The Estate Tax
One of the richest men in the world, Warren Buffett (as of 2010), suggests that repealing the estate tax will benefit only the richest Americans. In 2010, this is the top 2% of the United States population. To put this in more common terms, 98 of every 100 people who die face no estate tax whatsoever. Nevertheless, many younger Americans assume that the group of richest Americans will eventually include them.
Listen to the short Warren Buffet on the Estate Tax sound clip at the link below and then answer the following questions.
According to the sound clip, Warren Buffett, and proponents FOR an estate tax, what are the compelling arguments for having an estate tax?
Do you agree with these arguments? If so, why? If not, why not?
this is the link
Warren Buffett Backs the Estate Tax
November 15, 20077:00 AM ET
Heard on The Bryant Park Project
The tycoon says repealing the estate tax would benefit only the richest Americans. But many younger Americans assume that the group of richest Americans will eventually include them. Anya Kamenetz, author of Generation Debt, makes a bid for your attention.
(Soundbite of movie, "Austin Powers: International Man of Mystery")
Mr. MIKE MYERS (Actor): (As Dr. Evil) Here's the plan: We hold the world ransom for $1 million.
Mr. ROBERT WAGNER (Actor): (As Number 2): Don't you think we should maybe ask for more than a million dollars? A million dollars isn't exactly a lot of money these days.
Mr. MYERS: Okay then, we hold the world ransom for $100 billion.
ALISON STEWART, host:
Dr. Evil may have had it right the first time. If he had only a million bucks, he wouldn't be hit with the estate tax, but if he got that $100 billion, Mini-Me...
LUKE BURBANK, host:
STEWART: ...would have to pay 45 percent of it to the government if he was a U.S. citizen and if he was real. Who is real - Warren Buffett - really rich, and he testifying for the Congress yesterday. He wants the estate tax to stay in place because rich guys like him, they should pay up according to Mr. Buffett.
So right now, you're thinking, I'm lucky if I make my mortgage, why are you talking to me about this? This is the perfect place to stop and play the news game we like to call Make Me Care.
Stepping up to the plate, Anya Kamenetz, the author of "Generation Debt" and the writer of the Yahoo! Finance column of the same name. So, Anya, when was the - this estate tax enacted?
Ms. ANYA KAMENETZ (Author, "Generation Debt"; Columnist, Yahoo! Finance): Well, it's been around for quite a while now. In 2001, when Bush came in, he enacted a sort of - he wanted to get rid of the estate tax and he did it - he decided to do it slowly, so the exemption has been going every year. By 2010, the estate tax is supposed to be all gone. And then if we don't make a change, it's going to go back to the pre-2001 levels.
STEWART: All right. So for 98 percent of the population - literally 98 percent - this doesn't really matter yet it gets so much political time. So Anya, we're going to put 60 seconds on the clock. You have one minute to make us care about the estate tax. You've done this before so you know when you hear the ticking sound, you have 10 seconds left. Estate tax, should it stay or go? The issue itself, Make Me Care.
Ms. KAMENETZ: All right. So the estate tax, as you mentioned, it applies to wealth over one and a half million dollars for a single person. You get to keep that small fortune of one and a half million and then above that, you get to bite. And so, by being extremely efficient, it raises almost a trillion dollars a year from, as you said, less than 2 percent of all estates.
This is great example of, you know, a tax debate is really a debate about two things: it's about our priorities as a country and it's about incentives, right? So priorities - we have to pay for a lot of stuff, we have a record deficit out there; we have a huge war to pay for; and, oh, yeah, there are these totals coming in from maybe having a health care at some point and having better education; we have an environmental change to prepare for. This is a tax that is levied on the richest folks, the ones who can have - who have the most ability to pay for it. Secondly, incentives, right? What Warren Buffett was talking about, he decided to give away his own money and not give it all to his children because he believed that, you know, he doesn't believe in being a member of the lucky sperm clubs.
(Soundbite of ticking)
Ms. KAMENETZ: And what does that mean? It means that (unintelligible).
BURBANK: And how do I join?
Ms. KAMENETZ: Huh?
BURBANK: And how do I join? Geez Louis.
(Soundbite of laughter)
Ms. KAMENETZ: So, you know, we want to have meritocracy in this country. We want to have earned wealth, people who made their money, who achieved something in their own lifetimes. We don't want to create a nation of, you know, kings and queens, and lords and ladies who have all inherited their fortunes. And, unfortunately, we have a situation right now where we have the most inequality, the most concentration of wealth at anytime in the last hundred years, and so, you know, the tax code cannot, you know, restore all of that inequality, but it can go a certain amount of the way, and the estate tax is one way to do it.
STEWART: All right. Anya, because of a technical snafu, you actually had a lot more time than the 60 seconds, but you did - you made me care a little bit.
Ms. KAMENETZ: Oh, I'm sorry.
STEWART: The whole priorities versus incentives argument is really interesting because a lot of times it comes down, when you hear the political arguments on both sides, it's - the idea is are we penalizing people or rewarding people? And that just seems to be where you stand on the issue, what your belief is about it.
Ms. KAMENETZ: Absolutely. I'd like to think.
STEWART: Anya Kamenetz, author of the Yahoo! Finance column of the same name...
BURBANK: That name being "Generation Debt."
STEWART: ...author of "Generation Debt."
STEWART: Thank you so much for trying to make us care about the estate tax.
Ms. KAMENETZ: Thank you.
Estate tax is an extremely efficient form of tax.
1) This tax applies to people who have net worth of $5 million or above for one person. In this way, it impacts only 2 percent of the US population but generates extremely high amount of tax.
2) Further, this tax also motivates people to create their own accomplishments as inheritance tax eats away roughly 40 percent of the wealth accumulated by their parents.
3) It is also helpful in creating more equal society as the concentration of wealth is discouraged.
4) The tax may also encourage high net worth people to donate more to charity.
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