I have been angry," Mr. Gates said, adding that if it were not for his full-time job, he would organize a group called Millionaires for the Estate Tax. Mr. Gates is president of the Bill and Melinda Gates Foundation, which has an endowment of $20 billion.

Mr. Gates is working on the drive with United for a Fair Economy, a nonpartisan, nonprofit organization in Boston that wants to narrow the gap between rich and poor. The petition on the estate tax is being circulated among Americans with enough money that they are affected by it, and a spokesman for the Boston group, Chuck Collins, said that of more than 120 such people asked to sign, only four had declined. He would not identify them.

Copyright 2001 The New York Times Company