Following are Warren Buffett's remarks to Congress last week. He may be one of the richest men in the world, but he hasn't let that fact cloud his judgment. I hope people in Washington are listening.
*********************
Thank you, Mr. Chairman. Mr. Chairman, Senators, I appreciate the opportunity to express a few views on the estate tax.
I will limit my remarks to three points.
The first relates to the intellectual dishonesty employed by those who use the phrase 'death tax.' This term is clever, it is Orwellian, and it is, if you'll pardon the expression, dead wrong.
More than 2.4 million Americans will die this year. About 12,000 of them will leave an estate that will be taxed when the exemption goes to $3 million, as Senator Grassley mentioned. It will be 9600 estimated and it's been 19,000 when the exemption was lower.
That means that 99-and-a-half percent of estates will be tax-free. You would have to attend 200 funerals to be at one at which the decedent's estate owed a tax. Indeed, far more people who die receive a large tax benefit. I don't think that's generally understood. Namely, a stepped up basis on appreciated assets.
If people insist on renaming the estate tax, it would be more appropriately labeled the 'death present.'
The second point I would like to make is that in a country that prides itself on equality of opportunity, it is becoming anything but that, as the gap between the super rich and the middle class widens in dramatic fashion.
Here are a few figures on the Forbes 400. Other people save their Playboy magazines, I save the Forbes 400 magazine.
Twenty years ago, 1987, it took $220 million dollars to make the list. Now it takes $1.3 billion, about a six-for-one increase. The total wealth of the list in 1987 was then $220 billion. Now it's $1.54 trillion, exactly a seven-for-one increase.
Tax law changes have benefited this group, including me, in a huge way. During that same period, the average American went exactly nowhere on the economic front. His income went from a median $26,061 to $48,201, almost exactly the increase of the CPI during the 20 years.
He's been on a treadmill while the super rich have been on a spaceship.
Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy.
Finally, I have a suggestion. Estate taxes now raise about $24 billion. It's one of the lowest percentages, incidentally, of total taxes in the history of the tax system.
As mentioned, that $24 billion will come from about 12,000 estates. Indeed, half of that sum will come from only about 1500 estates. The beneficiaries of each of those estates will receive millions, in many cases tens of millions or more. One point you never hear from proponents of estate tax elimination is whom they would get the $24 billion from if they didn't get it from the 12,000 large estates.
They just say, 'Free us.' They don't say who to further shackle.
Here's a suggestion: Keep the estate tax and its $24 billion, reshape it if you will, but keep the estate tax and its $24 billion. Then take a look at the bottom fifth of America. There are 23 million households in the United States with $20,000 or less of income. Many are paying payroll taxes that now total 15.3 percent. That 15.3 percent alone is more than the rate on dividends or capital gains and more than the rate on carried interest.
Let's give those 23 million households a $1000 annual credit. Every dollar of such a credit would affect real change in the lives of the 50-million-plus people residing in the 23 million households. Yet the cost of this would be less than getting rid of the tax on the 12,000 estates.
50-million people would be helped in a material way. The beneficiaries of the 12,000 estates would still receive what looks like a fortune to almost all Americans.
Leona Helmsley's dog, Trouble, reportedly is inheriting $12 million. If Mrs. Helmsley's estate is in the 45% tax bracket, Trouble could instead receive $22 million if the estate tax is removed.
Alternatively, just from Trouble's share of the Helmsley estate tax, 10,000 families making less than $20,000 annually could receive $1000 each to make their lives a bit better. Even though Trouble probably heard Leona say, quote, 'Only the little people pay taxes,' end-quote, I don't think he would mind the estate paying $10 million in order for him to get his $12 million.
We need to raise about 20 percent of GDP to fund the programs the American people want from the national government. Further shifting of this requirement away from the super rich is not the way to go.
This transcript is from this link at cnbc.om.
Showing posts with label estate tax. Show all posts
Showing posts with label estate tax. Show all posts
Monday, November 19, 2007
Wednesday, March 28, 2007
Fighting the Fair Tax
I can sometimes understand when the American public gets duped because the truth is so hard to discover. The truth in Iraq is hard to find because it is so far away, and we have few ways of getting the unspun truth. Ditto Gitmo.
But how stupid do you have to be to fail to recognize that the estate tax only affects the super rich? Here's another smoking gun.
