Today, Warren Buffet announced that he will donate the bulk of his multi-billion dollar fortune to charity. In addition, he came out in support of a full reinstatement of the estate tax that the current administration has vowed to eliminate.
I had mixed feelings about the elimination of the estate tax. If you happen to accumulate millions (or billions) of dollars over the course of your life, you probably pay at least some tax on the money you are accumulating. Then, when you pass on and bequeath that money to someone else, it gets taxed again. It seemed somewhat unfair.
However, Warren Buffet's position on the issue reminded me of something. There are millions of people in this country who can barely afford to eat and keep a roof over their family's heads. People who are accumulating millions upon millions of dollars typically can afford to hire accountants and lawyers to assure that they pay as little as they can in taxes on their accumulations. After these people pass on, without the estate tax they get to leave their inequitably taxed booty to others.
If the initial estate tax repeal continues on schedule, as of 2011 estates of $1 million or more would be subject to taxation again. Even at 55%, that means that someone would still be inherriting $450,000 that they didn't have before. That's a lot of cabbage.
The rich can avoid having their estates taxed by doing just what Warren Buffet is doing, donating it to charity in a will. They can pick the charity that they'd like to support, or the government will use the money to support its own programs. Personally, I prefer Buffet's strategy. But, hey, even the current administration puts some money into social programs. It's a much better use of that excess wealth than encouraging the wealthy to indulge themselves while others wonder how they are going to heat their homes next winter.