A group of three dozen wealthy progressives, including Warren Buffett, Jimmy Carter, Bill Gates Sr., and George Soros, today released a Responsible Estate Tax Proposal:
- We believe a more appropriate exemption is $4 million per couple, indexed to inflation.
- We believe there should be a graduated rate on the taxable estate over the exemption amount, beginning at 45% and rising on the largest fortunes.
- We believe that compliance should be simplified to allow for state tax credits, portability and the reunification of federal gift taxes.
But consider that these rich liberals do not propose repeal of the charitable exemption, by which Buffett and Gates--among many others--will evade taxes by passing much of their estates to charitable foundations that will then go on to fund liberal causes ad infinitum. Indeed, "at the 2010 Berkshire annual shareholders meeting, according to Dow Jones Newswires, Mr. Buffett urged attendees to “follow my tax dodging example” and give away their wealth." (Link) As Professor Edward Zelinsky notes:
Buffett is contributing the bulk of his assets to the Bill and Melinda Gates Foundation. Buffett has received excellent legal advice to guarantee that his contributions will not generate federal tax. This provokes the question: Why?
Buffett could give his fortune to the Gates Foundation in a manner which generates federal tax. This would leave less for the foundation but more for the federal fisc. Indeed, Bill Gates, like Warren Buffett, advocates retaining the federal estate tax. He too could leave his assets to his foundation in a fashion which would share part of those assets with Uncle Sam.
It seems strange for prominent and outspoken advocates of the federal estate tax to dispose of their assets in a manner meticulously designed to avoid the federal estate tax.
Not strange. Just hypocritical.
Of course, the tax-dodging charitable deduction isn't the only hypocrisy at work here. Buffett and Gates Sr., for example, have profited hugely from preying on people subject to the estate tax. As for the former:
The “Oracle of Omaha’s” wealth has come from making wise investments in three different business activities. First, he’s made substantial investments in major corporations that he believes will appreciate; second, he operates a huge casualty and life insurance business which provides massive reserves of cheap capital to support his other two investing activities; and third, he purchases family owned businesses at fire sale prices. The last two practices are directly dependent on the death tax, and it’s unlikely that Mr. Buffett would be the world’s second richest man without it.
The life insurance companies that give Mr. Buffett such a large reserve of capital to draw on are heavily dependent on the death tax ...
Even as Mr. Buffett’s insurance companies are “protecting” family businesses from the IRS, he is buying companies that are forced to sell themselves to pay the death tax. Mr. Buffett’s ability to buy family businesses at bargain basement prices depends on families being desperate to sell—and nothing produces family businesses desperate to sell quickly like a 55% bill from the IRS on all of the businesses’ assets.
Mr. Buffett has bought numerous companies who were forced to sell because of the death tax including: Dairy Queen, Jordan’s, Justin Industries, Star Furniture, Borsheim, Ben Bridge Jewelers, U.S. Liability, NetJets, R.C. Wiley, Flight Safety and Nebraska Furniture Mart.
These investments are the financial equivalent of a vulture scavenging a corpse. Berkshire Hathaway is benefiting directly from the misfortune of others – and the economy would be much better off if the death tax didn’t force families to sell their businesses under duress.
As for Gates Sr.:
As an estate planning attorney in Seattle, Bill Gates Sr. earned his living reducing the estate taxes owed by people less wealthy than his son.
I've got no problem with people getting rich. I've got no problem with people trying to minimizetheir taxes to the fullest extent allowable under law. I just have a problem with rich hypocrites using complicated tax dodges that less wealthy people can't afford to avoid paying taxes, while proposing to raise other people's taxes.