Where I Stand — Brian Greenspun: A taxing opinion

Friday, Feb. 16, 2001 | 9:42 a.m.

Brian Greenspun is editor of the Las Vegas Sun.

IF YOU ARE known by the company you keep, I am in some pretty good company. At least when it comes to my position on estate taxes.

I know a great many people who count their net worth in the many millions of dollars and who, at first blush, would be quick to embrace President George W. Bush's plan to eliminate all estate and gift taxes by 2009. And why not? After all, most people work hard all of their lives and some of them accumulate sizable estates and reasonable small businesses they would wish to leave to their heirs without the government taking a huge chunk of those dollars on their way to the next generation. And to do all that just because a person dies, well, it hardly seems fair.

I have always felt a bit like an outsider in that particular group of people because not only have I not jumped at the prospect of never paying estate and gift taxes again, I have done worse. I favor them. The word traitor comes to the minds of many of my "friends," because they cannot fathom how a person of means could support the concept of a death tax. It is a position that has caused bouts of loneliness from time to time, especially at the golf course, which is heavily weighted with people subject to inheritance tax bites.

That's why I was heartened the other day when the New York Times ran a front-page story under the headline, "Dozens of Rich Americans Join in Fight to Retain the Estate Tax." After reading the story I was even more convinced that my position was not only sound from a fiscal standpoint but from a political one as well. Let me explain.

One might expect that a person who has achieved some financial security during his life would be guided in his judgments by what is best for him and his family in an economic sense. After all, it is no secret that most Americans "vote their pocketbooks" come election time, so why shouldn't the people with the fattest pocketbooks act the same way. It seems self-evident that from a self-interest standpoint, wealthy people should be the first to favor a repeal of inheritance taxes because they are the people hardest hit by that levy. While the estate tax starts at an almost reasonable 37 percent, it quickly moves up to 55 percent of estates over $3 million. That means the government gets more than the heirs.

Just try doing the math on what might be Bill Gates' estate, assuming he lives to a reasonable age and it continues to grow the next 30 years as it has done the past three decades. I am not a math major, but he could die with nearly $1 trillion in his kick. That means the government would rake off almost $550 billion before Bill's heirs got their first dime! Obviously, that's not how it would really work, because the very wealthy people know how to reduce their estates long before they move on to their next challenge. It is the people with far less but more than most -- say $5 million to $10 million -- who will have the most trouble planning properly for the end, which usually comes when you least expect it.

And if you think Gates is an anomaly, then let's think about lesser billionaires -- that doesn't sound right -- like George Soros or members of the Rockefeller family. I haven't counted his money but what about Ben Cohen, co-founder of Ben and Jerry's, who struck it big when he sold out recently. Or billionaire extraordinaire Warren Buffet who is everyone's idea of the right way to do business in America. These people have real money and many reasons to keep it out of the hands of the government by putting it into the hands of their heirs and loved ones. Of course they will be in favor of the Bush plan to repeal the death tax.

So who are the people in the New York Times article who favor retaining the estate tax?

Let's see, there is George Soros, David Rockefeller Jr., Steven C. Rockefeller, Ben Cohen and, of course, Warren Buffet. Two of those guys are the beneficiaries of their grandfather's ingenuity and hard work. The others made it themselves. Each of them thinks that repealing the estate tax is bad for America. Oh yes, the fellow who got the others to climb aboard his effort to oppose the estate tax repeal is William H. Gates. He's Bill's dad and says that he speaks for his multibillionaire son when it comes to this issue.

Can you really believe that there are rich people who think this way? They would be kicked out of most respectable country clubs for having such "liberal" ideas. But are they wrong? Or do they have a little keener insight into an America of tomorrow that will boast a strong and growing middle class, the quintessential element of an enduring democracy. I believe that these people and many others in America who favor fixing the estate tax problem rather than ending it are on the right track.

There is no question that 55 percent numbers are confiscatory. It makes far more sense to approve a reduction in the tax along the lines that former President Clinton offered as a compromise to Congressional Republicans, who refused to take it because of election year politics. He favored an estate plan that would exempt the first $6 million which would cover almost all of the family businesses and farms in America. The remainder of the estates would be taxed only when sold and, then, at the existing capital gains rate which in this case is 20 percent.

By following a plan like that, the concerns of Buffett and others would be met and the needs of an America incented to grow through hard work and creativity would be preserved. Gates' concern is 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 lost revenues "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."

Buffett says, "We have come closer to a true meritocracy than anywhere in the world. 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."

I find those compelling reasons to retain a reasonable estate tax. By doing so we go a long way to ensure that future generations will work as hard or harder as the preceding ones, maintaining a strong middle class which, in turn, provides the glue that makes our democracy work.

By the way, preserving our democracy is not a liberal idea. It is based on enlightened self-interest which is as conservative as we can get.

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