Warren Buffett to Congress: Keep Taxing the Mega-Rich

[one...two...tree 2,762]

By Chuck Collins

Billionaire Warren Buffett testified before the Senate Finance Committee on Wednesday in defense of the federal estate tax, the nation's only tax on inherited wealth.

Buffett invoked the historical roots of the estate tax, established in 1916 during the Gilded Age to put a brake on anti-democratic concentrations of wealth and power. "Dynastic wealth, the enemy of meritocracy, is on the rise," Buffett told the panel. "Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."

As a result of the 2001 Bush tax cut, the federal estate tax is being phased out and in 2010 will be completely repealed for one year. But the entire tax bill sunsets in 2011, and unless Congress takes action, the estate tax will return. The votes no longer exist for "permanent repeal," so a compromise lies ahead.

Wealthy individuals and tax cutters have always disliked the estate tax, which they labeled the "death tax." In the mid-1990s, a group of superrich families began funding organizing efforts to abolish the tax, culminating with the passage of the 2001 legislation.

For the last decade, conservative tax cutters working to abolish the tax have had the upper hand, beating up Democrats for supporting a tax that they alleged "destroy family farmers and small businesses." They put forward these farmers and small business owners as the public face of their campaign, even though research and investigative reporting have vanquished these charges. Tom Buis, president of the National Farmers Union, representing 250,000 farmers, complained, "Family farmers and ranchers are insulted by those who use farmers as the reason for eliminating estate taxes, when the real beneficiaries are the nation's multimillionaires."

After a decade of false accusations and innuendo, Wednesday's hearing was the first opportunity to set the record straight as to who pays the estate tax, how much revenue it generates and why we should retain it. Senate Finance Chair Max Baucus, D-Mont., a supporter of abolishing the tax, conceded that the "99 times out of a hundred, the tale is worse than the tax."

Republican Chairman Charles Grassley, R-Iowa, complained that "the death tax" was "fundamentally wrong." Buffett responded that use of the phase "death tax" was "intellectually dishonest" and "clever, Orwellian and dead wrong."

Buffett pointed out that tax cuts of the last decade have enabled the superrich, including himself, to get richer. "Tax-law changes have benefited this superrich group, including me, in a huge way. During that time the average American went exactly nowhere on the economic scale: He's been on a treadmill while the superrich have been on a spaceship."

http://alternet.org/workplace/68145/

[almaty 19]

he is a wise man..

[GaryC 7]

What a hypocrite! He has all his money put in tax shelters and off shore investments. He gets taxed very little. The man is sickening.

[GaryC 7]

Warren Buffett, hypocrite? On the death tax issue, that's the fact

Date published: 8/24/2006

HOUSTON--The federal government won't be get- ting a windfall of Buffett bucks after all.

This year the world's second-richest man, Warren Buffett, turns 76. He's built a fortune worth an estimated $44 billion. He's also a strong proponent of the federal death tax, which (were he to die in 2011) would claim some 55 percent of his estate. So it must have occurred to some IRS bureaucrats that they might eventually cash a probate check for upwards of $20 billion.

But that's not going to happen.

On June 26, Buffett announced plans to give more than $30 billion to the Bill & Melinda Gates Foundation. That's completely reasonable. Buffett is a friend of Bill Gates, and the foundation's good work is well worth supporting.

But it's clear that Buffett had more than one reason for giving his fortune away.

Buffett says he wants to shelter his fortune from the tax man. He went so far as to insist that his beneficiaries "must continue to satisfy legal requirements qualifying my gifts as charitable and not subject to gift or other taxes."

Ironically, even as he avoids paying the death tax, Buffett still insists that the tax is critical. "I would hate to see the estate tax gutted," Buffett told reporters as he announced his gift. "It's a very equitable tax." Just not one he wants to pay.

Buffett's actions, while hypocritical, make sense. Death shouldn't be a taxable event.

