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Do Death and Taxes Have to Come Together?

Aired March 15, 2001 - 7:30 p.m. ET


BILL PRESS, CO-HOST: Tonight: it's said that nothing in this world is certain except death and taxes. But do they have to come together? Is it time for Congress to repeal the estate tax?

ANNOUNCER: From Washington: CROSSFIRE. On the left, Bill Press. On the right, Robert Novak. In the CROSSFIRE: William Gates Sr. of Responsible Wealth, and Republican Senator Jon Kyl of Arizona, member of the finance committee.

PRESS: Good evening. Welcome to CROSSFIRE.

Will you still have to pay taxes when you're dead? Now that the House has passed the president's across-the-board cut on income taxes, a Senate subcommittee today took up his second proposal: repeal the estate tax. Or, as George Bush might say, "Leave no heir behind."

It's unfair, say Bush and Republican senators, led by tonight's guest, Jon Kyl, to burden rich kids with paying taxes on money they inherit from their parents. Especially from family farms and small businesses.

But Bush's plan has run into unusual opposition -- from some 700 millionaires and billionaires. Some of the nation's wealthiest individuals, like William Gates Sr., those who would benefit the most, and who say, "We don't need it. Spend it on something better."

All of which makes for a great debate. Why shouldn't taxes stop at death? And why give the super rich a tax break when the super rich say they don't want it -- Tucker Carlson.

TUCKER CARLSON, CO-HOST: Mr. Gates, now, you've come out against repealing the estate tax, but in some ways, this argument is irrelevant to you. You don't worry about what to leave your son, he's literally the richest man in the world. He can afford terrific estate planning.

But if you've got a $5 million working ranch, say, and five children, the question is not what to do with the family Picassos, but how to keep from selling the family business to pay government taxes. So unless you're really, really rich, there really is a terrible effect that the death tax has, isn't that right?

WILLIAM GATES SR., RESPONSIBLE WEALTH: Well, I don't mean to divert you, but what you said is not true. I am quite concerned about the estate tax. I have two daughters that I intend to bestow most of my wealth upon. My wealth is not nearly what you're assuming it is. My estate tax liability will be something in the neighborhood of $6.8 million, so it's not -- it's not as if the estate tax doesn't mean anything to me.

CARLSON: But wouldn't you say it means a great deal more to, say, a rancher who has a ranch, say, is worth $5 million -- but it's not a liquid $5 million, and estate taxes might force his heirs to sell that ranch and get rid of the family business.

GATES: That is true. But it's meaningful to me because I don't -- it isn't that I have so much money that it's not meaningful. It's more meaningful to your hypothetical rancher, yes. And he's not hypothetical -- it's more meaningful to the rancher you described. That's correct.

CARLSON: Then why in the world would you support keeping a tax that would force his heirs to sell the ranch just in order to pay the government?

GATES: Well, your assumption involves an awful lot of facts and questions. I don't think that it's true that all families are all that excited about inheriting the ranches or the businesses. I mean, lots of people sell the ranches and businesses because their kids don't care to do that. In the small number of cases -- and we're talking about a very small percentage of estate tax payers, only 2 percent of people who even pay a tax, and then within that 2 percent, the number that would fit in the description that -- the category you're calling it, is really small. As to them, i think there is an American value that attaches to that situation, and I think that it is important to protect the ability of families to pass assets of that kind along to their children.

And I really do believe that the estate tax should be amended to provide substantial exemptions or exceptions, and length of payment, so that that kind of horse sale will not occur.

PRESS: Senator Kyl, there are so many problems with your proposal of eliminating the estate tax...



PRESS: ... it's hard to know where to begin. But let me begin with the people that I feel the least sorry for, who are the kids, the ones who have to pay this tax. Now, right now, I could leave each of my sons $675,000 tax free. My wife and I together could leave each of them $1.3 million, tax free. That's going to increase to $2 million that we could leave each of them tax free by the year 2006. I don't feel sorry for them one bit!

And one of the wealthiest members of the House of Representatives, Pete Stark -- when this was debated last year on the floor of the House -- he spoke to his kids -- he's got a much bigger estate than I did. And he put it very bluntly, in his style, right on the line, as what this meant to them. Let's take a listen to Pete Stark.


