Jewish World Review June 15, 1999 /1 Tamuz, 5759
http://www.jewishworldreview.com -- IF YOU HAD $80 billion, would you want your own children to manage that hard-earned wealth? Or would you rather trust lawyers and technocrats who make their living giving away other people's money?
Bill Gates, the $80-billion-dollar man, has very publicly chosen the latter course. The Microsoft founder and his wife made international headlines recently after donating $5 billion to one of their philanthropic foundations. The gift doubled the asset base of the William H. Gates Foundation. A second charitable entity, the Gates Learning Foundation, has assets of $1.3 billion.
In past interviews, Gates has said he will give $10 million each to his children and leave the rest to charity. "I won't leave a lot of money to my heirs because I don't think it would be good for them," Gates said.
Gates' love-'em-and-leave-'em-a-pair-of-bootstraps philosophy is shared by several other prominent mega-moguls. Warren Buffett, the famed Berkshire-Hathaway investor whose $36 billion in assets make him the second-richest man in the world, once quipped: "The idea that you get a lifetime of food stamps based on coming out of the right womb strikes at my idea of fairness."
John Malone, chairman of TCI, who is worth a relatively paltry $1.5 billion, echoed that sentiment recently in the Rocky Mountain News: "I think kids are destroyed by too much wealth, not enhanced by it." Moreover, he said, "I don't believe control of a big public company is a hereditary asset. I think control has to be earned, and my children have no interest in taking on that kind of responsibility."
Gates, Buffett, and Malone are free to exercise their parental prerogative and dispense with their wealth the best way they see fit. But for parents who trust their kids and have raised them to be responsible stewards, the tax code currently poses an enormously unjust obstacle.
So-called death taxes place heavy financial burdens on the intergenerational transfer of wealth and property, some at rates exceeding 50 percent on money that has already been taxed once or twice under the income tax. These taxes create perverse incentives, encouraging people to consume the bulk of their wealth before death or spend gobs of money on complicated estate-planning schemes that leave kids out of the equation.
A compelling policy brief just published by Toward Tradition , a Mercer Island-based educational foundation, adds a new dimension to the death-tax debate: "Esau's Delusion: Moral Consequences of the Estate Tax" argues that federal estate and gift taxes are fundamentally at odds with the biblical understanding of inheritance. Author Adam Pruzan, Toward Tradition's program director, advocates repeal of death taxes not only for purely economic reasons, but also for moral and cultural ones.
"Inheritance," he writes, "is the glue that binds the generations to one another."
The paper recounts the Torah's tale of Esau, who sold his birthright to his twin brother Jacob for a measly bowl of soup. Esau's mistake, his delusion, was casually spurning his claim to his financial inheritance without realizing the moral consequences. "Disrupting the transmission of our material inheritance will badly erode, if not altogether destroy, our ability to transmit a spiritual legacy," Pruzan counsels.
Many of this generation's millionaires and billionaires believe that passing on too much wealth to their kids will spiritually corrupt them. But Pruzan counters that "many large fortunes have been successfully passed down to worthy heirs, whose parents also gave them the disciplines necessary to preserve their wealth, and to resist its corrupting influence." Besides, history is rife with examples of how great wealth has corrupted presumably altruistic trustees who aren't part of the families whose wealth they control.
A recent case is the ugly fate of the $10 billion Bishop Estate in Hawaii, originally set up in the late 1800s to educate the state's children but famed instead for its cronyism and incompetent administration. Four of five philanthropic trustees - none of them related to the estate's founder - were removed just weeks ago by a probate judge for their involvement in theft, property kickbacks, gross mismanagement and alleged intimidation of students and teachers who were the original intended beneficiaries.
How do modern tax policy and Bill Gates fit into Pruzan's thesis? "In the absence of the estate tax," the paper points out, Bill Gates "could well find his best and most natural heirs right across from him at the breakfast table, in the person of his own children. The existence of the estate tax, however, means that it costs Bill Gates virtually nothing to entrust his fortune to foundation technocrats, while he would have to pay tens of billions for the privilege of leaving in charge the very people he has the most reason to trust."
Gates, Buffett, Malone and other business titans have made their
personal anti-inheritance ideology clear. But government should
not favor that ideology over a spiritually based view of inheritance,
or any other philosophy. It should be neutral. Instead, by taxing
the dead and punishing heirs, government sabotages family
legacies built over