Interview with William Gates, Sr., on the Estate TaxInterviewer: Meredith Dodson, RESULTSApril 18, 2006 at 11:30 am ET(Our website also includes an audio recording of this call as an mp3 file) Meredith Dodson: Greetings, everyone. This is Meredith Dodson, director of domestic campaigns at RESULTS in Washington, D.C. This is a short interview recorded on Tuesday, April 18, 2006 with Bill Gates, Sr. Bill Gates, Sr. is the co-chair of the Bill and Melinda Gates Foundation, the largest foundation on earth and co-author with Chuck Collins of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. It is an estate tax primer and quintessential man-bites-dog story of over 1,000 high net worth individuals who rose up to protest the repeal of the estate tax and in the process made headlines everywhere. Thank you for joining us, Mr. Gates. William Gates, Sr.: I am very happy to be here, Meredith. Thank you. Meredith Dodson: We have a series of a few short questions to ask you. And again these will be both recorded as an audio file and available as a transcription at www.results.org. William Gates, Sr.: Could I just intercede just to make a one-sentence statement, which is that while I am connected with the Bill and Melinda Gates Foundation, the subject of this interview, the taxation of estates, is not on the foundation’s agenda. This is a matter which is my own personal concern. Meredith Dodson: Thank you. I think that is an important clarification. William Gates, Sr: Thank you. Meredith Dodson: The first question or kind of two questions: why do you think we should keep the estate tax? Or another way of asking this is why shouldn’t all the wealth parents have earned go to their children? William Gates, Sr: Well, I mean, there is quite a lot to be said on that question. Let’s start off with the proposition that our country is in deep trouble. We have a budget that isn’t working. We are spending way more money than we are taking in. And you start with the proposition that it is sort of ludicrous to get rid of a good sensible tax at a time when your budget is seriously out of whack and has every prospect of getting worse. The estate tax is an important tax and could be much more important as time goes along if it is retained. Net worth of individuals is increasing as a result of which any estate tax is going over time to generate very, very large revenues, the kind of revenue which would make a very important contribution to avoiding or reducing the deficits which we are facing. So the first thing to say is that we can’t afford not to do it. The second thing, of course, is that it is such a sensible tax. Here, this is a transfer which is occurring basically from parents to children. That is the way we collect taxes in this country, when transfers occur, when there are realizations on assets that, the tax system imposes something to recompense the government for its contribution to the, you know the creation of whatever was generated in the transaction. And here we have people passing along wealth, which is to a large extent, a very large extent, a simple product of their having been Americans. When you stop to think about those of us who may be subjected to this tax as to why this is happening, you start off with the very first proposition being that it is because we are Americans. This tax would not be any concern whatsoever if we have been born in West Africa somewhere. We wouldn’t have had any chance to have the comfort and to generate the wealth and the opportunity to pass along some part of that wealth to our children but for having been born in this country, a place where markets are stable, where laws are enforced, where tomorrow’s business is predictable, that you can have confidence that what you own can be sold and that people will maintain their obligations and their purchase arrangements. This is an orderly place and that is a fundamental reason for people accumulating wealth. At the risk of giving too long an answer, Meredith, let me just add one thing which seems to be particularly pertinent in the case of the estate tax, and it is this. So much of our wealth is a function of the growth in technology in our country. This particular feature of the American characteristics is a major reason for the vast increase in personal wealth. Things like the Internet, jet engines, the human genome, all of those wonderful scientific things that are generating very significant, very successful businesses of one kind and another. And all of those things, all of those things are a product of research financed by the federal government and made available to business essentially at no cost. Here is what really is happening is that those of us who are participating in this wonderful American economy and enjoying the fruits of this new technology, as I say, all of these fundamental elements of economic life in our country, all of us enjoying those have an indebtedness to the federal government for having made it possible. There would be no Internet, no jet engines, no human genome projects. All of these things are created by the $90 billion or so in dollars that the United States spends every year on research creating these opportunities for people. So, you know people say death tax — fooey!. This is a tax on grateful heirs. This is a tax which is basically a “due bill”, a “due bill” to those of us who have had the good fortune to be successful financially in this country, to pay back some part of it to the society that made it possible. Meredith Dodson: Great, thank you. The next question is, and you have touched on this a little already, but in your view, does the estate tax punish success or hurt businesses? William Gates, Sr: I think that, you know, it is a direct corollary of success. Sure, you know much is made of the fact that family businesses are burdened by the need to pay the estate tax sometimes. But, you know, those cases are infinitely, infinitely remote. And with the exemptions that people are talking about today like $3.5 million per person or $7 million per couple, these problems are gong to virtually disappear completely. And, you know the instances where someone has really been imposed upon by the estate tax are few and far between and they occur only in the absence of doing successful — the very simple planning that is possible to be done to create the liquidity you need to pay the tax at the end of a wonderful and comfortable life. Meredith Dodson: And I will add for journalists who are listening to this recording, our April 19, 11:00 am Eastern Time media call, one of the guest speakers on that call will be (Tom Buis) from the National Farmers Union, who will talk more about family farms and small businesses and how they would be impacted by the estate tax and why the National Farmers’ Union opposes a full repeal of the estate tax. Finally, Mr. Gates, a third question for you. Why should Americans care about the estate tax if many will never be wealthy enough to pay the estate tax? William Gates, Sr.: Well, I suppose one thing might be anybody should be excited about the possibility that somebody else is going to help cover the federal deficit and it is not going to come of out of their own pocket. I should think that is a very good reason for people to be excited about it. But there is more to it than that. It isn’t just one part of our society pawning an obligation off on another part. I go back to the fact that the relationship between wealth and what society has provided for use in this country is direct and undeniable. So, all of us should be concerned about taxes reflecting equity, so to speak, reflecting reasonable relationship between the events being taxed and the government facilities which are made possible by taxation. So, you know, it is from my point of view the most sensible kind of taxation at the end of a wealthy person’s life to recover something. And we are not; you know, we are not talking about confiscating estates. We are talking about some percentage of the estate, with plenty left for children, some part of it being used to recompense society for the contribution it has made for the opportunity to be financially successful. Meredith Dodson: Thank you. Is there anything else you would like to add before we close out this interview? William Gates, Sr.: I guess I might say that what is clear in this debate is that it is, you know, we ask the question “Why should people who aren’t going to pay it be concerned about it.” I guess the other side of that coin is that what we are really dealing with is a group of people who are going to pay it, who are trying to repeal it in order to save themselves the money paid on this tax. That it is a clever, and so far quite successful, campaign by people of enormous wealth who have collaborated — who have put their money into a campaign to bring about the repeal of the tax. What is so sad about that is as we talk about efforts to make modifications to make the tax less burdensome and to increase exemptions and that sort of thing, those who are fighting for its repeal don’t want to talk about those kinds of modifications, don’t want to talk about fixing the tax. They just want to repeal it. And it is simply an effort by the wealthiest people in our country to try to get rid of this tax which they regard as, you know, as a burden they just don’t want to pay. Meredith Dodson: Great, and for journalists who are listening on this call, I believe on April 25, “United for a Fair Economy and Public Citizen” will be releasing a report detailing more about the efforts of a few to repeal the estate tax, and that would be available at www.faireconomy.org. Well, thank you very much, Mr. Gates. It has been a pleasure to be on the phone with you. William Gates, Sr.: Thank you Meredith. I enjoyed it.
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