Billionaire investors Warren Buffett and George Soros are calling on Congress to increase the estate tax as lawmakers near a decision on tax policies that expire Dec. 31.
In a joint statement today, Buffett, Soros and more than 20 other wealthy individuals asked Congress to lower the estate tax’s per-person exemption to $2 million from $5.12 million and raise the top rate to more than 45 percent from 35 percent.
An estate tax structured this way will “raise significant revenue to reduce the deficit and fund vital services, will only be paid by the top one percent of estates, will raise more from the wealthiest estates” and will simplify compliance, said the statement. It also was signed by John Bogle, founder of mutual fund company Vanguard Group Inc., and former President Jimmy Carter.
The renewed push for raising an estate tax faces significant opposition in Congress, where Senate Democrats including Max Baucus of Montana and Mark Pryor of Arkansas have joined Republicans to support the current estate tax parameters. That intra-party dispute caused Democrats to leave estate tax changes out of legislation they passed July 25 extending income tax cuts.
There’s probably enough support among Democrats to maintain the existing estate tax parameters, said Carolyn Lee, senior director of tax policy at the National Association of Manufacturers in Washington, which supports existing levels.
“We think that family-held and multi-generational businesses are important,” she said. “It’s part of the American way of life.”
Changes to the estate tax are among the more than $600 billion in automatic spending cuts and tax increases scheduled to take effect in January.
If Congress does nothing, the amount one could exempt from the estate tax would drop to $1 million and the rate would increase to 55 percent. Obama wants to reinstate the 2009 levels, which include a $3.5 million exemption and a 45 percent top rate. Compared with continuing current policies, Obama’s plan would raise $119 billion over the next decade, according to his budget proposal.
Cutting estate taxes just means that someone else will have to pay for government, Bogle said.
“I’m more than happy for my own estate to pay my fair share,” he said today on a conference call with reporters.
In 2013, under the plan favored by Republicans, there would be an estimated 3,600 taxable estates in the U.S., according to the nonpartisan congressional Joint Committee on Taxation. Obama’s plan would double that number to 7,200. If Congress does nothing, 55,200 estates, or 2 percent of estimated 2013 decedents, would owe taxes.
Buffett, 82, is the chairman, chief executive officer and largest shareholder of Berkshire Hathaway Inc., and his $46.7 billion fortune as of yesterday places him fourth on the Bloomberg Billionaires Index.
Buffett has long been a supporter of estate taxes. He testified before the Senate Finance Committee in 2007 and said the tax was necessary to “prevent our democracy from becoming a dynastic plutocracy.”
Buffett has committed most of his wealth to charities, including the Bill & Melinda Gates Foundation and organizations started by his three children. He has urged billionaires to agree to donate at least half their wealth in a campaign he co- founded with Microsoft Corp. Chairman Bill Gates, the world’s second-richest person, who’s worth $62.7 billion according to the Bloomberg Billionaires Index.
Contributions to charitable groups can be deducted from annual income and, at death, from the taxable value of an estate.
Obama has used Buffett’s call for higher taxes on capital gains to promote the “Buffett rule,” which would require a minimum tax rate for top earners.
Soros, 82, is chairman and founder of Soros Fund Management LLC. He is worth $21.6 billion, placing him at 24th on the Bloomberg Billionaires Index. He has donated more than $3 million to Democrats and has financed groups such as the American Civil Liberties Union.
Other signers of the statement include Bill Gates Sr., father the Microsoft chairman; Richard Rockefeller, chairman of Rockefeller Brothers Fund Inc.; and Leo Hindery, managing partner of InterMedia Partners LP.
Rockefeller said on the conference call today that a higher estate tax rate encourages philanthropy, because it gives wealthy people an incentive to direct their money to causes.
The $4 million exemption per couple, indexed for inflation, is adequate, he said.