The Hypocrisy of the Very Wealthy
Fortune magazine’s July 5th issue features a story about “The $600 Billion Challenge” from Bill Gates and Warren Buffett to other billionaires. They are soliciting pledges from the other super wealthy people to give at least half of their net worth to charity in their lifetimes or at death.
These are the same billionaires that keep championing the Death Tax [Estate Tax] that will once again start confiscating up to 55% of large estates for those who die after December 31, 2010.
Estate taxes penalize ‘Good behavior’. Society is better off when its citizens save and invest, rather than spend and consume all their income. These retained earnings are used to fund growth in America. Those who have private wealth do not burden the rest of its citizens with supporting them in their retirement years.
What do our laws promote though? People who die with little to nothing in lifetime savings can pass their meager assets to their families or others of their choice with no additional federal tax burden. In others words… if you spend/squander all your net lifetime earnings you are rewarded with no taxes upon death.
On the other hand, those who save, invest and grow their net worth throughout their lifetimes are penalized by up to 55% for not spending the money they did not consume.
When you reward bad behavior and chastise good behavior, which do you think you will get more of? This is very similar in our present social security system. We give disproportional benefits to those who contribute little to nothing into the system during their working lives while those who paid the most into the system during their working years will get much less back in relation to their personal contributions.
It is almost a given that ‘means testing’ is just over the horizon as a way to trim future social security deficits. When that takes full effect the people that paid in the very most will likely see little to nothing at all because they ‘don’t need’ the help. Our crazy system once again sends the message that you have to be crazy to work hard, save and invest. You’ll get much better treatment if you have nothing saved when you retire than you will if you have substantial assets and income.
Back to the headline topic. Gates and Buffett have pledged or given almost all their wealth to tax exempt foundations that effectively protect their enormous wealth from ever being taxed- in their lifetimes or even after their demise. Yet they want others, with much lower estate values, to have to forfeit over half their lifetime savings to the federal tax man.
Just as our politicians should be in the same health plans and social security system as they are dictating for us, billionaires should subject their estates to the same treatment they are touting for those with less than them (and without their teams of lawyers to avoid paying taxes).
Dr. Paul Price