The post-presidential campaign is in full swing. On Tuesday, a stellar list of ultra-wealthy individuals and public figures called on President Barack Obama to strengthen his estate tax proposal in fiscal cliff negotiations with House Republicans.
Supporters of a stronger estate tax, which most would ultimately have to pay, signed a letter urging the president to tighten the 2009 estate tax law on which his proposal is based, allowing a $4 million per couple exemption and a graduated rate starting at 45%.
Signers included the following:
- Robert Rubin, former Treasury secretary and co-chairman of Goldman Sachs;
- John Bogle, founder and former chief executive of The Vanguard Group;
- Abigail Disney, a filmmaker and philanthropist;
- Richard Rockefeller, M.D., heir to the Standard Oil fortune.
During a news conference, Rubin said the group’s proposal “serves important economic and social purposes. We need substantial revenue for deficit reduction, public investment and providing economic security. A substantial estate tax can provide some of that revenue with no meaningful adverse impacts.”
Disney agreed. “I can afford to pay the estate tax, and I should,” she said. “I don’t have any interest in compounding my already significant advantages, and the advantages of my children, with a weak estate tax, especially on the backs of the middle class.”
If allowed to fully revert to its pre-Bush level, the estate tax would raise some $536 billion over 10 years, according to Responsible Wealth, which organized the sign-on letter. However, the president’s proposal, which is based on the significantly weakened 2009 law instead of the pre-Bush level, would leave $256 billion of that revenue on the table.
At the 2009 estate tax levels, 99.7% of estates would be exempt because of the $7 million per couple exemption. “It’s an outrage to suggest anything weaker than 2009 law, which would only benefit the remaining 0.3%,” Mike Lapham, Responsible Wealth’s project director, said. “What we should be talking about is how to make the estate tax stronger than 2009 law.”
Bill Gates Sr., father of Microsoft’s founder, said signers of the letter, including Warren Buffett, believed that a $4 million exemption per couple and a 45% rate, rising on the very largest fortunes, was reasonable and should be put into law.
“Particularly in the face of the devastating cuts to social programs that are being proposed, it would be shameful to leave potential revenue on the table from those most able to pay,” Gates said.
Although Responsible Wealth’s estate tax proposal would not fully revert to the pre-Bush tax rates, it would be significantly stronger than 2009 law. The group rejects opponents’ claims about the estate tax’s negative effect on small businesses and farms.
In a statement, it cited Tax Policy Center data, indicating that only 40 small farms and businesses are expected to pay any estate tax in 2012, and those will pay only 3.1% of the estate’s value, on average. And in most of those cases, they have enough liquid assets to easily pay the estate tax without having to touch the farm or business.
Moreover, if any of them is cash strapped, provisions in the law allow them to pay any tax liability over 15 years. Even in 2001, when there was only a $2 million per couple exemption, the Farm Bureau could not cite a single example of a farm being sold to pay the estate tax, the statement said.
“We all have an obligation to form a more perfect union, to promote the general welfare, and establish justice for all, and by that I mean economic justice,” Bogle said. A strong estate tax does all those things, he said.
“I’m an entrepreneur who created a successful business, which by the way, I did not build alone,” he added. “I recognize the role of government and society in helping make that possible. So I’m more than happy for my estate to pay my fair share of taxes on the wealth I’ve accumulated.”
Rockefeller spoke of the essential role of philanthropy in strengthening the fabric of society, and the role of a responsible estate tax structure in providing incentives for giving.
“If the world I leave behind is one of gated communities, growing inequality and misery among the have-nots, downward mobility for the middle class, a degraded environment and a rotting social and physical infrastructure–then their inheritance will be a shabby one–no matter how much money they get.”