In the coming months, Congress will be decide the future of the federal estate tax and whether or not to continue substantial tax cuts for the very wealthy.
As someone who would personally benefit from these tax cuts, I believe Congress should act responsibly and reverse the generous tax breaks they gave to wealthy families in 2001 and 2003, letting income tax cuts for those with annual incomes over $235,000 expire at the end of this year.
They should also reinstate the federal estate tax, our nation's only levy on inherited wealth. I believe the estate tax, which temporarily expired this year, is a fair and responsible way for those of us who have grown wealth in the U.S. to pay back the society that created the fertile ground for wealth creation.
My conservative friends ask: Why do you feel you have an obligation to society? My progressive friends ask: Why don't you give more money to charity instead of the government? My answers to both questions are rooted in the history of public investments that directly and indirectly benefited my family.
Paying Back Public Investments
In 1900, my great-great-grandfather co-founded a mining and construction business in Utah. Shortly after the business was created, it received a number of federal grants for large infrastructure projects, including the Hoover Dam, the largest construction project ever tackled at the time.
During the 1930s, our family enterprise expanded thanks to Depression-era public works projects. By mid-century, the company, under my grandfather's leadership, had become one of the most profitable mining and land development firms in the country.
Our family business was strengthened by a public infrastructure of roads, ports, and bridges that allowed us to easily transport materials. We also benefited from our nation's unparalleled system of property laws and legal remedies, designed to protect private property and investment.
These public inputs have benefited the majority of enterprises. Where would today's technology companies be without public investments in scientific knowledge, computer research, and the Internet? Where would many businesses be without our education system, transportation system, and the millions of direct and indirect subsidies that create the fertile ground for a healthy and vibrant economy?
My family's business was successful thanks to hard work. But it was also built upon a common wealth of public resources, scientific knowledge, and shared institutions. I believe that those of us who have disproportionately benefited from these investments have a corresponding obligation to reinvest in the common good.
Why Taxes, Not Charity?
I'm a strong believer in charitable giving, which when done well can advance innovative approaches to social problems. Maintaining a progressive tax system will not diminish charitable giving-in some cases, it will encourage it. Many of the wealthy households touched by the proposed higher taxes already give substantially to charity, and a return to a fairer level of taxation on those households is unlikely to substantially reduce their level of giving.
More importantly, taxes and charity pay for different things. The public investments that have built our infrastructure and ensured greater opportunity were made mostly with tax dollars, not charitable contributions.
Our tax dollars pay for big public investments such as water treatment systems, rail links, food stamps, environmental protection, national defense, bridges and roads, registries of deeds, and more. Philanthropic dollars contribute to a different infrastructure, often in the form of hospitals, cultural institutions, and colleges and universities.
We need both of these types of investments. But there are many things that philanthropy is not equipped to do-and yet are critical to the functioning of our society. Wealthy individuals should not aggressively avoid paying their fair share towards the commonwealth in the form of taxes.
This is one of the main reasons why I believe we should rebalance the tax code and allow the Bush tax cuts expire at the end of this year. This would represent a small increase on my taxes, but could raise an estimated $45 billion a year for the nation as a whole.
Toward a Fair Estate Tax
We should also reinstate the federal estate tax, which was allowed to expire at the beginning of 2010. I support the Responsible Estate Tax Act, which would reinstate taxes on the estates that wealthy individuals leave behind. It would also exempt farms and small businesses, institute graduated rates on larger estates, close loopholes, and encourage conservation easements. The Act also imposes a "billionaire surcharge" rate of 65 percent on estates over $500 million.
Reinstituting a progressive estate tax would be reasonable and fair. The Responsible Estate Tax Act would exempt estates below $3.5 million, so it would be paid by fewer than one in two hundred estates. It would generate at least $264 billion over the next ten years.
Raising taxes on middle income households will have a negative impact on the economy, but maintaining the estate tax will not. As former Treasury Secretary Robert Rubin and venture capitalist Julian Robertson recently wrote in The Wall Street Journal, "An estate tax can provide revenue-with little, if any, adverse supply-side economic impact-to fund deficit reduction, additional public investment or added assistance to those affected by the economic crisis."
More importantly, maintaining a fair estate tax is the right thing to do. It disperses concentrations of wealth and power that undercut our democratic society. It encourages charitable giving and also raises substantial revenue for public investments that will enable future generations to share prosperity. For my family, it is one of the important ways we pay back the society and commons that make private wealth possible.