No Free Ride for Mega-Rich Heirs, Billionaire Urges
WASHINGTON - The world's third-richest man called on lawmakers Wednesday to maintain the estate tax, levied on wealth passing between generations, or risk replacing U.S. democracy with 'dynastic plutocracy'.
'A meaningful estate tax is needed to prevent our democracy from becoming a dynastic plutocracy,' billionaire and philanthropist Warren Buffett told the Senate Finance Committee.
Heirs of great wealth already had won an 'ovarian lottery', Buffett told lawmakers. Rather than reward them further, the tax system should redistribute wealth to those at the bottom of the U.S. economic ladder and should finance programmes that promote opportunity and well-being.
'We need to raise about 20 percent of GDP to fund the programmes the American people want from the federal government,' he said referring to gross domestic product, a measure of national economic output. 'Further shifting this burden away from the super-rich is not the way to go.'
Instead of cutting the estate tax, he said, lawmakers should maintain it and use the 24 billion dollars it generates to grant rebates of at least 1,000 dollars a year to low-income taxpayers.
Buffett chided proponents of repealing the estate tax, most of them members of President George W. Bush's Republican Party, for calling it a 'death tax' and suggesting it somehow penalised dead people who already had paid taxes on their income while alive.
On the contrary, the 'super-rich' benefited inordinately from tax changes over the past two decades and the estate tax now stands out as a rare measure promoting some degree of meritocracy in the economic system, said Buffett.
Opponents of repeal, most of them from the opposition Democratic Party, will no doubt draw sustenance from Buffett's words and his exalted status. Forbes magazine ranks him as the world's third richest man and the second richest in the United States after Microsoft Corp. founder Bill Gates.
Buffett, chairman of Berkshire Hathaway Inc., is a member of Responsible Wealth, an association of the well-to-do dedicated to fair taxes, a 'living wage' greater than the government-mandated minimum wage, greater corporate accountability, and policies aimed at more people to own assets.
As of Wednesday, the group had enlisted 5,530 wealthy people to sign a petition urging preservation of the estate tax. Of the signatories, 2,171 were themselves subject to the levy, Responsible Wealth said on its web site.
Other billionaires backing the estate tax include George Soros, the philanthropist and chairman of Soros Fund Management.
The estate tax's fate likely will be decided after next year's presidential and legislative elections. Republicans have failed to garner enough Democratic support for a repeal or permanent reduction despite trying to tie their demands to an increase in the minimum wage that won approval last year.
Pressure to reach an agreement is building because a law enacted in 2001 gradually reduces the tax before rescinding it for one year, 2010, before re-imposing it in 2011.
Currently, the first two million dollars of an estate are exempt from the estate tax. Portions above that threshold are taxed in increments up to a top tax rate of 45 percent. By 2009, the exemption will rise to 3.5 million dollars. The tax is set to disappear altogether in 2010 before coming back in 2011 with a lower exemption threshold of one million dollars and a top rate of 55 percent.
Senate Finance Committee Chairman Max Baucus, a Democrat, said that fewer than one in a hundred U.S. households pay the estate tax and proposals to do away with it lacked popular and legislative support.
Charles Grassley, the top Republican on the panel, said that 'death should not be a taxable event' but voiced willingness to compromise on the issue so long as the estate levy protects small businesses and family farms.
Buffett, whose wife died in 2004, is said to have split his estate between his children and the Bill and Melinda Gates Foundation, the global health and education charity set up by the Microsoft founder and his wife. Buffett's reported net worth, or what is left of his assets after all liabilities have been deducted, stands at 52 billion dollars. Last year, he reportedly gave away 4 billion dollars.
© 2007 Inter Press Service