Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett's (a connection that began in 1991, when a mutual friend introduced Buffett and Bill Gates).
http://money.cnn.com/2006/06/25/magazines/fortune/charity1.f...
Berkshire has a market cap of ~200B, buffet owns around ~45 billion of their stock so his actual investment was 5 * (45/200) = 1.125B. It's reasonable to think he might be swayed by 2.5% to 5% of his net worth, but his personal investment is not all that significant (for him).
Used to be people respected earning your own living, now all people seem to respect is compound interest.
Much of the money you have on hand when you die has already been taxed in one form or another. (If it hasn't, your death should trigger the much lower capital gains tax - that's how it works in Canada, for example.) If you've been working hard to ensure your wife and children don't want for anything in life, why in hell should the government take half of what you've earned and already paid taxes on?
I don't understand your bit about compound interest. The people in this community who are affected by the estate tax don't get there through compound interest, they get there through entrepreneurship and job creation. If you want to propose that the estate tax only affects passive income, I'd certainly be in favor.
And if your wife and children inherit 3.5 million tax free and half of everything else, they will be fine. I'm more sympathetic to the wife argument, if she was spending time with the kids instead of developing a career - the children have presumably had a good education, they should be able to make their own money if 3.5 million isn't enough.
RE: compound interest, if you don't understand that, then you really do not understand inherited wealth.
To avoid the creation of an aristocratic class.
The founding fathers had this specific aim in mind. Details here:
http://budiansky.blogspot.com/2010/10/adam-smith-thomas-jeff...
A relevant quote from the article:
[Thomas] Jefferson cited Adam Smith, the hero of free market
capitalists everywhere, as the source of his conviction that (as
Smith wrote, and Jefferson closely echoed in his own words), "A
power to dispose of estates for ever is manifestly absurd. The
earth and the fulness of it belongs to every generation, and the
preceding one can have no right to bind it up from posterity. Such
extension of property is quite unnatural." Smith said: "There is
no point more difficult to account for than the right we conceive
men to have to dispose of their goods after death."
The states left no doubt that in taking this step they were giving
expression to a basic and widely shared philosophical belief that
equality of citizenship was impossible in a nation where
inequality of wealth remained the rule. North Carolina's 1784
statute explained that by keeping large estates together for
succeeding generations, the old system had served "only to raise
the wealth and importance of particular families and individuals,
giving them an unequal and undue influence in a republic" and
promoting "contention and injustice." Abolishing aristocratic
forms of inheritance would by contrast "tend to promote that
equality of property which is of the spirit and principle of a
genuine republic."Trust babies destroy family fortunes more efficiently than estate taxes.
I have three children, ages 3, 2 and six months. If I were to die tomorrow, the cost of raising those kids and sending them to college would be something like $3.5M. So, I have a life insurance policy, as any responsible parent does.
But under the current law, the proceeds of my life insurance policy are subject to the estate tax.
Sure, if you're paining a hypothetical about a 24-year-old Ivy League graduate who just received news that his parents have passed and that he has inherited a $3M estate, it doesn't sound too bad if part of that inheritance is taxed.
But now imagine a toddler who just lost two parents and needs to be fed, clothed, sheltered and educated for the next 20 years... it's different.
That makes sense.
You know what doesn't make sense, though? Complaining about a "death tax" on the one hand while complaining about the budget deficit at the same time, yet maintaining that you're the political party of hard work, bootstrapping, blah blah. If you care about the latter two, don't spend your time going to the mat for Paris Hilton. If you consult some charts about income distribution in this country, you can conclude that the vaaaaaaaaast majority of the revenue collected under this tax comes from very large estates where the children would be set for life with 10% of it, and they're doing very very well with 3.5Mil + 45% of the rest.
Exceptional cases may be worthy of exceptions under the law, but that doesn't change whether the law makes sense in the general case.
I did a quick check at vanguard.com, and mutual funds that deal in intermediate-term bonds are yielding in the 6.5% to 7.5% range. So whoever gets guardianship of your kids would be able to feed, house, and educate them from an income stream of over $130K per year (presumably that income would be subject to capital gains tax).
I am sure that your untimely death would cause great suffering for your children, but I really don’t see them suffering in a financial sense.
I'm opposed to an aggressive estate tax too, but I can't believe those numbers; that comes out to more than $50k per year per child.
A lot of Buffet's money comes from insurance companies that sell life insurance intended to pay the inheritance tax. No tax, no need for that insurance....
What a guy. He advocates a tax that he won't pay and that results in money in his pocket....