Lawmakers partially agreed in 2001. That year they started phasing out the death tax. It's scheduled to decline every year until 2010, when it will disappear for one year--before returning at full strength (55 percent) in 2011.

Liberal New York Times columnist Paul Krugman calls this the "Throw Momma From the Train Act," since it would give people a perverse incentive to die in 2010. The best way to avoid that, of course, is to completely eliminate the death tax--permanently.

This wouldn't be an extreme step. Some 24 countries, including Canada, Australia, India, Mexico, China, Russia, and even Sweden (poster child for the welfare state) have no death tax.

The fact that the United States still does hurts our global competitiveness. A recent study by the American Council on Capital Formation showed that only two major nations (Japan and South Korea) have higher death-tax rates than the U.S.

The death tax is simply bad public policy. It imposes a gigantic burden on small businesses. Family firms built by the sweat of a lifetime's work can be wiped out by the tax when their owners die.

Business owners pay an estimated $12 billion each year just for insurance to prepare for the eventual payment of onerous death taxes. That's $12 billion that's not being spent on expanding those businesses through research and development or through hiring new employees.

This perverse situation does help explain Buffett's support of the death tax. His company, Berkshire Hathaway, sells "death tax insurance" to small businesses. And when a small businessman lacks such insurance? Buffett can swoop in to buy small businesses, such as the chain of 63 jewelry stores formerly owned by the Bridge family of Seattle.

Good tax policy is predictable tax policy. Businesses need to know how their profits will be taxed next year if they're going to make the right decisions. By forcing small businesses and family farms to hedge against the future instead of grow into it, the death tax holds back our economy and reduces job growth.

Economists at The Heritage Foundation estimate it costs us between 170,000 and 250,000 jobs a year.

It's almost inconceivable that a country founded on the principles of freedom and opportunity is still taxing economic virtue and productivity. As Sen. George Allen, says, there should be "No taxation without respiration."

Warren Buffett has managed to dodge the death tax. It's past time for Washington to kill it off permanently.

http://fredericksburg.com/News/FLS/2006/08...dex_html?page=2

[Trumplestiltskin 5,791]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Edited November 19, 2007 by Number 6

[one...two...tree 2,762]

Gary, donating money to a charity isn't a tax shelter because he's not going to see any of that money again.

I wouldn't call that hypcritical at all... his argument is against high concentration of wealth, handed down generationally, which leads to aristocracy. So, a billionaire like him can choose to let his inheritance be taxed or he can donate it charity - a great system that works.

[w¡n9Nµ7 §£@¥€r 123]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

[one...two...tree 2,762]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

[w¡n9Nµ7 §£@¥€r 123]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

What's wrong is wrong. Once the government taxes a dollar, they should keep their hands off it. Wrong doesn't become right just because a there are very few victims.

And frankly, I'm much more concerned with realigning government spending to be more in line with what people need. Once that's done, we'll have a clearer idea of 'how much' the government needs and then they can levy it in a progressive manner that is fair to the poor. There is really no need to tax a dollar twice to do that.

[Dan J 277]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

What's wrong is wrong. Once the government taxes a dollar, they should keep their hands off it. Wrong doesn't become right just because a there are very few victims.

And frankly, I'm much more concerned with realigning government spending to be more in line with what people need. Once that's done, we'll have a clearer idea of 'how much' the government needs and then they can levy it in a progressive manner that is fair to the poor. There is really no need to tax a dollar twice to do that.

Right, we could basically eliminate inheritance tax with a better progressive tax scale. It would serve the same purpose and be less paperwork.

[Trumplestiltskin 5,791]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

I'm going off the UK system where the threshold is well... a lot lower than that; but its really the same principle IMO. I think inheritance taxes are fundamentally wrong, doesn't really matter if the people inheriting the money can technically afford it.

[one...two...tree 2,762]

Estate taxes are fundamentally unfair - essentially it amounts to taxing money that was already taxed. While I'm sure it is a loophole for the super-rich (lets face it - one of many), in Britain at least its the general public who get reamed when a relative dies.