REP. PETE STARK (D), CALIFORNIA: You're going to get a downpayment on that from your mother and me of $1,350,000 -- free. You haven't worked a day in your life for that. You've gotten a college education, down payments on your homes, cars -- but you haven't work worth squat.


PRESS: They haven't worked squat. We're suppose to feel sorry for them? Two million each? They ought to thank their lucky stars!

KYL: Nobody's saying we should feel sorry for anybody, but, Bill, what about the American dream? The American dream has always been to leave the next generation off better than your generation was. And the idea here is to work, to save, to invest, and to have something left over for your kids, and not to have the government take it all from you.

In the case of the small businessman and the farmer, as Mr. Gates just pointed out, we do have to be concerned about them, because it's not a matter of feeling sorry for them. It's a matter of them having to literally sell the family farm or the small business just in order to pay the taxes to Uncle Sam. That's unfair.

PRESS: Senator, Tucker and I do another show called "THE SPIN ROOM." What we just heard from you is pure spin.


KYL: Do I qualify as a host of your show, then?

PRESS: ... the family farm. You've the spin of the year award. And I want to get to the family farm just a little bit later, but why don't we come back to these kids? The American dream is to leave our kids better off than I was, and you know, if I can leave each of my sons $2 million, you know how much better off they're going to be than I was? By $2 million!

But the point is there's something more here, which is, it seems to me, by exempting everybody from these estate taxes, in effect, you're creating an American -- or continuing -- an American aristocracy. I want to quote Mr. Gates. I want to reach out and touch him because he's the father of the wealthiest man in America.

And here's what he said to your subcommittee...

GATES: It's not catching.

PRESS: I wish it were!


PRESS: Here's what he said to your subcommittee this morning. From your testimony, sir.

Quote -- "A good life should be something which is achieved. It should not be delivered as a result of the womb you happen to start out from."

I don't think Thomas Jefferson could have put the American spirit any better, Senator.

KYL: That's great, Bill.

Here's the problem: if the United States government is going to take it upon itself to level the playing field, which is what Mr. Gates testified to this morning, for every child when they begin life, rather than insuring that every child has the opportunity to achieve to the very best of their potential, we're basically going to have to assure results in this country rather than opportunity.

It has never been the American dream, or the American philosophy, to take money away from people just so there can be a leveling so that all people are exactly equal in this country when they're born. If that's your philosophy I say, God help the United States of America, because the United States government should never have as its goal taking enough money away from every family so that every child starts out equal with every other child. That's wrong.

CARLSON: Mr. Gates, you hear a lot of talk about the heirs involved. Here you heard Congressman Stark was really pretty upset with his own children for being lazy and undeserving, etcetera, etcetera -- but there are some children who are awaiting money from their parents who aren't undeserving or lazy, and I want to read you a quote from one of them.

This is from Erin O'Leary, who's president of Disabled American for Death Tax Relief. She read the ad that you and others put in newspapers against the repeal of the tax.

She said she was offended by your callous and heartless comments, and listen to what she said: "Some of us who would receive this wealth are in wheel chairs. Some are deaf or blind. Some are on respirators. Others require medication or nursing services." She points out that according to the Census, there are up to two million disabled Americans who would be hurt, who are going to be hurt, by the death tax -- who may end up becoming wards of the state because the money their parents were to leave for them to support them is going to be grabbed by the federal government.

This is not a theoretical case. This is a real case. What do you say to people like Erin O'Leary?

GATES: That's a new one to me. That's an interesting complaint. You know, the whole business of the farms and the small business people who -- it isn't a question of the passing-on thing, the issue there is being required to sell something that they don't want that sell. That's going to lead, inevitably, even at -- if everything happens the way I'd like it to, there would be much larger exemptions. Exemptions on a level where a disabled person -- I mean, I don't know the mathematics of disability, or what is required to live through a life disabled -- but if the disabled person is relying on their own estate, people on the Hill now are talking about exemptions which would not interfere with that in the slightest.