Eighteen families, including the owners of Nordstrom Inc., The Seattle Times Co., Mars Inc., Koch Industries Inc. and Wal-Mart Inc., that stand to save $71.6 billion in taxes are financing lobbying efforts to repeal the estate tax, according to a study by two groups.
Public Citizen and United for a Fair Economy, which want to see estate tax rates increased to as high as 60 percent, said the families perpetrated a fraud on ordinary Americans by saying the levy constitutes an unfair "death tax." Only about 0.25 percent of Americans who die this year will leave an estate large enough to be taxed, the groups said.
The groups estimated the 18 families have spent as much as $500 million on lobbying efforts since 1994.
Republicans have fought the estate tax by renaming it the death tax. I say we take back the rhetorical upper hand by calling it the Fair Tax.
Read the story here.
But how stupid do you have to be to fail to recognize that the estate tax only affects the super rich? Here's another smoking gun.
Eighteen families, including the owners of Nordstrom Inc., The Seattle Times Co., Mars Inc., Koch Industries Inc. and Wal-Mart Inc., that stand to save $71.6 billion in taxes are financing lobbying efforts to repeal the estate tax, according to a study by two groups.
Public Citizen and United for a Fair Economy, which want to see estate tax rates increased to as high as 60 percent, said the families perpetrated a fraud on ordinary Americans by saying the levy constitutes an unfair "death tax." Only about 0.25 percent of Americans who die this year will leave an estate large enough to be taxed, the groups said.
The groups estimated the 18 families have spent as much as $500 million on lobbying efforts since 1994.
Republicans have fought the estate tax by renaming it the death tax. I say we take back the rhetorical upper hand by calling it the Fair Tax.
Read the story here.
Thursday, March 01, 2007
The President's Proposed 2008 budget
Not only does [the president's proposed 2008 budget] make many of Bush's tax cuts permanent, but it envisions a complete repeal of the Estate Tax, which mainly affects only those who are in the top two-tenths of the top one percent of the richest people in this country. The proposed savings from the cuts over the next decade are about $442 billion, or just slightly less than the amount of the annual defense budget (minus Iraq war expenses). But what's interesting about these cuts are how Bush plans to pay for them.
Sanders's office came up with some interesting numbers here. If the Estate Tax were to be repealed completely, the estimated savings to just one family -- the Walton family, the heirs to the Wal-Mart fortune -- would be about $32.7 billion dollars over the next ten years.
The proposed reductions to Medicaid over the same time frame? $28 billion.
Read the entire story here.Thursday, August 03, 2006
Vote for I-920--decimate public education!!!
The great transfer of tax responsibility from the wealthy to everyone else has reached our state. I-920 has qualified to be on the ballot this year. Unless you are one of the wealthiest 250 people in the state, you really have no reason to vote for this.
The site mentions three very good general reasons for an estate tax:
The Estate Tax is the fairest way to raise revenue, from those most able to pay. The estate tax is the most progressive way available to raise revenue our state desperately needs to meet its commitments. Any other way we raise revenue will place a higher burden on lower and middle income families.
The estate tax is one way wealthy people pay back to society after they die for the benefits of the economic, judicial, educational, and transportation systems that helped make them rich. Paying the estate tax enables our society to invest in the next generation, who will build our future economy.
Permanent repeal of the federal estate tax (not the state estate tax) would cost the charitable sector more than $13-25 billion each year, according to the Congressional Budget Office. The estate tax encourages wealthy individuals to contribute to charities because the donations are exempt from the estate tax.
(An aside: the second reason is one I have espoused for years. I have used an analogy. If Bill Gates lived in Hong Kong, the government would not spend any money protecting his copyrights and trademarks, and he would be a schlub like you and me. He could not defend his copyright on his own. He needs the feds. The government protects his wealth using its might. Taxes are essentially protection money.)
Read about I-920 here.
The site mentions three very good general reasons for an estate tax:
The Estate Tax is the fairest way to raise revenue, from those most able to pay. The estate tax is the most progressive way available to raise revenue our state desperately needs to meet its commitments. Any other way we raise revenue will place a higher burden on lower and middle income families.
The estate tax is one way wealthy people pay back to society after they die for the benefits of the economic, judicial, educational, and transportation systems that helped make them rich. Paying the estate tax enables our society to invest in the next generation, who will build our future economy.
