Billionaire Warren Buffett told Senate tax writers Wednesday that the rise of “dynastic” wealth threatened the American ideal of equal opportunity.
Buffett built his massive fortune as the head of investment firm Berkshire Hathaway and is ranked by Forbes as the second-wealthiest person alive, although last year, he pledged much of his money to the charitable Gates Foundation.
Instead, Buffett said, lawmakers should continue to exempt the vast majority of estates from taxes but increase rates for the “super-rich,” such as himself.
Congress has tinkered with the estate tax several times in its history, including the Bush tax cut of 2001. That law increased the value of estates exempt from the estate tax, known by its critics as the “death tax.”
Of nearly 2.5 million deaths in 2004, 19,300 estates paid the tax, according to the IRS. But by 2009, only about 9,600 estates would pay a tax because far more would be exempt. It would raise nearly $22 billion in revenue in 2009, roughly $5 billion less than the estate and other inheritance taxes are expected to bring in for 2007.
All estates would be exempt from the tax for one year, 2010, before the estate rules established in the 2001 law would be repealed.
Buffett said Congress should not return to the pre-2001 days, when estates worth more than $1 million were taxed.
But he said people like him should be taxed at “a lot” higher rate than 45 percent, the current upper limit.
Several committee members and two witnesses spoke against the estate tax during the hearing, with most arguing that the tax makes it harder to pass small businesses, farms and ranches from one generation to another.
Finance Committee Chairman Max BaucusMax BaucusChanging of the guard at DC’s top lobby firm GOP hasn’t reached out to centrist Dem senators Five reasons why Tillerson is likely to get through MORE (D-Mont.) said he would like to see the estate tax repealed. Ranking member Chuck GrassleyChuck GrassleyTrump, lower court nominees need American Bar Association review Trump eyeing second Supreme Court seat Grassley: Another Supreme Court vacancy likely this summer MORE (R-Iowa) said that “Death should not be a taxable event.” Baucus said at the hearing that a repeal would not make it through Congress.
Sen. Maria CantwellMaria CantwellReport: GOP lawmakers selling access to top staffers Bipartisan group demands answers on United incident Cohn backs modern version of Glass-Steagall: report MORE (D-Wash.) suggested the estate tax made it more difficult for family-run newspapers to remain in business, a problem that further encouraged greater media consolidation, which Cantwell opposes.
The Seattle Times in Washington state is a family-owned newspaper.
Buffett told Cantwell that newspaper owners “want you to believe” that current estate taxes make it impossible to pass the business to the next generation. But in truth, he said, most make enough money to pay the interest on the debt they may need to take out to pay the estate tax and still leave enough for a healthy profit.
Buffett suggested, however, that additional exemptions may need to be carved out for farms and ranches that are highly valued but do not generate enough income to pay off the tax debt.
More broadly, he argued that the rich have gotten richer in the past two decades as incomes for the remainder of Americans have remained flat.
“Dynastic wealth, the enemy of a meritocracy, is on the rise,” Buffett said.
Estate tax critics focus on “freeing us,” he said. But “they don’t say who they will shackle” to make up for the lost federal revenues.