When my parents pass - I'm the sole next of kin. I dread to think how much I'll get from the estate - probably not a lot. Not only would I get hit with inheritance tax, but if my parents were to end up in a care home before then, the local authority has carte-blanche to seize their assets to pay for the residential care.

Well said. Double taxation is unfair and wrong.

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

What's wrong is wrong. Once the government taxes a dollar, they should keep their hands off it. Wrong doesn't become right just because a there are very few victims.

And frankly, I'm much more concerned with realigning government spending to be more in line with what people need. Once that's done, we'll have a clearer idea of 'how much' the government needs and then they can levy it in a progressive manner that is fair to the poor. There is really no need to tax a dollar twice to do that.

Double taxation is a misnomer. If you win a large sum of money from the lottery, you are taxed on those winnings. An inheritance is not earnings you made yourself, so you aren't being taxed twice. Money is taxable every time it changes possession and we don't call it double taxation.

[w¡n9Nµ7 §£@¥€r 123]

Double taxation is a misnomer. If you win a large sum of money from the lottery, you are taxed on those winnings. An inheritance is not earnings you made yourself, so you aren't being taxed twice. Money is taxable every time it changes possession and we don't call it double taxation.

If you sell me your car, I give you my money. My money changes hands as a result of an economic transaction. Value is added to both sides of an economic transaction. I paid you for the car because the car is worth more to me than the sum of money. You sold me your car for the sum of money because the sum of money is worth more to you than the car. In the end, value is added to both parties and that makes a transaction. The government levies taxes on transactions, which I have no problem with.

If I die and leave you my money, my money changes hands but not as a result of an economic transaction. Value is added to you (duh) but not to me. There is no value add, just a value transfer. A tax on a transfer is wrong, IMO.

Edited November 19, 2007 by VJ Troll

[one...two...tree 2,762]

Double taxation is a misnomer. If you win a large sum of money from the lottery, you are taxed on those winnings. An inheritance is not earnings you made yourself, so you aren't being taxed twice. Money is taxable every time it changes possession and we don't call it double taxation.

If you sell me your car, I give you my money. My money changes hands as a result of an economic transaction. Value is added to both sides of an economic transaction. I paid you for the car because the car is worth more to me than the sum of money. You sold me your car for the sum of money because the sum of money is worth more to you than the car. In the end, value is added to both parties and that makes a transaction. The government levies taxes on transactions, which I have no problem with.

If I die and leave you my money, my money changes hands but not as a result of an economic transaction. Value is added to you (duh) but not to me. There is no value add, just a value transfer. A tax on a transfer is wrong, IMO.

IMO, any change of possession of money or wealth is an economic transaction. If I give money to a charity, I get a tax break. If I receive money as a gift, and it's large enough, I must report it as taxable income.

[russ 1]

The first 3.5 million of inheritance is tax free. How many of us here will even be in that ballpark?

Most of us under 30. I'm 29. My estate (and my wifes) will certainly be worth over 3.5 million when I die in 50 years. (My 401(k) is projected to be between 12-15 million then) Adjusting for inflation, it is reasonable to believe that the average 30 year old making $100,000 now will die with an estate of at least 10 million. Using the last 35 years inflation numbers a guide, that hypothetical 30 year old now would expect to make $500,000 in 35 years adjusted for inflation (and that doesn't count normal expected salary increases).

Mostly, the estate tax hurts small businesses (like farms for example). While the owners may plan for the children to continue the business, if their estate is not structured properly, the tax bill often makes the business fail. It is largely a tax on stupidity now.

The best way around the estate tax is life insurance. Guess what business Mr Buffett is in? Of course he would want to keep things the way they are - it serves his interests.

The wealthy who are smart don't pay estate taxes anyway. They have Lawyers, estate planners, trusts, and other structures in place to avoid them anyway. It is mostly a tax on stupid people (who don't put these steps in place).