Permanent repeal of the federal estate tax (not the state estate tax) would cost the charitable sector more than $13-25 billion each year, according to the Congressional Budget Office. The estate tax encourages wealthy individuals to contribute to charities because the donations are exempt from the estate tax.
(An aside: the second reason is one I have espoused for years. I have used an analogy. If Bill Gates lived in Hong Kong, the government would not spend any money protecting his copyrights and trademarks, and he would be a schlub like you and me. He could not defend his copyright on his own. He needs the feds. The government protects his wealth using its might. Taxes are essentially protection money.)
Read about I-920 here.
Tuesday, July 25, 2006
The old end-around
If you can't kill the estate tax by law, or by dysphemism (calling it the death tax), kill it by letting the law stand but neglecting to enforce it.
The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.
The administration plans to cut the jobs of 157 of the agency’s 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.
The Bush administration has passed measures that reduce the number of Americans who are subject to the estate tax — which opponents refer to as the “death tax” — but has failed in its efforts to eliminate the tax entirely. Mr. Brown said in a telephone interview Friday that he had ordered the staff cuts because far fewer people were obliged to pay estate taxes under President Bush’s legislation.
But six I.R.S. estate tax lawyers whose jobs are likely to be eliminated said in interviews that the cuts were just the latest moves behind the scenes at the I.R.S. to shield people with political connections and complex tax-avoidance devices from thorough audits.
Sharyn Phillips, a veteran I.R.S. estate tax lawyer in Manhattan, called the cuts a “back-door way for the Bush administration to achieve what it cannot get from Congress, which is repeal of the estate tax.”
Read the entire story here.
The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.
The administration plans to cut the jobs of 157 of the agency’s 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.
The Bush administration has passed measures that reduce the number of Americans who are subject to the estate tax — which opponents refer to as the “death tax” — but has failed in its efforts to eliminate the tax entirely. Mr. Brown said in a telephone interview Friday that he had ordered the staff cuts because far fewer people were obliged to pay estate taxes under President Bush’s legislation.
But six I.R.S. estate tax lawyers whose jobs are likely to be eliminated said in interviews that the cuts were just the latest moves behind the scenes at the I.R.S. to shield people with political connections and complex tax-avoidance devices from thorough audits.
Sharyn Phillips, a veteran I.R.S. estate tax lawyer in Manhattan, called the cuts a “back-door way for the Bush administration to achieve what it cannot get from Congress, which is repeal of the estate tax.”
Read the entire story here.
Saturday, July 01, 2006
Warren Buffet, the Oracle of Omaha
Few doubt Warren Buffet's wisdom. Through intelligence and perseverence, he became the second richest man in America.
Few doubt Warren Buffet's heart. He recently pledged over $37 billion to charity, with much of it going to the Bill and Melinda Gates foundation.
In fact, Warren Buffet may be the quintessential American, a self-made man who never forgot his roots. And, as a final proof of his sagacity, he supports the estate tax.
"I would hate to see the estate tax gutted," Buffett said at a Manhattan news conference with the Gateses about his donation.
"It's a very equitable tax," Buffett said. "It's in keeping with the idea of equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged."
Read the entire story here.
Few doubt Warren Buffet's heart. He recently pledged over $37 billion to charity, with much of it going to the Bill and Melinda Gates foundation.
In fact, Warren Buffet may be the quintessential American, a self-made man who never forgot his roots. And, as a final proof of his sagacity, he supports the estate tax.
"I would hate to see the estate tax gutted," Buffett said at a Manhattan news conference with the Gateses about his donation.
"It's a very equitable tax," Buffett said. "It's in keeping with the idea of equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged."
Read the entire story here.
Sunday, June 25, 2006
Estate tax, part whatever
Anyone who knows me or has read this blog knows I am a rabid defender of the estate tax. It prevents capital from accumulating in the hands of the very few, and any economist not on a Republican think-tank payroll knows that is a good thing.
The New Republic just published a great article on Democratic Senator Blanche Lincoln (a Republican in sheep's clothing) who has lobbied to abolish this tax. The article points out first of all the distorted rhetoric surrounding the estate tax, and also points out the inconsistencies that arise when the tax is opposed.
