Ah, to be rich. This week, we saw Warren Buffett giving $37 billion to charity and deriding super-wealthy people who leave their fortunes to their children. And on the other side of the coin, we saw Malcolm Stevenson “Steve” Forbes Jr. arguing that Congress should gut the estate tax so that super-wealthy people can leave larger fortunes to their children.A Republican “compromise” bill — offered after a full repeal failed earlier this month — awaits a key Senate vote on Thursday; it already passed the House. The compromise bill, which would rely on high exemptions and a low capital-gains tax rate, would eliminate roughly 80 percent of the estate tax’s effect. The GOP has enough supporters for its passage, but needs 60 votes to end a Democratic filibuster; the vote is expected to be close.
Buffett may not have intended for Monday’s announcement to coincide with the upcoming Senate vote, but he pointedly used the press conference to lobby in defense of the estate tax. The compromise bill, Buffett said, would not only deprive the federal government of approximately $80 billion a year, it would kill the tax incentive that encourages wealthy people (like him) to give their stashes to charity, rather than to their undeserving offspring.
Forbes, a man who twice ran for president on a “flat-tax” platform that would have reduced his personal taxes by an estimated $200,000 a year, has taken up the cause of undeserving offspring. And he has a lot staked on his claim. It’s bad enough, for instance, that he had to share an estimated $1.23 billion inheritance with his three brothers when his father, Malcolm Sr. (who inherited the eponymous publishing company from his father), died in 1990. But now Forbes must anticipate the day when he will have to divide his already-diminished fortune among his five daughters. Understandably, he’s worried about how they’ll manage.
As it happens, many of America’s wealthiest people, including Buffett and co-philanthropist Bill Gates, want the US to keep the estate tax (see a list of those people at responsiblewealth.org). But someone must stand up for the Paris Hiltons of this country. So, while Buffett and Gates were planning to rid the world of malaria, Forbes was on TV arguing that life isn’t sufficiently advantageous for billionaires’ heirs.
Not in those words, naturally. His actual argument is that anything the government gains in estate-tax revenue is more than offset by — follow closely here — lost productivity incurred when rich people devote their time to evading the estate tax.
“The amount of time my brothers and I spent with our father and tax lawyers to make sure we could pass this business on could have been more productively used to expand the business,” Forbes said recently. “We spend more trying to deal with this tax, pay this tax, prepare to pay for it, or avoid it for our kids and grandkids, than the government collects on it.”
A perfect example of this productivity-sapping drudgery occurred two years ago, when, for estate-tax planning purposes, the Forbes family sold Malcolm Sr.’s Fabergé-egg collection for an estimated $80 million — and threw a party to display them.
Last year, in another estate-tax maneuver, they used tax breaks intended for conservation to convert half of their Colorado ranch into $70 million cash by selling property shares for luxury hunting-base-camp development, “so capitalists can commune with black bears, coyotes, and mountain lions,” as Bloomberg News put it.
Of course, Buffett’s tactic of writing a check to the Gates Foundation was just another, less time-consuming way to avoid paying the estate tax. But at least his money will go to people who actually need it.
