Monday, October 16, 2006

Surprising Voice in Support of WA Estate Tax

I'm not sure how things are gonna shake out on Washington state Initiative 920, which could repeal the so-called "death tax" (i.e., taxes on estates) and thus take away major funding of education improvements, but I'm not confident about it based on the free-for-all I witnessed outside of Target when people were signing petitions for this last summer (see previous post). As the No on 920 web site notes, none of the people I saw gleefully signing these petitions with dollar signs chinging up and down in their eyes will ever be affected by this:
Only the wealthiest in our community will profit from the estate tax repeal. Because the tax exempts all farms and only applies to estates valued at more than $2 million (or $4 million for a married couple), 99.5% of estates in Washington will not pay the estate tax...
The Seattle Times recently endorsed the repeal (and head-scratchingly endorsed incumbent Dave Reichert over Dem challenger Darcy Burner), but today the other Seattle paper, the Post-Intelligencer (which I like a bit better), provides two opinion pieces on either side of the debate, including one very rational voice (you can see the opposing, pro-repeal item here):
There is something poetic about using funds from an inheritance tax to pay for education, as the Washington state system currently does. It would be a shame to have it abolished in November if Initiative 920 passes.

Think of our state's estate tax as an "opportunity recycling program." It recycles society's investment in wealthy individuals to create opportunities for the next generation.

When someone has accumulated $10 million or $50 million or $50 billion (I can only think of one person in the last category), they have benefited disproportionately from society's investments in education, public infrastructure, scientific research and other forms of society's common wealth.
Who wrote this? William H. Gates, who indeed knows someone very well from that latter category. He goes on:
If we abolish the state's inheritance tax we stop the opportunity recycling program. We allow the common wealth to stop flowing and concentrate it in the hands of a few. And worse, we slow the investments in opportunity that aim to provide every young person a chance, whether they were born in South Seattle or Mercer Island.


One of the few progressive features of our state tax system is a modest inheritance tax. It raises substantial revenue for education, more than $100 million a year, from a handful of multimillionaires and billionaires. The first $2 million of any estate (and $4 million for a couple) is exempt from the levy.

The rate is very low, so those who owe the tax end up paying an average of less than 5 percent of the value of their estate. This leaves plenty to pass on to heirs.

The proponents of abolishing the tax say it is a form of "double taxation" and that it will hurt family farms and small businesses. In reality, most wealth subject to Washington's estate tax is in the form of appreciated capital gains from property and stocks, wealth that has never been subject to any form of taxation. Washington's estate tax completely exempts all farms and the vast majority of small businesses. Those few businesses large enough to be subject to the tax can spread their payments over 15 years.
I'm all for earning my keep to provide for my family, but I also understand the ideal of community and sharing the wealth with those who don't have the opportunities that I do. To vote for the repeal of this bill, you'd really have to be a modern-day Scrooge.


At 8:00 PM, Blogger Glenn said...

William Gates Jr. (II) has long been in favor of taxation to avoid unjustly accrued wealth. He was rich before his son became mega-super-rich. Warren Buffett is also completely in favor of inheritance taxes. (Although he got a little sideways criticism that his massive donations to foundations will reduce his tax bills, but that seems to exclude the fact that the foundations are charged with doing good.)

It's said that Bill Gates (III)'s pa and Buffett are the reasons that he got into philanthropy so early. So not surprising that those two elder gents are not moneygrubbing so-and-so's, too.

At 9:18 AM, Blogger kat said...

It is interesting how many people vote with the assumption that they will at some point be considered part of the upper class. Never mind that they'll never be personally affected by the elimination of this legislation and will undoubtedly be affected by its passage, in terms of community works, projects, etc that don't get funded. And never mind that the "upper class" is pulling so far away that's its unimaginable to break its ranks short of A.) coming up with some great invention B.) Starring in a hit TV show C.) Losing a family member is some tragic enough way that guarantees and outlandish jury settlement or D.) winning the lottery.


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