Any sentient person could tell you that the populist arguments against the estate tax are hokum. Under current law, every individual will soon be able to pass on $3.5 million to his heirs tax-free. That's $7 million per couple before a single dollar of taxes kicks in. And this assumes zero estate planning; any competent lawyer can shelter a whole lot more than that. Even among the tiny percentage of estates that pay inheritance tax, the effective rate is under 20 percent.
Lincoln and other estate tax opponents, who are trying to abolish the levy even on the super-rich, like to repeat sob stories about families that have to sell their small business or farm to pay Uncle Sam. In fact, those families can spread out the pain in installments over 14 years, which is plenty of time to come up with the money.
But critics never talk about the handful of massively wealthy families who have bankrolled the anti-estate tax campaign. Those families stand to save billions, and they have found the small-business owners and family farmers to be useful mascots for their enterprise. One such family is the Waltons, who own Wal-Mart. They live in Lincoln's home state of Arkansas. I'm sure any connection between that fact and Lincoln's support for repeal is purely coincidental.
So Lincoln doesn't want rich heirs to pay any inheritance tax on their windfall. She wants middle- and lower-income workers to pay lower taxes as well. And she doesn't want to slash the federal budget. So, who does she want to pay more in taxes? This is the question estate tax foes who aren't rabid conservatives never answer: Name the group of people who you want to pay higher taxes so that the heirs of the very rich can pay less. They don't answer because their vision of government is incoherent.
Read the entire article here (though you may need to register).
The New Republic just published a great article on Democratic Senator Blanche Lincoln (a Republican in sheep's clothing) who has lobbied to abolish this tax. The article points out first of all the distorted rhetoric surrounding the estate tax, and also points out the inconsistencies that arise when the tax is opposed.
Any sentient person could tell you that the populist arguments against the estate tax are hokum. Under current law, every individual will soon be able to pass on $3.5 million to his heirs tax-free. That's $7 million per couple before a single dollar of taxes kicks in. And this assumes zero estate planning; any competent lawyer can shelter a whole lot more than that. Even among the tiny percentage of estates that pay inheritance tax, the effective rate is under 20 percent.
Lincoln and other estate tax opponents, who are trying to abolish the levy even on the super-rich, like to repeat sob stories about families that have to sell their small business or farm to pay Uncle Sam. In fact, those families can spread out the pain in installments over 14 years, which is plenty of time to come up with the money.
But critics never talk about the handful of massively wealthy families who have bankrolled the anti-estate tax campaign. Those families stand to save billions, and they have found the small-business owners and family farmers to be useful mascots for their enterprise. One such family is the Waltons, who own Wal-Mart. They live in Lincoln's home state of Arkansas. I'm sure any connection between that fact and Lincoln's support for repeal is purely coincidental.
So Lincoln doesn't want rich heirs to pay any inheritance tax on their windfall. She wants middle- and lower-income workers to pay lower taxes as well. And she doesn't want to slash the federal budget. So, who does she want to pay more in taxes? This is the question estate tax foes who aren't rabid conservatives never answer: Name the group of people who you want to pay higher taxes so that the heirs of the very rich can pay less. They don't answer because their vision of government is incoherent.
Read the entire article here (though you may need to register).
Wednesday, April 19, 2006
Jefferson lobbies for the estate tax
There is also an artificial aristocracy founded on wealth and birth, without either virtue or talents.... The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy.
-Thomas Jefferson, third US president (1743-1826)
-Thomas Jefferson, third US president (1743-1826)
Sunday, August 14, 2005
Don't repeal the estate tax (part 2)
I hate to keep beating the same drum, but...I'm going to beat the same drum. The NY Times published an article this morning about the proposed repeal of the estate tax.
Now, I've already stated that I am against a repeal of the estate tax. As I've said before, and as the Times noted this morning, it is misleading for opponents of the estate tax to claim that it is a double tax on earnings that have already been taxed once. In many cases, that's not true. "A lot of assets that passed through very large estates have never been taxed and never will be," said Mr. Graetz of Yale. "It's a very big issue."
However, the newest plan being floated, while not repealing the estate tax, actually would be better for millionaires than an outright repeal would be. In sum, the new plan would not only exempt large estates from the estate tax, it would also exempt the heirs from paying capital gains tax on property/investments the heirs sell. Say you buy stock worth $1 million. (Who hasn't?) It appreciates to $10 million. You die and your son gets the stock. Under the new plan, not only does he not have to pay estate tax on the $10 million, when he sells the stock, he doesn't have to pay capital gains on the $9 million appreciation of the stock. What a bonanza!
