The Pro-Tax Buffett is the title of the ninth chapter of my new book, Even Buffett Isn't Perfect, which is due for release in May 2008. Warren Buffett's Congressional testimony delivered today convinces me that the title of the chapter is apropros.
Buffett favors higher taxes on the so-called rich. He favors both higher income taxes and higher death taxes. Estate taxes take their biggest toll on those whose estates are not very liquid. This group includes small farmers, ranchers, and business owners. These individuals typically oppose the estate tax because it often means that heirs must kill the business to pay the tax. Yet many of the mega-rich including Buffett favor this tax. Perhaps it is because they feel a little guilty about being so rich. Perhaps it is because they are convinced that charities would suffer if there was no estate tax and no loophole available to escape it. Yet, as a number of conservative commentators have pointed out, even if there is no tax, anyone who feels strongly about leaving his money to the government is free to do so. However, they should not force others to do the same thing. Furthermore, if they really believe this tax is a good thing, they should not take advantage of loopholes to escape it.
Prior to the Bush tax reforms, estates that were valued above $675,000 were taxed. The federal tax rate reached as high as 60% on large estates. Under the current law, this non-taxable limitation escalates to $3.5 million by 2009. Estates above $3.5 million will be taxed at 45% in that year. In 2010 the estate tax will be completely repealed. There will be no estate tax in 2010. However, in 2011 it comes back with a vengeance, hitting estates worth more than $1 million.
Just imagine the kinds of discussions that are underway in law offices across the country as wealthy clients try to plan their futures. Pity the old and sick. Their heirs are praying they hang on until 2010, but they may also be hoping they kick the bucket before 2011.
Chances are good that Congress will once again tinker with estate taxes sometime in the near future. Most Americans would not object to an estate tax that was reasonable and fair. However, taxing estates above $1 million at rates approaching 50% hardly seems reasonable. Some have suggested a 15% tax on estates above $10 million. Liberals think this is inadequate. Conservatives think even this is too much. Regardless of which party controls Congress and who sits in the White House, we can only hope that our politicians reach some sort of reasonable compromise on this issue before too long.