Q & A: William Gates Sr. on the Estate Tax

Minneapolis Star-Tribune • October 26, 2003

By Dave Hage

Q Every time we write about the estate tax, we get agitated letters from readers who say it is unfair to tax away wealth or small businesses that Americans have accumulated through thrift and hard work. What do you say to them?

A Well, first of all, under current law the number of households who pay the estate tax is tiny -- in the year 2000 in Minnesota there were only 530 estates subject to the estate tax out of 37,000 deaths. ... As for small business, the tax code already has large exemptions for farms and family businesses, and no one has ever identified one farm that had to be sold to pay the estate tax.

But let me talk about values. We started off a long time ago in this country on the theme that it was not a good thing to have a small number of people at the top who were enormously wealthy, and I think we continue to believe that that's not a healthy situation.

As a matter of fact we haven't done a very good job of maintaining equality of opportunity in this country. At least the estate tax has made a contribution toward curbing the accumulation of enormous wealth in certain families, which really endangers people's sense of starting equally in the same race.

Q Your son is now one of the wealthiest individuals in the world. Do you ever get accused of being a traitor to your class?

A Yeah, yeah. But some people who think that don't always say it. I don't belong to any class.

Q What about people who say it's their money, they earned it and the government has no right to take it?

A Well, beyond the leveling issue, there is a question of the role of taxation.
The business of being wealthy, if you look at it fairly, is a direct function of the contribution that government makes.

Government creates markets that are stable and can be regulated, it educates our children, it gives us law and order and a court system for resolving our disputes, it funds research that gave us the Internet and genomic research, which created huge fortunes, even the Air Force that flies over our heads and keeps us safe. It's those "freebies" that are created by tax dollars.

The fact is that their wealth, their comfort is largely to be credited to the circumstances in which they grew up.

Q But why tax the savings that families have built up over a lifetime?

A You could ask the same question about any tax -- when you get the tax bill from the county every year on your home. You earned the money, you paid the mortgage, you fixed the plumbing, you paid the roofer -- why do they tax you on it? Come on. It's just a simple matter -- there's no way to run this country without taxation. There's no God-given right to hang on to every dollar you earn. -- not if you want schools and roads and an army. Taxes are a way you run society.

Q What about the argument that families have to sell off the family business to pay estate taxes?

A There is some truth to it. The estate tax in some cases imposes a liquidity problem. But this is grossly exaggerated. It is not really the small-business lobby that set out to eliminate the estate tax. It was a small group of very wealthy families who just wanted to get rid of it. We do have to do some kind of liberalization of the rules in the Senate. But the proof of the pudding is that every time one of those compromises comes up in the Senate, it fails. What that obviously shows is that the impetus to eliminate the estate tax is not to fix the small-business problem, it's to repeal the estate tax for extremely wealthy families.

Q Why does the nonprofit community care about the estate tax?

A Let's be honest: People give money to charity for many reasons -- altruism, a belief in a particular cause. But when they know that they are directing that money to a cause they believe in rather than to the IRS, they give more to charity.

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