How is that fair, considering that, if I sell a stock for a $100 gain, I have to pay taxes?
Taxes need to be fair, and I think the estate tax is fair. It taxes wealth that often goes untaxed during the owner's lifetime. And, the way it stands now, it will rarely if ever affect a working family; it will simply affect families who pass great deals of wealth from generation to generation, wealth that should be taxed, just like everybody else's.
Now, I've already stated that I am against a repeal of the estate tax. As I've said before, and as the Times noted this morning, it is misleading for opponents of the estate tax to claim that it is a double tax on earnings that have already been taxed once. In many cases, that's not true. "A lot of assets that passed through very large estates have never been taxed and never will be," said Mr. Graetz of Yale. "It's a very big issue."
However, the newest plan being floated, while not repealing the estate tax, actually would be better for millionaires than an outright repeal would be. In sum, the new plan would not only exempt large estates from the estate tax, it would also exempt the heirs from paying capital gains tax on property/investments the heirs sell. Say you buy stock worth $1 million. (Who hasn't?) It appreciates to $10 million. You die and your son gets the stock. Under the new plan, not only does he not have to pay estate tax on the $10 million, when he sells the stock, he doesn't have to pay capital gains on the $9 million appreciation of the stock. What a bonanza!
How is that fair, considering that, if I sell a stock for a $100 gain, I have to pay taxes?
Taxes need to be fair, and I think the estate tax is fair. It taxes wealth that often goes untaxed during the owner's lifetime. And, the way it stands now, it will rarely if ever affect a working family; it will simply affect families who pass great deals of wealth from generation to generation, wealth that should be taxed, just like everybody else's.
Wednesday, July 27, 2005
From an editorial in The Washington Post on Jul 24, 2005. pg. B.06
One of the chief arguments of those seeking permanent repeal of the estate tax is that it cruelly penalizes farmers and owners of small businesses whose heirs are forced to sell off their holdings to pay the tax. "In order to make sure our farms stay within our farming families, we need to get rid of the death tax once and for all," President Bush proclaimed in a speech last month to the Future Farmers of America.
This assertion, though, is more convenient myth than fact....A new study by the Congressional Budget Office examined estate tax returns filed by farmers and owners of small businesses in 1999 and 2000. The numbers that owed estate tax, the CBO found, were paltry. In 2000, for example, just 1,659 farm estates had taxes due.
But at that time the amount of money that could be passed on to heirs free of taxes was just half what it is now. With the current exemption level of $1.5 million, the CBO analysis found, only 300 farm estates in 2000 would have owed any tax at all.
At the even more generous exemption scheduled to take effect in 2009, $3.5 million, the ranks of those potentially hit hard by the tax would have dwindled even further; 65 farm estates would owe taxes.
In other words, the image of the grieving heir packing up his hoe as he trudges away from the family farm is just that -- a powerful image but not an accurate one.
See another story on this subject here.
One of the chief arguments of those seeking permanent repeal of the estate tax is that it cruelly penalizes farmers and owners of small businesses whose heirs are forced to sell off their holdings to pay the tax. "In order to make sure our farms stay within our farming families, we need to get rid of the death tax once and for all," President Bush proclaimed in a speech last month to the Future Farmers of America.
This assertion, though, is more convenient myth than fact....A new study by the Congressional Budget Office examined estate tax returns filed by farmers and owners of small businesses in 1999 and 2000. The numbers that owed estate tax, the CBO found, were paltry. In 2000, for example, just 1,659 farm estates had taxes due.
But at that time the amount of money that could be passed on to heirs free of taxes was just half what it is now. With the current exemption level of $1.5 million, the CBO analysis found, only 300 farm estates in 2000 would have owed any tax at all.
At the even more generous exemption scheduled to take effect in 2009, $3.5 million, the ranks of those potentially hit hard by the tax would have dwindled even further; 65 farm estates would owe taxes.
In other words, the image of the grieving heir packing up his hoe as he trudges away from the family farm is just that -- a powerful image but not an accurate one.
See another story on this subject here.
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