Several wealthy people today added their voices to a campaign to get Congress to extend and strengthen the estate tax, calling it a key incentive for people to leave money to charity.
“The federal estate tax encourages individuals and families such as mine to direct a significant portion of their estates to philanthropy,” Richard Rockefeller — chairman of the board of the Rockefeller Brothers Fund and a grandson of John D. Rockefeller, the industrialist and philanthropist — told a telephone conference call.
His sentiments were echoed by William H. Gates Sr., co-chair of the Bill & Melinda Gates Foundation, and John C. Bogle, founder and chief executive of the Vanguard Group, the financial-services company.
The phone call was organized by United for a Fair Economy, in Boston, a nonprofit group that works to lessen income inequality. The group is pushing Congress to act before its holiday recess to renew and increase the tax that applies to large estates when people die — which is set to expire at the end of the year.
The wealthy participants said the tax is a small price to pay to support government services like education and research that allow people to become prosperous in the United States. It also encourages philanthropy, they said, because people with large fortunes can make gifts to charity without paying taxes on them.
Mr. Bogle says he plans to leave money to his wife, six children, and 12 grandchildren when he dies, but that he will donate a “substantial part” of his estate to philanthropy. He said taxes will be due on his retirement plan when he dies — so the tax exemption for charitable gifts “is a huge incentive for me.”
He said his assets will still be subject to a substantial estate tax, but “I’m proud and pleased to pay it.”
“Virtually every well-to-do person sitting down with a lawyer to talk about their will gets into a conversation about whether he needs to do something for his church, his university, whatever,” Mr. Gates said. The “inducement” provided by the estate tax “is a gigantic element for philanthropy in this country,” he added.
Under current law, estates are taxed at 45 percent, with the first $3.5-million exempted ($7-million per married couple). If Congress does not act, the tax will disappear in 2010, then revert to higher rates in 2011. The House of Representatives voted recently to extend the current estate tax permanently, but the Senate has so far not acted.
United for a Fair Economy wants Congress to increase the current rate, which has been brought down through a series of cuts enacted during the Bush administration. It favors a proposal by Rep. Jim McDermott, Democrat of Washington, which would apply a 45-percent tax, with a $2-million exemption per spouse, and index the exemption to inflation. It would also tax assets above $5-million at 50 percent, and above $10-million at 55 percent.
Lee Farris, the group’s estate-tax policy coordinator, says extending the current law, rather than returning to the higher rates that are now set for 2011, would amount to a “$391-billion tax break to the wealthiest 1 percent of Americans over 10 years, at a time when economic inequality has skyrocketed.”
United for a Fair Economy proposes that Congress extend the current rate for one year, but strengthen the tax after that.
