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Dear Mr. Gates:

You have, by dint of your intelligence and sincerity, become a major spokesman for wealthy Americans calling for higher taxes. Since the nation’s budgetary problems will only be solved by combining spending reductions with tax increases, this is a compelling claim.

However, the devil, as they say, is in the details. Allow me to call three details to your attention:

1) Microsoft’s tax avoidance. Microsoft has become increasingly adept at parking its profits in low tax foreign jurisdictions, rather than paying U.S. taxes. After analyzing Microsoft’s financial statements, Tax Analysts’ Martin A. Sullivan recently concluded that Microsoft “has dramatically stepped up its efforts to take advantage of lax U.S. transfer pricing rules.” In lay terms, Microsoft is avoiding U.S. taxes by accounting maneuvers which shift its profits to low tax havens.

Of course, Microsoft is not alone in this behavior. However, Microsoft is the source of your family’s wealth and influence. I suggest that you start a campaign to press U.S. corporations to pay U.S. taxes and that you lead with Microsoft as the campaign’s first target.

2) Millionaires and billionaires are different. You are the leading proponent of the plan to establish an income tax in Washington State. The tax will be levied at a rate of 5% on annual incomes over $200,000 ($400,000 for couples). The rate will increase to 9% on annual incomes over $500,000 ($1,000,000 for couples).

Individuals earning these kinds of incomes are undoubtedly affluent. But few of them are software billionaires. Unfortunately, the Washington State levy will tax millionaires and billionaires at the same rates.

Many individuals triggering the first tier of the Washington income tax will be professionals like me. Many of the individuals triggering the higher tax level will be small businessmen and businesswomen. As to this latter group, the Washington tax will be among the nation’s highest. For these people, the tax will impose a noticeable burden and could lead to economic distortions such as a decision to leave Washington for a state with a low or no income tax.

It is neither fair nor efficient for the billionaires of Microsoft to pay the same marginal tax rates as these other taxpayers.

I suggest that you call for a third, substantially higher rate for the Washington State tax to apply to individuals such as you. The resulting revenues would permit a reduction of the rates applying to other, less affluent Washington State taxpayers.

3) The Gates Foundation is a tax shelter. The Gates Foundation does great work of which you and your family can be justifiably proud. But there is one thing the Gates Foundation doesn’t do: pay taxes.

You and your son have both been outspoken proponents of federal estate taxation. However, the resources you and he contribute to the Gates Foundation avoid such taxation. Moreover, the foundation, as a tax-exempt entity, pays no federal income tax.

I understand and applaud the charitable impulse which animates the Gates Foundation. My wife and I have established a private foundation in memory of our son though this fund is, needless to say, much smaller than the Gates Foundation.

It is, nevertheless, problematic to call for others to pay higher estate and income taxes while the Gates Foundation, one of the country’s largest, effectively shelters your and your son’s incomes and estates from the federal fisc.

I urge that the Gates Foundation annually and voluntarily

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Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Professor Zelinsky discusses Warren Buffett’s plans to donate his assets in a tax-free fashion to the Bill and Melinda Gates Foundation. Zelinsky suggests that Buffett, a prominent and outspoken proponent of the federal estate tax, should instead contribute his fortune on a taxable basis.

I am a Warren Buffett fan. In large measure, this reflects an Omahan’s pride in the success of another native son. My Buffett enthusiasm also stems from admiration for Buffett’s earthy wisdom and simple lifestyle. Though I have spent the last thirty years living in Connecticut and teaching in New York, I am still a Nebraskan at heart and Warren Buffett is the ultimate Nebraskan.

Among his other observations, Buffett has correctly noted the dangers to a democracy of inherited wealth as well as the moral obligation of those who have done particularly well in American society to give back to that society. As Buffett observed, he would not be Warren Buffett if he had been born in Bangladesh.

These concerns have led Buffett to support retention of the federal estate tax and to express dismay that his federal income tax bracket is lower than his secretary’s. Buffett’s observations are particularly noteworthy because Buffett is an acquisitive investor who believes in the marketplace. He cannot be dismissed as hostile to accumulation, success or capitalism. On the contrary, he is one who celebrates and embodies those qualities even as he raises important concerns about federal tax policy.

All of this leaves me perplexed by the way Buffett is contributing the bulk of his assets to the Bill and Melinda Gates Foundation. Buffett has received excellent legal advice to guarantee that his contributions will not generate federal tax. This provokes the question: Why?

Buffett could give his fortune to the Gates Foundation in a manner which generates federal tax. This would leave less for the foundation but more for the federal fisc. Indeed, Bill Gates, like Warren Buffett, advocates retaining the federal estate tax. He too could leave his assets to his foundation in a fashion which would share part of those assets with Uncle Sam.

It seems strange for prominent and outspoken advocates of the federal estate tax to dispose of their assets in a manner meticulously designed to avoid the federal estate tax.

Buffett (and Gates) might explain this apparent contradiction by arguing that their charity is an effective substitute for taxation. Thus, the argument would go, when they give $1.00 to the Gates Foundation with no corresponding tax payment, they should nevertheless be treated as if they had paid $1.00 in tax since the contributed $1.00 is devoted to public purposes.

For two reasons, this explanation proves unconvincing. First, this explanation undercuts Buffett’s now famous comparison of his tax rate with his secretary’s. If Buffett’s charitable contributions are to be treated as if they were tax payments, Buffett’s taxes are then far higher than claimed when he compared his burden to his secretary’s.

Second, giving money to the Gates Foundation is not the same as giving money to the federal Treasury. The federal Treasury is controlled by the people of the United States through their elected representatives. The Bill and Melinda Gates Foundation is controlled by Bill and Melinda Gates.

I hope that Warren Buffett will rethink his plans. The same skilled lawyers who arranged for Buffett’s fortune to go the Gates Foundation tax-free could instead arrange for Buffett’s assets to go to this foundation on a taxable basis. The resulting payment to the federal Treasury would demonstrate that the sage of Omaha is willing to put his money where he says his heart is.