Death tax showdown heads to Warren Buffett’s home state
While President Barack Obama touted the “Buffett Rule” at his State of the Union address, even inviting Warren Buffett’s secretary as his guest, the billionaire pro-tax advocate’s home state of Nebraska was hard at work trying to cut taxes and, in particular, finish off the last vestiges of the state’s death tax.
On Jan. 12 Nebraska Republican Gov. Dave Heineman used his annual State of the State address to propose the set of tax cuts, focusing on corporate and individual income taxes as well as the inheritance tax, which penalizes the deceased’s money as it is handed down to their beneficiary.
Though Nebraska already did away with its estate tax — a tax on the actual deceased’s holdings before they are even transferred — its continuation of the inheritance tax still landed it on Forbes list of “Where Not to Die in 2012,” published one month before the State of the State address.
The state’s revenue committee is holding hearings on the abolition of the tax on Thursday. The governor and experts from both sides of the debate are expected to testify.
The abolition of the inheritance tax is opposed most strongly by county officials. In Nebraska, the majority of money from inheritance taxes goes to the counties, and they fear lost revenue if the tax is repealed.
But counties shouldn’t oppose the tax’s repeal, said Palmer Schoening, director of federal affairs for the American Family Business Institute, a trade association that represents family business owners and farmers.
“County officials should not depend on dead people’s money to fund their activities,” Schoening told The Daily Caller. “Repealing the state’s inheritance tax will help family businesses and farms expand and add more jobs.”
Studies from Connecticut to Tennessee support this expectation, added Schoening, who will testify before the state committee on Thursday.
More jobs mean the counties can collect more taxes on living people.
When testifying before the U.S. Senate Finance Committee in 2007, Buffett, who was born in Omaha, Nebraska, said that the estate tax should be higher than it currently is, testifying that, “A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy.”
This is the essential argument of those who favor the death tax: That not only is it an important source of government revenue, but it is a blockade against the development of an American ruling class. (RELATED: Anti-death-tax advocates eye victory in Tennessee)
Those who oppose the tax maintain that by taxing people large amounts of money for saving, rather than spending, the government is double-taxing, creating disincentives for responsibility and destroying family businesses that cannot protect their assets from death like their big-business competition does.
But Buffett’s motives may not be entirely innocent. Through his company, Berkshire Hathaway, Buffett owns General Re Life, IdeaLife Insurance, Central States Indemnity Life, First Berkshire Hathaway Life Insurance Co. and Berkshire Hathaway Life Insurance Co. of Nebraska. This is noteworthy because life insurance companies make a profit when citizens pay them to help get their estate in order for the complicated, and often very expensive, act of passing away.
“The life insurance industry currently makes about $14 billion per year by selling insurance that helps cover expensive death taxes,” American Family Business Institute President Dick Patten told TheDC. “While Warren Buffett’s assets are protected by tax-free foundations, his company Berkshire Hathaway owns seven life insurance companies. So I’m sure he doesn’t mind that his Nebraska neighbors have to pay a hefty sum to his industry to avoid losing their livelihoods to the government.”
To date, 38 states do not have any death tax. Including Nebraska, the tax is only retained in 22 states and the District of Columbia.