Buffett urges Congress to keep estate tax intact

Warren Buffett called on Congress to maintain the estate tax, saying that plans to repeal the levy would benefit a handful of the richest American families and widen U.S. income disparity.

Buffett, the billionaire chairman of Berkshire Hathaway Inc., which is based in Omaha, Neb., told the Senate Finance Committee that advocates of repeal were "dead wrong" to call the levy a "death tax."

It would be more appropriate to call it a "death present," said Buffett, 77, who is the third-richest person in the world, according to Forbes Magazine. "A meaningful estate tax is needed to prevent our democracy from becoming a dynastic plutocracy." Heirs to vast fortunes, he said, have already won the "ovarian lottery" and shouldn't be further rewarded by the tax system.

Congressional Democrats are likely to seize on Buffett's comments to bolster their argument that repeal of the estate tax amounts to a windfall for a few wealthy families. Republicans have pushed to permanently eliminate the tax or reduce the rate and increase the value of exempt estates.

Buffett said that in the past 20 years, tax laws have allowed the "super-rich" to get richer.

"Tax-law changes have benefited this group, including me, in a huge way," he said. "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."

The estate tax has been a dormant issue for the past year after Republicans failed to lure enough Democrats to agree to a repeal or permanent reduction of the levy.

Lawmakers are under pressure to reach some agreement on the future of the tax because a law enacted by Congress in 2001 gradually phases it out through 2010, when it will be fully repealed for one year. The tax is scheduled to return in 2011 with a top rate of 55 percent on estates worth more than $1 million. For this year, individual estates valued at more than $2 million are taxed at a top rate of 45 percent. By 2009, estates valued at less than $3.5 million will be exempt.

Buffett urged the committee to keep the estate tax in some form and to use the $24 billion it raises to give a $1,000 tax rebate to low-income households.

"We need to raise about 20 percent of GDP to fund the programs the American people want from the federal government," he said. "Further shifting this burden away from the super-rich is not the way to go."

He said that if he had his "druthers," the tax code would be restructured to remove some of the burden from households earning less than $20,000 a year. Those households pay a 15.3 percent Social Security and Medicare tax, he said, while top money managers at hedge funds and private-equity firms pay a 15 percent rate on most capital gains, dividends and profits they earn.

"I can't imagine a tougher problem than living in the United States and having a $20,000 income and having $3,000 taken out of that," Buffett said.