A Fair Payment for War

Washington Post • March 25, 2003

By William H. Gates Sr. and Chuck Collins

Last week we saw something unprecedented in American history: a push for tax cuts targeted to the wealthy in a time of war. As U.S. jets prepared to bomb Baghdad, Sen. Jon Kyl (R-Ariz.) offered an amendment to the federal budget legislation accelerating the repeal of the estate tax. It is a provision that would benefit less than 2 percent of the wealthiest taxpayers. It passed by a narrow vote of 51 to 48.

There is something unseemly about Congress's obsession with repealing the estate tax, the nation's most equitable tax on accumulated wealth, at a time when life and death are at stake. The American history of estate and inheritance taxes is wound together with mobilizations for war. The first federal tax on wealth was levied in 1797, as our country was faced with the escalating costs of responding to French attacks on American shipping.

During the 19th century, federal revenue came primarily from excise taxes and tariffs. Income and estate taxes were imposed only in revenue emergencies, during the Civil War and the Spanish-American War. Wartime taxation, or the "conscription of wealth," was perceived as equitable at a time when many citizens were sacrificing their lives, sometimes as soldier proxies for wealthier citizens.

The 1916 estate tax was a fundamentally American response to the excessive inequalities of the Gilded Age and reflected the country's need to move beyond reliance on the regressive tariff and excise taxes as primary sources of government revenue. Yet it was given a tremendous push by the U.S. entry into World War I and the need for wartime funds. Even after the war, businessman Harlan E. Read argued in his book "The Abolition of Inheritance" that war debts should be paid off with heavy taxes on inherited wealth.

In order to pay for World War II, the income tax was broadened to many lower-income households. In 1942 Irving Berlin wrote a patriotic song called "I Paid My Income Tax Today" to mark the unprecedented tax collections. One verse went: "You see those bombers in the sky, Rockefeller helped to build them, so did I." President Franklin D. Roosevelt understood that national unity against Hitler depended on a sense of shared sacrifice, by both Rockefeller and Rosie the Riveter.

Top income rates were boosted, and the estate tax was increased so that fortunes exceeding $50 million would be taxed at 70 percent. FDR spoke out boldly against war profiteering, saying, "I don't want to see a single war millionaire created in the United States as a result of this world disaster."
Today the lives of some of our citizens are at risk. Others are feeling the pain of the recession, losing their jobs, savings and security. State and local governments, facing the worst budget cuts since World War II, are laying off workers and cutting education spending, children's health care and basic human services.

Rather than facing these problems and appropriating the money to resolve them, congressional leaders are using the diversion of war to pass a tax cut for the wealthy that would exacerbate budget shortfalls at all levels. While the public's attention is riveted on Iraq, the Senate acts to accelerate the repeal of the progressive estate tax.

At a time when states need $70 billion in federal aid to close their deficits, federal priorities seem to be very different. Will the costs of war be paid by reductions in spending, mostly affecting our most vulnerable citizens? Will there be clear domestic economic winners and losers in the conduct of this war?

Political scientist Michael Lipsky observed a year ago that this war "will evidently exacerbate the divide between rich and poor." Wars have had this effect on the United States before, but absolutely without precedent is a push for a windfall tax cut for the wealthy as wartime expenses mount.

William H. Gates Sr. is co-chairman of the Bill and Melinda Gates Foundation. Chuck Collins is co-founder of Responsible Wealth. They are the authors of "Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes."

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