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The Senate Hears a Sage
Nov 16, 07
I got to watch Warren Buffett testify before the Senate Finance Committee on Wednesday in defense of the federal estate tax, the nation's only tax on inherited wealth.
It was really a remarkable hearing. A longtime Washington lobbyist and former Hill staffer said it may have been the best hearing he'd every seen.
Buffett's prepared remarks invoked the historical roots of the estate tax, established in 1916 during the Gilded Age to put a brake on anti-democratic concentrations of wealth and power. "Dynastic wealth, the enemy of meritocracy, is on the rise," Buffett told the panel. "Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."
After a decade of false accusations and innuendo, Wednesday's hearing was the first opportunity to set the record straight as to who pays the estate tax, how much revenue it generates and why we should retain it. Senate Finance Chair Max Baucus (D-Montana), a supporter of abolishing the tax, conceded that "99 times out of a hundred, the tale is worse than the tax."
Republican Chairman Charles Grassley (R-Iowa) complained that "the death tax" was "fundamentally wrong." Buffett responded that use of the phase "death tax" was "intellectually dishonest" and "clever, Orwellian and dead wrong." Buffett pointed out that the tax cuts of the last decade have enabled the superrich, including himself, to get richer.
"Tax-law changes have benefited this superrich group, including me, in a huge way. During that time the average American went exactly nowhere on the economic scale: He's been on a treadmill while the super rich have been on a spaceship."
Buffett noted that only one in 200 households in the U.S pays the tax and they are exclusively multi-millionaires and billionaires. "Leona Helmsley's dog, Trouble, reportedly is inheriting $12 million," Buffett quipped. Without an estate tax, "Trouble could instead receive $22 million."
Buffett has a few lessons for Congress on tax priorities for the coming years. He supports making the tax system more progressive. To underscore the unfairness of the tax system, he recently offered a $1 million reward to any member of the Forbes 400 who could prove that they pay a higher tax rate than their personal assistants and secretaries. So far, he has had no takers.
He thinks helping low-wage Americans is a bigger priority. "Keep the estate tax and its $24 billion," Buffett proposed. "There are 23 million households in the United States with $20,000 or less of income. Let's give those 23 million households a $1000 annual credit. The cost of this would be less than getting rid of the tax on less than 12,000 estates.
Let's hope Congress starts to act on common sense from the Sage of Omaha.
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