Warren Buffett, Bill Gates, and the billionaire challenge

In winning over 38 billionaires to pledging half their wealth to charity, Warren Buffet and Bill Gates also set a better climate in the political debate over ending the Bush tax cuts on the rich.

America’s superwealthy are being hit up hard for their money on two fronts this year – for charity and for higher taxes. At the least, these new appeals may serve as a reminder for everyone in how best to give back to society.

One front is a gentle arm-twisting campaign by Warren Buffett and Bill Gates to persuade fellow billionaires to commit half of their wealth to good causes. In just a few short weeks, the two men have won over 38 of those listed on the Forbes 400 list of wealthiest Americans to make that pledge.

About half of those asked have so far said yes, often saying they see their giving as an investment in society. Their names range from New York Mayor Michael Bloomberg to eBay founder Pierre Omidyar. In all, they have a combined net worth of more than $200 billion.

But money for charity isn’t the main point. As Mr. Buffett, head of Berkshire Hathaway investments, said: “At its core, the Giving Pledge is about asking wealthy families to have important conversations about their wealth and how it will be used.”

Such family and peer pressure certainly has its uses if they encourage generosity. The Buffett-Gates campaign in particular may also help create useful publicity for a broad political discussion about government tax rates. In coming weeks, Congress will decide whether to eliminate the Bush-era tax cuts for families earning more than $250,000 – the other proposal to wrest money for the public good away from the rich.

High-profile philanthropy by this large number of super-rich is indeed a rare display of heartfelt concern about others. It sets an example for those of more modest means to make more donations. “By giving, we inspire others to give of themselves, whether their money or their time,” says New York’s mayor, who earned his wealth publishing financial news.

The Giving Pledge campaign may also help dampen the harsh rhetoric of class warfare in the coming fight over the Bush tax cuts.

The willingness of both rich and poor to pay taxes – “the price of civilization,” as Justice Learned Hand called them – is critical to a functioning government. But the debate on Capitol Hill mostly centers on data and arguments from economists about the effects of tax rates on private investments and the budget deficit, or the tax burdens on each income group. Economics is not really a science, however, so it’s hard for either side to win those debates.

Rather, the setting of tax rates is a democratic exercise, even though for many Americans the paying of taxes seems coercive – like an IRS agent citing jail time if you don’t pay up. That’s why each elected official must give voice to their constituents’ willingness to be taxed, just as Buffett and Mr. Gates have quietly drawn out the rich to say how much they would give to charity.

Sen. Barbara Boxer (D) of California is one lawmaker who says the rich are ready to pony up more in taxes. “Those people who are making that kind of money, they’ve told me that they feel fine contributing to this country,” she says. Such statements are far better than the usual practice of demonizing the wealthy.

But then Jon Kyl (R) of Arizona makes an opposing point by highlighting a wealthy small-business man, Craig Fritsche, the owner of Tart Lumber in Virginia. “Do we need to raise taxes on people who create the jobs in our country?” asks Mr. Kyl.

Congress sets the priorities for both government spending and taxes. Lawmakers must reflect the will of voters to contribute to the wider community, but also persuade them to be taxed more – or on different types of income – when that is needed.

It is the type of task that Gates and Buffett have learned well as they continue to hold private dinners with more billionaires to ask them to make the Giving Pledge. “We hope to come back in six months and surprise you more,” Buffett said, “or at least surprise ourselves.”

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