VIDEO AND TRANSCRIPT: Warren Buffett's Statement to Congress on Estate Taxes
VIDEO CLIP AND TRANSCRIPT OF WARREN BUFFETT'S OPENING STATEMENT BEFORE THE SENATE FINANCE COMMITTEE HOLDING A HEARING ON ESTATE TAXES.
Warren Buffett: 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.
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