Billionaire Warren Buffett urged Congress to preserve the estate tax, saying that plans to repeal it would benefit a handful of the richest American families and turn the country into a "plutocracy."
Buffett, the chairman of Berkshire Hathaway and the second-richest man in America after Bill Gates, according to Forbes magazine, testified before the Senate Finance Committee on Nov. 14, 2007. He told the panel, which is exploring ways to replace the ever-changing rules of the current estate tax system, that advocates of repeal are "dead wrong" to call the tax a "death tax."
Buffett said it would be more appropriate to call it a "death present" because heirs get to calculate their capital gains on inherited assets based on the price when they inherited them rather than when the decedent originally bought them.
Buffett noted that so few Americans are subject to the estate tax that "you would have to be at 200 funerals to attend one where the decedent paid the tax."
"Dynastic wealth, the enemy of a meritocracy, is on the rise," he went on. "Equality of opportunity has been on the decline. . . . We ought to do more for [low-income Americans] and take more out of the hides of people like me."
Those who support repeal claim that the estate tax sometimes forces the heirs of family businesses and farms to sell pieces of the business just to pay the tax bill. Testifying in favor of repeal was Dean Rhoads, a rancher and state senator from Nevada, who said when his in-laws died, the family had to sell land to pay the estate taxes and are now paying $18,000 in taxes, plus interest, every year. "We have had to borrow money to make these payments," Rhoads said.
Currently, only estates worth more than $2 million are taxed by the federal government. The threshold is scheduled to rise to $3.5 million in 2009. For the year 2010, estates will be entirely free from federal taxation. However, the law that includes this provision expires at the end of 2010. Thus, unless Congress acts in the interim, the estate tax exemption will then revert to $1 million.
Buffett said he would raise the amount of estate assets exempt from the estate tax to $4 million. He also said he might include an exemption for small family-owned businesses.
Senators on both sides of the aisle agreed that complete repeal of the estate tax is not in the cards now. "I think everyone in this room knows we're not going to repeal the estate tax. It's not going to happen in the foreseeable future," said Committee Chairman Max Baucus (D-MT).
"We can't get [repeal] done," said Sen. Jim Bunning (R-KY). "We ought to be able to come to a compromise."
Articles on the hearing appeared in a number of online publications, including The New York Times, Reuters and CNNMoney.com.
In connection with the hearing, the Joint Committee on Taxation released its background research memorandum, "History, Present Law, And Analysis of the Federal Wealth Transfer Tax System" (November 13, 2007, Report No. JCX-108-07, PDF, 50 pages). To download a copy, click here.
For the Senate Finance Committee's hearings page, click here.