CARLSON: But what about the more basic principle involved, which is: Gee, this money has already been taxed. Here the person dies and the government, simply because he's not around to defend his own wealth, moves in and takes more than half of that. You don't see something fundamentally unfair with that?

GATES: I don't -- let's see, if we -- one thing we might do is go down and look for all the taxes we've got that represent a second shot at something, and repeal all of those, then wouldn't have any tax program at all.

CARLSON: Well, it doesn't mean...


CARLSON: But you put an ad in the newspaper defending this tax.

GATES: That sort of thing happens in all kinds of instances.

CARLSON: But the principle remains the same, and I'm wondering how you defend the principle.

GATES: Well, I'm saying that it's not a good principle.

CARLSON: And, yet, you put an ad in the paper defending it.

GATES: And if you applied that principle uniformly across the tax code, you'd end up with no tax code at all, So I -- don't think it's an important principle. The principle that I think is important, is the people who have prospered without any real contribution to it. People who have benefited from free education, people who have benefited from an economy that works, people who have benefited from a country that works, from order, freedom, models, those people owe something back to society.

The fact that somebody can make $100 million -- to start at that level -- and there are all kinds of people at that level; isn't it sensible to have them pay $50 million back to the country? $50 million for the kids?

KYL: After they paid their income taxes.

GATES: Sure.

CARLSON: We'll be back in just a moment to talk more about the rich and what they owe with William Gates Sr. and Senator Jon Kyl of Arizona on CROSSFIRE. We will be right back.


CARLSON: Welcome back to CROSSFIRE. Its passage once all but assured, repeal of the inheritance tax is now under fire from all sides. From Democrats who say it favors the rich. And in some cases from the rich themselves, who agree. Some Republicans have proposed a compromise: don't end the tax, mend it, by raising the threshold at which it kicks in.

Not good enough, say others in the G.O.P. There are principles involved here: should Americans ever be taxed twice on money they earn? Shouldn't parents be able to pass on the fruits of their labor to their children? Tonight, representatives from both sides: William Gates Sr of the group, Responsible Wealth, and Arizona Republican Senator Jon Kyl -- Bill.

PRESS: Senator, when you were elected senator of Arizona, you had the responsibility to serve not only your citizens of Arizona, but all the citizens of the United States, as a United States senator. Looking at this estate tax that Mr. Gates pointed out recently, so few people have to pay it; 98 percent of all estates are not big enough to qualify for this estate tax, and in 1997, there were 43,000 Americans only who had to pay it, which is less than 2 percent of all taxpayers. And my question to you: out 300 million Americans, why are you so obsessed with these 43,000? I mean, doesn't that amount to special interest legislation?

KYL: Bill, first of all, I'm not obsessed with anything. You called me on the show to talk about this bill.

PRESS: But you want to repeal...

KYL: We do want to repeal because, first of all, it's a grossly unfair tax, very inefficient, and you are right, it doesn't collect all that much money. The unfairness of it, coupled with the fact that it doesn't collect that much money, means that we can eliminate it.

But you are also wrong about something else: according to testimony this morning, approximately 10 million people a year are affected by the tax. They don't all pay it but these are the people who pay to have others plan their estates, to buy insurance, to pay the accountants and the lawyers, and the people who lose their jobs, as a result of the businesses that goes out of business or the money that's paid for estate planning, rather than employing people and, so on and so on.

So the effect of it is much more significant than just the people who actually end up paying it. As a matter of fact, the very wealthy don't pay it; they can plan around it.

PRESS: That's a very good point by the way. People do proper planning; their estate tax is a lot lower than it should be, and if some people don't do the proper planning...

KYL: But the facts show that the people who can least afford to do it don't do the planning.

PRESS: But here is the question: if there are some problems -- I think John McCain had the right idea during the primary. I think that John Dilulio, the White House director of the Faith-Based Initiative Office in the White House -- working for President Bush -- had the right idea, when he said to "The New York Times" the other day: "I don't want to be the skunk at the picnic, but no, I don't think the estate tax should be eliminated -- modified, maybe, but not eliminated."

Why don't you just raise the ceiling up to, say, $5 million.

