Steve Forbes Argues Against Entrenched Foundations

And he does so very effectively in Forbes’ latest issue (2nd item at link, which probably requires subscription), in the process exposing the hypocrisy of ultra-rich death tax defenders:

Term Limits for Foundations?

In announcing his extraordinary gift to the Bill & Melinda Gates Foundation, Warren Buffett repeatedly criticized efforts to repeal the death tax, warning of the dangers of “dynastic wealth” and belittling the idea that great wealth should be passed on to “members of the lucky sperm club.”

Ironically, there is one, largely unaccountable aristocracy in American life today: foundations. These organizations run on in perpetuity. They control hundreds of billions of dollars in assets. They only have to distribute a minimum of 5% of their assets each year, and even that mandate can be lessened by various loopholes and legal dodges. They do not answer to the marketplace or an electorate. Most of them are dominated by proactivist-government types vibrating with barely concealed hostility to entrepreneurial capitalism.

At least charitable organizations such as the American Red Cross and United Way have some form of public accountability because they are dependent on private donations. Hence the American Red Cross’ president felt she had no choice but to resign when it turned out that monies received to help victims of 9/11 were being diverted for other purposes. Years before, the president of the United Way had to resign in the aftermath of bad publicity over excessive salaries and expense-account abuses.

As for the death tax, its very existence has actually helped to preserve those “dynastic” fortunes so worrying to Warren Buffett. It has led to a proliferation of trusts and other instruments designed to escape the tax collector. These devices–usually run by competent money managers–help preserve and expand fortunes by not letting the heirs get their hands directly on the money.

Eliminating the death tax would in most if not all instances eliminate the need for the trusts in the first place. Heirs would then have control of their money to squander it (creating work for those who work in the businesses where the money is being squandered) or invest it (if done wisely, contributing to economic growth). It will less likely be wasted on far-left ideas that would wither on the vine without their gravy-train of foundation funding. What’s not to like?