More on Robertson, Rubin, and the Estate Tax
Several reader-participant-community member-content co-creator-watchdogs have e-mailed to follow up on the earlier post concerning Robert Rubin, Julian Robertson, and the estate tax.
Among Mr. Robertson's and Mr. Rubin's arguments for the estate tax are that without it, the federal government is "losing revenue" that it can "ill afford to forgo" and that, philosophically, inherited wealth runs counter to the concept of meritocracy.
One point is that Mr. Robertson is a strange messenger for the concept that taxes should be increased because the government can't afford to lose the revenue, because Mr. Robertson has structured his own affairs in a way to minimize his taxes. He fought a long legal battle to avoid $26.7 million in taxes and $21 million in interest that he would have owed in New York City taxes had he spent more than 183 days a year in New York City, which could also use the revenue. "Famed course developer avoids $27 million tax bill," was the way that Golf Magazine reported it.
Mr. Robertson has also parked $974 million in assets (as of a tax return for the year ended November 30, 2008) in a private foundation, the Robertson Foundation, that is tax-exempt and has the effect of sheltering those assets from federal taxes, including from an estate tax if it were re-imposed. In connection with closing some of his hedge funds, the New York Times reported that "One thorny issue in the closing of Tiger is related to Mr. Robertson's incentive fees, which have been kept offshore where they compound tax-free until the funds are repatriated, according to a source. This person said that Mr. Robertson might have a $200 million tax liability on those fees."
An interesting question is whether Mr. Robertson did ever repatriate those funds (I believe one of the offshore funds was called Jaguar and based in Curacao) or whether he kept them offshore (causing the U.S. government to lose revenue that it can "ill afford to forgo.") New Zealand's Dominion Post newspaper reports that Mr. Robertson spends three months a year in New Zealand, where he "owns two luxury golf resorts in Cape Kidnappers in Hawke's Bay and Kauri Cliffs in Northland, and has recently bought the prestigious Matakauri lodge at Lake Wakatipu, near Queenstown." If Mr. Robertson likes to golf, there are plenty of fine courses here in America — after all, the federal government here can use the revenue.
Finally, for a guy who argues that inherited wealth is somehow a philosophically flawed concept counter to the meritocracy on which America is based, Mr. Robertson sure does have a way of helping out his own children. The New Zealand Herald News reports that "Robertson's middle son, 31-year-old Jay (Julian Robertson III) runs both Kauri Cliffs and The Farm at Cape Kidnappers." A New York Times wedding announcement from 2002 identified another son, "Julian Spencer Robertson," "known as Spencer," as "a program officer at the Tiger Foundation." A third son, Alex Robertson, was recently promoted to managing partner of Tiger Management at age 30, according to a report in the Wall Street Journal. So this guy is going around using the platform of the Wall Street Journal editorial page to lecture America on the evils of inherited economic power as opposed to meritocracy while at one time or another employing all three of his own sons!
As for Mr. Rubin, several reader-participant-community member-content co-creator-watchdogs note that as Treasury secretary, he took advantage of a provision that, as a Forbes article put it, "allows government officials to defer capital gains taxes on assets they have to sell to avoid a conflict of interest, as long as the proceeds are reinvested in government securities or a broad array of mutual funds approved by the government within 60 days." Mr. Rubin "made ample use of the tax break," the Forbes article says. A commenter suggests that so long as Mr. Rubin and Robertson are suggesting bringing back the estate tax retroactively, why not impose a similar retroactive rule change on Mr. Rubin's capital-gains-tax savings?
Another reader-participant-community member-content co-creator-watchdog emails with more arguments against the estate tax: "It treats similarly situated individuals differently. Take two people who each earn $200k per year. One spends every dime he earns and enjoys the consumption. The other lives frugally and hopes to pass on his savings to his children. It does not make sense to punish the saver with additional taxes upon death." And, "It is unclear who really pays the estate tax. If you tax savings, you will have less savings. Less savings translates into less investment. The burden of less investment does not fall on the wealthy. It falls on all of us to the extent the economy is less productive, unemployment is higher etc. The assumption that the burden of the estate tax only falls on the wealthy is probably wrong."
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