Every time the air fills with talk of tax increases, Bill Gates Sr. is trotted out to make the case that higher estate taxes are good for philanthropy, good for the country and good for goodness sake. Now, with the estate tax set to expire January 1, there he was again at a recent press event, joined by oil heir Richard Rockefeller and mutual fund pioneer John Bogle, the three of them singing from the same high-tax hymnal. The press, hushed as usual in the presence of accumulated wealth, responded with uncritical coverage.
Permit me a moment of skepticism.
Consider the cast of characters, beginning with Mr. Rockefeller. While he may be a source of wisdom on many matters, Americans are unlikely to seek or accept his advice on the vexed subject of inheritance. As the grandson of the great oil man, he was trust-funded at birth and has had little influence over the primary course of his own financial life. It seems safe to say that, to the vast majority of Americans, his experience will seem more alien than instructive. Mr. Bogle makes a more credible witness. He not only built the great Vanguard financial services firm from the ground up, but he was in large part responsible for democratizing and demystifying the financial markets for America's middle class. Whenever he has something to say on the subjects of savings, investment, philanthropy or taxation, we should listen respectfully. And when he says, specifically, that the tax exemption for charitable gifts is a "huge incentive" for him and will result in the donation of a "substantial part" of his estate, we have no reason to doubt him.
Then there's Mr. Gates. It is no slight to Messrs. Rockefeller and Bogle to point out that, had they shown up without Mr. Gates, their conference would have registered a zero on the media Richter scale. Mr. Rockefeller's fortune has been barricaded for generations, which places his tax situation somewhere beyond the range of general curiosity. And Mr. Bogle, for all his business success, probably made less money in a half-century of service to Vanguard than a few 29-year-old hedge fund managers will take home to Greenwich this year. As the man said, life is unfair. No, it is Bill Gates's presence at these high-tax rallies that gives them snap and crackle. It is Bill Gates's presence, carrying as he does the name of the most successful entrepreneur of the age, that midwifes the headline, "Rich Guys Seek Higher Taxes," a contrarian tease lodged squarely in the long journalistic tradition that began with the query, "Say, is that a man biting a dog?" If Bill Gates's' name happened to be, say, Walter Gates, he would be dismissed as just another tax lawyer hyping tax increases because they're good for business.
Why then is it problematic to call Bill Gates Sr. as a witness in this case? For openers, he's not really a rich guy. He's related to a rich guy, a fate that has befallen many an American and ruined more than a few Thanksgiving dinners in the process. Then there's the fact that he's the father of the world's richest child, which makes him uniquely unqualified to speak to the dynamics of inheritance. He will never know either the difficulty or the satisfaction of leaving the family business to his children -- his family business was created in the successor generation. Nor will he face the challenge of passing on the family farm -- if he bequeaths the family farm, assuming he has one, it will amount to no more than a rounding error in his son's real estate portfolio. And he will never understand the emotional importance of smoothing life's path for his children and grandchildren -- life's path for his children and grandchildren is freshly Zambonied each morning.
That's on the personal side. On the professional side, Mr. Gates's background is more question-begging still. Now retired, he was for most of his career a partner in a Seattle law firm called Preston Gates. Back when Bill Jr. was starting to build his software company in the Seattle suburbs, Preston Gates employed 13 attorneys: it enjoyed a solid reputation, but it was nobody's idea of a legal powerhouse. Then Bill Jr.'s company began to grow and grow and Preston Gates grew along with it, not as exponentially as the Microsoft miracle, but fast enough to become a substantial regional firm with a presence in Washington, D.C. One could thus say that Bill Sr. became one of those demographic oddities -- a parent who, in effect, inherited wealth from his child. But that would make the story too pat. In his legal practice, Bill Sr. never really immersed himself in intellectual property rights or antitrust issues or any of the legal esoterica critical to Microsoft's future. His specialty at the law firm was estate planning, which is to say that he made his living advising clients on how to avoid paying estate taxes. By all accounts, he was good at it. It has long been a poorly-kept secret that top-tier lawyers regard the estate tax as a "voluntary tax," in that it is actually paid only by taxpayers who are ill-informed or under-advised. The clients of Bill Gates Sr., by all accounts, fell into neither category.
So whenever Bill Gates Sr. starts dispensing advice on estate-tax policy, aren't we entitled to ask -- to whom should we be listening? The high-paid professional who helped his clients avoid the tax? Or the public moralist who advises the rest of us that it is our civic duty to pay it?
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