Buffett's words, and his actions, on the estate tax

BOB RAYNER
TIMES-DISPATCH

Warren Buffett sure bought some fine headlines when he decided to donate two-thirds of his estate to a foundation run by fellow mega-billionaire Bill Gates and his wife.

There's little doubt that much good will be accomplished with the $30 billion Buffett intends to gradually funnel to the Gates Foundation, doubling its endowment.

Buffett clearly believes he's the best judge of how to dispose of the $44 billion or so he's earned during a career as one of history's great investors. He's surely right about that.

So it's a little odd -- a bit ironic, even -- when we recall that Buffett has been a vocal opponent of efforts to repeal the estate tax, also known as the death tax.

. . .

The federal estate tax applies if you die and leave more than $2 million to your heirs, except your spouse, who can inherit without paying taxes. Basically, the government takes a 46 percent cut of everything above $2 million.

For example, a $4 million estate left to someone's children would pay $920,000 to the federal government.

In reality, though, entire industries have thrived by creating plans to avoid or minimize estate tax liability

It seems a safe bet that Buffett's lawyers and tax accountants have devised ways to legally avoid the federal estate tax.

Assume, for the sake of simplicity, that the billionaire decided to allow his estate to be taxed at the current 46 percent rate. The federal government would grab about $20 billion off the top. That leaves a hefty $24 billion.

But Buffett plans to give $30 billion to the Gates Foundation, and smaller but significant sums to other foundations, including three run by his children.

Guess the feds are getting stiffed.

Which is fine. Better to have Bill and Melinda Gates spend that money on fighting Third World diseases than see it turned over to the earmark crowd in Congress.

Still, one has to wonder why Buffett believes his judgment should prevail when it comes to his own wealth, but the federal tax code should decide the fate of estates created by folks who don't game the system as skillfully as The Oracle of Omaha.

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In a CNN interview last year with Lou Dobbs, Buffett bemoaned the effect an estate-tax repeal would have on the federal budget:

"We raise, what, $30 billion from the estate tax," he told Dobbs.

"And, you know, I would like to hear the congressmen say where they are going to get the $30 billion from if they don't get it from the estate tax. It's nice to say, you know, wipe out this tax, but we're running a huge deficit, so who does the $30 billion come from?"

Well, $20 billion could come from Buffett's estate one of these days. But apparently it won't.

Buffett's numbers were a little off the mark, by the way.

The estate tax raised about $25 billion last year, according to the Congressional Budget Office. Fun fact: That's how much the federal government spends in 82 hours.

Buffet should be congratulated for putting his enormous wealth to work helping the far-less fortunate.

But it's a bit unseemly to watch him avoid the full force of a tax he insists others must keep paying.

Most Americans never have to worry about paying the estate tax. Clearly, some billionaires don't, either.

Contact staff writer Bob Rayner at brayner@timesdispatch.com or (804) 649-6073.