If you are lucky enough to inherit (for example) $10 million in property or investments from deceased relatives, you are also lucky enough to pass a good portion of that to the government in the form of estate taxes. It is kind of a strange concept. Why should that money be taxed? It is simply a gift from one person to another, not a gift to the government. The basic argument in favor of the estate tax is that it helps to prevent massively wealthy families from avoiding tax on their main source of income, generation after generation. The existence of the estate tax also encourages charitable giving, as that is a way to avoid this particular tax.
Opponents of the estate tax often call it a “death tax” to stir emotions and create a political issue. Warren Buffet has is critical of the “death tax” term and is a strong supporter of the estate tax.
The billionaire investor has been an outspoken critic of efforts to repeal the estate tax and in testimony at a Senate Finance Committee estate tax hearing on Wednesday, he told lawmakers that you’d have to attend 200 funerals to be at one where the family of the deceased would owe estate tax.
So it sounds like the families that were intended to be taxes on their estates end up avoiding the tax while still passing along their wealth. Those who want to repeal the tax argue that it hurts farmers and family business owners whose property or business is passed down from one generation to the next, and need to sell part of their business to pay the bill.
Buffett provided suggestions for improvements to the estate tax that will ensure that those passing on their wealth fairly contribute to the government while protecting family-owned businesses.
File this under the category of “problems I’d like to have one day.”
Update: On Advanced Personal Finance, KMC explains why the estate tax is the most misunderstood tax.
Do you think the estate tax should be repealed?
Buffett: Phrase “Death Tax” is “Dead Wrong” [CNN Money]
Updated November 16, 2007 and originally published November 15, 2007.