Gates' fatherly advice: Pay higher taxes
November 19, 2003
BY ANDREW HERRMANN
Staff Reporter
The Chicago Sun-Times
The father of the world's richest man said Tuesday in Chicago that his son, Bill Gates, ought to pay more taxes.
In fact, all of America's super rich should be giving more to the government. Bill Gates Sr. calls it a "payback'' to the country that has allowed them to become so financially flush.
"Why are rich people so rich? Well, you might say they're intelligent. They work hard. Maybe they're a little lucky,'' said Gates.
But they have also won what he called "the ovarian roulette'': They were born into a nation that provided the foundation -- through government research, regulatory stability and subsidized education -- that allowed their talents to shine (and their pocketbooks to grow).
Gates' comments, at a press conference and later at a meeting of business people at a Michigan Avenue hotel, aren't directed against his son, Microsoft founder Bill Jr., who is worth an estimated $52.8 billion. The father said he's "very proud'' of the junior Gates, who has also been called the world's greatest philanthropist.
But the senior Gates, 77, a spirited former lawyer partial to monogrammed shirts, is using his position to slap at the Bush administration's tax cuts, specifically for the richest Americans and especially at efforts to permanently abolish the estate tax.
Proponents of getting rid of the "death tax'' say it is unfair and forces family businesses to liquidate or arrange complicated and expensive estate planning.
In a book he co-wrote with Chuck Collins, Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes, Gates argues that such taxes won't wipe out the rich.
Ending the estate tax of 45 percent on those with a net worth of $3.5 million after the year 2010, as proposed by the Bush administration, would cost the federal government billions and negatively effect charities that benefit from wealthy Americans looking to cushion the blow of the taxes, he said.
Passing great wealth from generation to generation is not healthy for a deficit-plagued economy or for individuals -- and that includes his own family, he said.
"By and large, some kid who has [an inherited] $30 million in the bank, he's going to spend his time at his house in the Hawaiian Islands. What impetus is there for him to do anything constructive?'' said Gates. His son is aware of the danger. He "feels like he needs to be very, very sparing about what [his children] inherit from him.''
"This is Bill and [wife] Melinda's major challenge: to raise their kids to be balanced people. They try very hard to do ordinary things: They wait in line at the movie theater, they go to hamburger places,'' said Gates.
As a matter of public policy, the government should be reimbursed for its "venture capital,'' the billions it spends annually on research, typically at universities. "Integrated circuits, the microprocessor, the human genome, the Internet. All of those things were created as a result of government investing in science and discovery,'' he said. The discoveries "are essentially free to the smart entrepreneur.''
The benefits aren't limited to just owners of technology companies. Real estate moguls, construction contractors, farmers and Wall Street investors build fortunes on the residuals of gee-whiz discoveries that got their start in government funding, Gates said.
Even his son's enormous fortune was built upon government research, said Gates. Microsoft's programming language, for example, was based on Dartmouth BASIC, developed at Dartmouth College, said the elder Gates.
Bill Jr. supports his father's efforts on estate taxes, Bill Sr. said.
The estate tax is in play in Congress. In 2001, Congress approved a gradual scaling back of the tax and raising the eligible wealth. Currently, the feds take 49 percent of estates over $1 million for an individual and $2 million for couples. In 2010, the tax will be 45 percent for individuals with a worth of $3.5 million, or $7 million for a couple.
Under the current law, it will then drop to zero for a year, then go back to this year's exemptions and a 55 percent tax.
President Bush wants a permanent repeal. The House in June voted to do that; the Senate is reportedly a few votes short of agreeing.
Gates, who towers at 6 foot 6 inches, says he admires successful entrepreneurs. But the estate tax, he said, is "a simple indebtedness for the society that made possible the lives they've been able to lead. It's certainly appropriate for society to recover something for its investment.''
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