Buffett Tells Senators To Keep Death Tax

by Leroy Baker, Tax-News.com, New York

16 November 2007

Billionaire Warren Buffett told a panel of US Senators on Wednesday that retaining the estate tax is essential to stop the wealth gap between the middle class and an elite of super-rich Americans growing further.

In testimony before the Senate Finance Committee, Buffett, who has emerged as an unlikely ally of the Democrats in calling for more taxes on wealth, argued that far from encouraging wealth creation and investment, tax policies which allow the wealthy to keep more of their money are actually eroding the tenets of economic opportunity and social mobility held dear by Americans.

"Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline," he told the Committee. “A meaningful estate tax is needed to prevent our democracy from becoming a dynastic plutocracy."

"In a country that prides itself on equality of opportunity, it's becoming anything but that as the gap between the super-rich and the middle class is widening," Buffett remarked.

He suggested that rather than repealing the estate tax, it should be reformed to have less impact on smaller estates, but tax larger estates more.

Under current law, the estate tax will gradually decline until it is fully eliminated in 2010. However, in 2011, the tax returns in full force, allowing an exemption from the estate tax of $1 million per person, and taxing all other estates under a progressive tax rate structure, topping 55%. For this year, individual estates valued at more than $2 million are taxed at a top rate of 45%.

Just 9,600 US estates will be subject to the estate tax in 2009, according to the Congressional Joint Committee on Taxation. But this number will jump to an estimated 62,000 in 2011.

Attempts, mainly by Republicans, to get legislation through Congress repealing the estate tax, sometimes known as the death tax, have repeatedly failed in recent years, and lawmakers on both sides of the aisle now accept that outright repeal is a remote possibility.

"I support repeal. But we need certainty in this area. So we need a deal that can garner 60 votes," observed Sen. Max Baucus, the Montana Democrat and Chairman of the Finance Committee. "We need to provide predictability and relief for taxpayers like ranchers and farmers in Montana."

However, other lawmakers, including Chuck Grassley of Iowa, another largely agricultural state, are still holding out for full repeal.

"I believe that the estate tax, or death tax, is unjust from a philosophical and from a technical viewpoint," he argued in his hearing statement.

"From a philosophical perspective, I have always said that death should not be a taxable event. There is something fundamentally wrong when the government swoops in after a funeral to take a cut of what that person had worked their whole life for, and has already paid taxes on at least once," he remarked.

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