I am one of those lucky Americans who won the genetic lottery. That is, I was born rich. And believe it or not, my family’s business success happened because of–not in spite of–our country’s progressive tax system.
My great-grandfather, William Pigott, founded the Seattle Car Manufacturing Company in 1905. It has evolved into PACCAR, one of the largest heavy-duty truck manufacturers in the world. Although my great-grandfather’s ingenuity and ambition was key to his success, in many ways you could say Uncle Sam was his business partner.
Around the mid-20th century, PACCAR (then Pacific Car and Foundry Company) acquired the Peterbilt Motors and Kenworth Motor Trucks companies. The trucks PACCAR manufactures would have nowhere to travel without the roadways, highways, bridges, and tunnels that the government builds and maintains. Not to mention the plows, streetlights, and police that keep these streets safe and passable–all paid for with tax revenue.
In essence, public structures supported by our tax revenue paved the way–literally–for my family’s business success.
That’s why I find anti-estate tax rhetoric so mind-boggling, especially coming from those who achieve business success because of government-created policies and structures. My great-grandfather and many others like him managed to accumulate enough wealth to pass on to younger generations during a time when taxes on the wealthy were far higher than they are now. I get more than a little frustrated listening to all of the misinformation that seems to cloud the debate surrounding the estate tax. So let’s set a few things straight about the estate tax.
Much of the wealth subject to the estate tax has never been taxed. For wealthy Americans like me, the paycheck earned from the jobs we work is only a tiny portion of our wealth. Most of our income comes from watching our stock portfolios grow. Indeed, the majority of the one-quarter of one percent of American households who even qualify to pay the estate tax–that’s one out of every 500 families–earn the majority of their wealth from accumulated assets, not earned income. If not for the estate tax, in many cases this wealth would avoid taxation entirely.
The estate tax is a critical source of revenue at a time when our nation needs it most. The one-year lapse in the estate tax this year will cost the U.S. Treasury roughly $25 billion in uncollected estate tax revenue. That’s money that could be directed towards the significant challenges facing our country: an economy in shambles, structural and social needs going unmet, and a mounting federal deficit. Instead, $25 billion dollars is sitting in the bank accounts of wealthy heirs who didn’t lift a finger to earn it. I, for one, am not interested in hoarding money that I didn’t work to earn when it could be put to work to make our communities stronger.
The estate tax is an incentive for very wealthy individuals to engage in charitable giving and use their wealth for the greater good. As the recent “billionaire’s pledge” demonstrated, the estate tax encourages people with wealth to support nonprofit services that are meeting critical needs in our communities. Repealing the estate tax entirely would provide no incentive for wealthy families to donate their wealth to the greater good, and could put the nonprofit sector in serious jeopardy.
Many pundits say the estate tax is shaping up to be one of the hottest debates of the year. That may be true, but to me the issue is very simple. Our tax code should reflect our collective values.
Preserving the estate tax will allow our government to support the public structures that keep our communities strong. It will provide revenue needed to pay down our federal deficit so our nation can return to secure financial footing. It will pave the way for future generations to access the same opportunities to succeed in business that my great-grandfather had more than 100 years ago.
And–most importantly–it will help us focus on what sort of a nation we wish to be.