Who Will Pay?
By E. J. Dionne Jr.
Friday, January 17, 2003; Page A23
"I thought it was an interoffice joke."
That's how Chuck Collins, co-founder of a group called United for a Fair Economy, reacted when he was first told that William Gates Sr. wanted to talk with him about stopping the repeal of the estate tax.
It was no joke. The father of one of the richest men in history believes, as he put it during a visit here this week, that the inheritance tax "is the most intelligent tax ever devised."
Why? Because it doesn't tax labor or investment. It encourages each generation to build new wealth. And it accepts the idea that the very wealthy owe something back -- not just to society but to government itself. In their just-published, clearheaded primer on estate taxes, "Wealth and Our Commonwealth: Why Americans Should Tax Accumulated Fortunes," Gates and Collins quote Theodore Roosevelt.
"The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government," the Republican Roosevelt declared in 1906. "It is only under the shelter of the civil magistrate that the owner of valuable property can sleep a single night in security." Without government to enforce contracts, protect life and property, and mitigate social inequities, the very wealthy would live in constant fear of being plundered.
Gates, a happy warrior and a bear of a man, has thrown his formidable resources into making sure that he and people like him pay a decent share of the cost of government. He and Collins are doing urgent work. By pushing to repeal both the estate tax and the dividends tax, the Bush administration is doing all it can to shift the total tax burden away from the very wealthy and toward middle- and lower-income taxpayers.
The administration is disguising its intentions by combining these large tax cuts for the wealthy with more modest breaks for people in the middle class, all the while running up the deficit. It is trying to push off the table the obvious option -- to give a break to the middle class without handing out huge sums to a very small number of very wealthy Americans. It will and should be repeated over and over that under Bush's program, Vice President Cheney would get a tax cut of $327,000, according to calculations by Bloomberg News based on Cheney's 2001 tax return. In a time of war, is it really urgent to plunge the country ever deeper into debt to give Cheney and comparably placed taxpayers that much relief? The administration is placing the burden of helping the wealthy now on our children and grandchildren. This is not only unjust, it's nuts.
Gates and Collins, whose book focuses on the estate tax, ask the essential question: Isn't the estate tax a better tax than the alternatives? "Estate taxes compared with what?" they write. "Wage taxation? Increased sales taxes? Consumption taxes? A return to nineteenth century tariffs?" Their questions apply just as well to the tax on dividends.
Ah, but wouldn't everyone pay less if government grew smaller? But this administration, with its war plans and other military expenditures, is making government bigger. Without big cuts in spending on items that Americans like -- Medicare and other health programs, Social Security, child care, aid to education and, let's not forget, domestic security -- the choice will be larger deficits or a heavier tax burden on middle-class and poor Americans.
And as state and local governments' revenue dries up while the federal government puts more burdens on them -- for example, homeland security costs and the price of complying with the new education law -- these governments either have to raise taxes, especially regressive sales taxes, or slash spending.
Which of the following would be smarter: for the feds to put lots of money into repealing estate and dividend taxes that affect a handful of Americans; or to use the same sums to help the vast majority of Americans avoid big sales and property tax increases?
Let's be clear: This is not a battle over tax cuts. It's a fight over who will pay for government, today and tomorrow. Almost all Americans could be protected from estate levies simply by exempting the first $8 million of a fortune from the tax -- a lot of money by most reckonings. Inheritance taxes would fall only on the largest estates.
That, says Gates, is entirely just. As he puts it, those who were best able "to take advantage of what society has to offer" have a debt to pay. It's a concept no less worthy for being old-fashioned.
© 2003 The Washington Post Company