KYL: Actually, Bill, that's what we will do. The compromise that's going to pass -- in fact, my bill has bipartisan support because we have compromised. What we are doing is literally replacing the estate tax with the capital gains tax and no carryover in basis, so that you will pay the tax when you sell the property, not when you die. We just basically take death out of the equation.

That means the Treasury will still receive a lot of the money that would have been paid, but instead of having to do this when the head of the household dies, you do it when you decide to sell the property.

PRESS: So George Bush's plan to eliminate the estate tax is dead.

KYL: No, that's not true. George Bush's plan to repeal the estate tax will in fact pass and it will be substituted with a capital gains tax that's only applied if and when the property is sold.

CARLSON: Mr. Gates, everybody involved agrees that this tax doesn't raise that much money -- $30 billion a year, which is small potatoes, not even a french fry in the federal budget. So this isn't really about money, is it? It's about social engineering, about making people behave in a certain way, by making them more virtuous really, but I want you to consider the unintended consequences of a tax like this. I'm reading a quote here from Steve Moore, who is an economist, says:

"The death tax rewards the very life of lavish and unproductive consumption it is intended to discourage. The tax says to the elderly: live high on the hog, wrap yourself in every material comfort, eat, drink, and be merry. You can't take it with you and you can't leave most of it to your kids."

This is true; I mean, there really is no incentive for the elderly whose money will be grabbed by the government to do anything but go to Boca every year.

GATES: Do you believe that is true?

CARLSON: I believe it is absolutely possible.

PRESS: He doesn't believe anything.

CARLSON: Of course I believe it's true. Look...

GATES: Go to Barbados, go to...

CARLSON: But why not? Better that than giving the money to the DMV, which is essentially what happens. GATES: OK, but do they really do that? I don't accept that explanation of our society at all. Look, I don't think people act that way. I do think that it is a way of avoiding the estate tax, to not be -- care so much about what you spend during your life. I'm going to live that way. And that is OK. But not going to go off on some frolic of some kind in order to avoid estate taxes.

CARLSON: You said one of the reasons you like the estate tax is because it compels people to give to charity, right?

GATES: I don't think I ever used the word "compels."

CARLSON: That's really what you mean. People give to charities to avoid the tax, but if you are giving to charity because if you are trying to get out of avoiding tax, it's not really charitable giving, is it? I mean, isn't the essence of charitable giving is that it's voluntary?

GATES: It seems to me, the value of charitable giving is to the charities and the people benefited by charities. I don't think the motives of the people who do it matter very much.


KYL: Let me make a point, Tucker. This morning, Mr. Gates testified and I commend him for it, that in his case, he would have given most of the money to charity in any event. The argument that it helps charities is really a bogus argument. Studies show that it more affects the timing, instead of giving closer to death, if it were repealed, it would be...

CARLSON: Shouldn't people be able to make that choice? I mean, if you want to give money to the local opera company, you should be able to, but if you want to send your grandkids to camp, shouldn't it be up to you? I mean, why should the government say, we think people ought to give charities, therefore, we keep the tax in place?

GATES: Well, (UNINTELLIGIBLE), talk to the people who are proposing the itemization of deductions in the income tax rules as well. Maybe you -- maybe you think that's wrong. I mean, it's just an inducement. People start off with a charitable motive, make no mistake about it. I don't think the tax deduction makes somebody give away money to a charity who otherwise would not.

But it is -- it does help. It helps explain to the kids why you're going to give a million dollars to your university instead of giving it to them, because it only costs them 45 cents. That -- that's the role it plays.

It's not major. Charitable giving will not die if the estate tax goes away, but it will go down. It will go down.

PRESS: Yeah, it seems to me -- I want to pick up on that point, Senator Kyl, because you said there's no -- it doesn't have any influence at all. I mean, human nature, being what it is, if people know that they can reduce their tax bill by giving more to charity, they're going to do it.

Of course, I think their primary motive is they want -- they've been very lucky, they want to give back as much as they can. But the taxes are certainly a factor in that. And so to the extent that the estate tax is lessened, won't the hospitals and the museums and the schools and the churches and the Red Cross and the Salvation Army suffer because of it?

