Buffett: Phrase 'death tax' is 'dead wrong"

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.

Buffett said if anything the estate tax is a "death present" because heirs figure their capital gains on inherited assets based on the price when they inherited them rather than when the decedent bought them.

Those who support repeal say that the estate tax is an unfair burden on family businesses and farms, the heirs to which may be forced to sell pieces of the business just to pay the estate tax bill.

Supporters of repeal also say that the estate tax can amount to the government profiting from someone's death. "There is something fundamentally wrong when the government swoops in after a funeral to take a cut of what the person had worked their whole life for, and has already paid taxes on at least once. ... The government should not be able to profit from that person's death," said Committee Ranking Member Charles Grassley (R-Iowa).

Those, like Buffett, who oppose repeal say it would be too costly for the government to give up the tax revenue.

They also argue that without an estate tax, the heirs of the wealthy are given an unfair advantage over everyone else.

"I believe in keeping equality of opportunity," said Buffett. "You don't get to be a quarterback ... because your father was a quarter back 20 years ago."

Under current law, estates worth up to $2 million this year and next will be exempt from federal estate tax, and portions of an estate above that amount would be taxed at 45 percent.

By 2009, the exemption level rises to $3.5 million, and by 2010 the estate tax will be repealed for one year.

Come 2011, the tax will be reinstated, with an exemption level of $1 million and a top rate of 55 percent.

Estates that exceed the exemption level are taxed in a graduated manner with rates starting at 18 percent and rising to 45 percent.

Buffett said he would raise the amount of estate assets exempt from the estate tax from the current level of $2 million to $4 million and end up with a top rate higher than 45 percent.

But, he said, he'd put in a more gradual slope in rates in terms of how heavily assets above that $4 million are taxed. He also indicated he might include an exemption for small family-owned businesses so that they wouldn't be forced to sell off assets to meet their estate tax bill.

Buffett also said it was important that estate-tax laws be clear and consistent rather than having exemption levels and rates change each year. "I wouldn't have the capriciousness of the 1-year this and 1-year that. ... I don't think people should have to guess when they're going to die."

A theme throughout the billionaire's testimony was a call to lawmakers to consider using the revenue raised both from the estate tax in particular and the tax code more generally to better help the 50 million people living on household incomes of less than $20,000 a year.

Committee Chairman Max Baucus (D-Iowa) noted that the committee would be dealing with the issue of tax reform "aggressively" next year and asked Buffett for his views on how the tax code should be reformed.

Buffett noted that he thought the code should be more progressive - meaning those who make more should pay even more than they do now relative to those who make less. "We ought to do more for [low-income Americans] and take more out of the hides of people like me."