Are taxes a moral issue?
That was the question at a gathering of religious leaders in Bellevue last Sunday evening. The topic was Initiative 920, the initiative to repeal the estate tax.
The Rev. Sandy Brown of the Church Council of Greater Seattle, the Rev. Robert Taylor from St. Mark’s Episcopal Cathedral and Rabbi Daniel Weiner from Temple De Hirsch in Bellevue joined Bill Gates Sr. and me in discussing the morality of taxes.
The common (un)wisdom is that taxes are something that are to be paid or avoided, but not blessed. The facts run counter to this. If we believe in a civil society and the rule of law, we will pay our taxes without hesitation. After all, a civil society is possible only with a government that provides the infrastructure for business, discourse and politics; that enables citizens to realize economic security; and that gives all children the foundation of education to contribute to our economy and democracy as adults.
The state estate tax crystalizes the discussion of morality and taxation.
The estate tax is dedicated to public education. It funds programs to help underachieving students get back on the bus and pass the WASL. Proceeds from the tax reduce class sizes in our public schools. Some of the money creates 7,900 more slots in our state’s public universities and provides financial assistance for middle-class and lower-income kids in college. What could be more moral than providing these educational supports with a small percentage of the proceeds of huge estates?
Five years ago, immediately after 9/11, it would have been unthinkable to have this repeal on the ballot. Why? Because in the aftermath of the attacks on the World Trade Center and the Pentagon, we weren’t just looking out for No. 1. We looked out for each other. We understood that in some fundamental way, we had all been attacked; we shared a common fate and a common solidarity. We were all Americans and all patriots.
This sense of society, of our commonwealth, has vanished. Now it’s OK to be greedy and endorse greed. And that is what Initiative 920 – repealing the estate tax – is all about. This initiative is only on the ballot because one real estate tycoon – Martin Selig – has contributed $839,825 to the campaign, enabling employment of paid signature gatherers.
What does Selig want? He can’t take the Columbia Center in Seattle with him when he dies. Apparently, he is unwilling to part with even a small portion of his estate for his already wealthy adult children.
Selig is trying to re-create a financial aristocracy that further concentrates wealth with each generation. It is not like his children already haven’t had lives of privilege. His oldest daughter went to the private Lakeside School in Seattle, Georgetown University in Washington D.C., and the London School of Economics. Then she came home to take a seat at her dad’s company. That is a privileged pathway.
The state’s estate tax doesn’t throw any barriers in this pathway. It simply states that when someone with more than $2 million in assets dies, a tax on the excess above $2 million generates funds for the children of the entire state, not just one or three descendants. These descendants still gain the lion’s share of the estate.
Here is how it works. Let’s take a fictitious family, the Smiths. The Smiths have assets of $3 million. When Mr. Smith dies, his wife gets the entire Smith estate, with no taxes taken. By the time Mrs. Smith dies, the estate is worth $2.5 million. Mrs. Smith gives $300,000 to charity in her will. So the taxable amount of her estate is $200,000, because the first $2 million doesn’t count and the charitable donation is tax-free.
This $200,000 is taxed at 10 percent, or $20,000. That’s less than 1 percent of the total value of the estate. If the estate includes a family-owned business, the heirs have 15 years to pay off this tax. That’s $1,333 a year. And these same heirs gain $2,180,000!
Tell me what isn’t fair about this formula for the Smith children.
In a world of unadulterated greed, that $20,000 slice should have gone to the Smith children, so they would have gotten $2.2 million. In a civil society, in which we want to give all children a foundation of learning, that $20,000 rightly belongs in the classrooms of our state.
Which world do we live in?
John Burbank, executive director of the Economic Opportunity Institute (www.eoionline.org), writes every other Wednesday. Write to him in care of the institute at 1900 Northlake Way, Suite 237, Seattle, WA 98103. His e-mail address is john@eoionline.org.
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