Tax the Rich, Says One of the World's Richest Men

WASHINGTON — Warren Buffett, one of the world's richest persons, urged Congress on Wednesday to ease up on taxing the poor and middle class and "take a little more out of the hides of people like me."

At a Senate Finance Committee hearing on the estate tax, Buffett went beyond opposing the repeal of that tax to call for a more progressive tax system in general.

During the past two decades, the federal tax system has helped widen the income gap between the middle class and "super-rich," Buffett testified.

"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."

Democrats, who control the committee and Congress, predicted that sweeping tax changes are coming soon and asked for advice from Buffett, whose net worth was estimated at about $52 billion in March by Forbes Magazine.

Buffett said he would favor a "very progressive consumption tax" to put the burden on people using the nation's resources. But he conceded, "I don't see how we get there from here."

In reforming the current income tax, he said, "I would make it a lot more progressive," raising rates for higher income brackets.

In the House, Ways and Means Committee Chairman Charles Rangel, D-N.Y., has forecast a major change in the tax system after the 2008 election, and Democrats on the Senate Finance Committee agreed.

"There is a tax code meltdown coming very shortly," said Sen. Ron Wyden, D-Ore., who has proposed a simplified flat tax with many fewer deductions and credits.

Democrats and Republicans on the committee agreed that efforts to repeal the estate tax — which critics call the "death tax" — are doomed.

"The votes just aren't there to repeal it," said Sen. Jon Kyl, R-Ariz., an opponent of the tax.

Buffett, 77, said repealing the estate tax would contribute to the development of wealthy family dynasties and run contrary to the American ideal of equal opportunity.

"You don't get to be the quarterback for the University of Nebraska football team because your father was quarterback 20 years ago," he said.

But Buffett did support raising the exemption level from estate taxes to $4 million and indexing it for inflation. He said tax rates on inheritances above that level should be progressive, with the top rate higher than the current 45 percent.

A major tax reform law enacted in 2001 brought sweeping and complex changes to the estate tax. The top rate was gradually lowered from 55 percent, while the amount that heirs could exempt from the tax rose from $675,000 to a high of $3.5 million in 2009. In 2010, the tax is to be repealed entirely.

But to reduce the 10-year budget impact of the tax reforms, Congress decreed that the estate tax will be reborn in 2011 with a top rate of 55 percent and an exemption of only $1 million.

"So the only convenient time for death and taxes is 2010 — at least for the heirs," testified Conrad Teitell, a tax attorney with the firm of Cummings and Lockwood in Stamford, Conn.

Other witnesses told how the estate tax could force their heirs to sell family ranches and businesses.

Dean Rhoads, who owns a ranch outside Elko, Nev., said his father-in-law had to sell part of the spread to pay a $300,000 estate tax when his wife died. Then, Rhoads said, he had to borrow money to pay $340,000 in estate taxes when his father-in-law died.

When he and his wife die, Rhods said, their children may have to pay a similar amount — "a third time as a family for one ranch."

Eugene Sukup, whose family-owned plant in Iowa makes grain storage and handling systems, said his sons and grandchildren want to continue the business.

"I've always said that death should not be a taxable event," said Sen. Charles Grassley, R-Iowa, an opponent of the estate tax.

However, Committee Chairman Max Baucus, D-Mont., pointed out that less than 1 percent of all estates are currently subject to the estate tax.