KYL: You want to know the facts, Bill? You want to know the facts?

PRESS: I'm asking you.

KYL: According to -- well, I'll give you the facts: 8 percent of the giving is by bequest. I said, "Most of the people," and I think most is, 92 percent probably is a good definition of most. So yes, it may influence some, but as Mr. Gates said, it will not have a major effect on charitable giving: 8 percent is by bequest.

PRESS: The 8 percent from the (UNINTELLIGIBLE) wealthiest in the country adds up...

KYL: No, no, 8...

PRESS: ... adds up to a lot of money.

GATES: Wait a minute. Wait a minute. The word "major" was not the word I used. I did not say "major." I think it will have a significant...

PRESS: But...

KYL: Well, the facts suggest that that's not true. And I quoted a survey in the hearing this morning in which the vast majority, 79 percent, said that this would not have any effect on their giving. In fact, 19 percent of the people said they would actually give more if they didn't have to pay the estate tax.

PRESS: Now, I love to disagree with my co-host, Tucker Carlson, here, who says that $30 billion is chump change for the federal government. According to the Center for Budget and Policy Priorities, that's 9 percent of all discretionary spending: $30 billion would do a lot for prescription drugs for seniors, do a lot to fix schools, would do a lot to expand health care to kids. Isn't that a better use for that money than giving -- putting it back into his pocket?

KYL: As you know, Bill, we've got a $5.6 trillion surplus. We're not going to spend all of that money.


PRESS: Senator, maybe.

KYL: We're going -- well, are you going to contest the figures -- you know, the government has said it's 5.6 trillion. The fact of the matter is it's probably substantially more than that. But using the most conservative numbers, everybody agrees that there is room to pay down the debt, increase spending on a significant number of programs, and still have money left over for the tax cut.

If you want to have a debate with me about whether we should spend a measly $1.6 trillion over the 10-year period here that the American people have already overpaid to the government by giving it back to working families in this time of economic downturn, that would be a great debate to have. This is only one of the three components of President Bush's plan, as you know. That's by far and away the smallest.

GATES: That is a $30 billion component, and if it doesn't come from the people who pay estate taxes, it will come from someone else.

KYL: Well, it's not $30 billion. Remember, we're replacing the estate tax with a capital gains tax, which will recapture maybe about half of that.

PRESS: Gentlemen, you started off debate today. We're sure it's not over. So we'll be watching very carefully. Thank you so much coming.

Senator Kyl, good to have you.

KYL: You bet.

PRESS: Mr. Gates, thanks very much -- coming all the way from Seattle.

Tucker Carlson and I will be back, and we're going to tell you how much we're going to leave our kids, estate tax or no tax, when we come back -- closing comments.


CARLSON: Bill, of all the people in the world who could come out and testify to keep this tax, the group that I find least compelling are billionaires. So Bill Gates -- Bill Gates is for the death tax. Who cares? His children have nothing to worry about at all. He is so far removed from the real effects of this tax that it means nothing to (UNINTELLIGIBLE)...

PRESS: Tucker, first of all, it's not a death tax, because nobody dead pays it. The people who pay it are the people who inherit all the money.

And you know why only the wealthy...

CARLSON: After the parents die!

PRESS: Wait! Whoa, whoa, whoa, whoa! My turn.


PRESS: You know why -- you know why only the wealthy are speaking about it? Because it doesn't affect anybody who's poor, it doesn't affect anybody who's middle class. It affects only the 43,000 wealthiest people in this country.

CARLSON: Totally untrue!

PRESS: And what they are saying falls...

CARLSON: It affects poor people who should be -- who should be inheriting money.

PRESS: No. No, no, no.

CARLSON: But they can't because...

PRESS: What they're saying is we can give each of our kids a million bucks each, and after that, if they have to pay taxes on all the rest we have to give them, then too bad for those poor little rich kids. Oh, my heart bleeds for them.


PRESS: From the left, I'm Bill Press. Good night for CROSSFIRE. We'll see you in THE SPIN ROOM later tonight.

CARLSON: See you there. From the right, I'm Tucker Carlson. Good night from CROSSFIRE.



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