A group of wealthy businessmen petitioned Congress last week for a more progressive estate tax.
“We believe it is right to have a significant tax on large estates when they are passed on to the next generation,” the letter says, boasting signatures from billionaires Warren Buffet, William Gates Sr., and George Soros.
Critics say the wealthy signatories actually stand to benefit financially from the policy they advocate.
“To Warren Buffett, a higher tax isn’t merely a political issue, it’s good business. Who do you think profits from higher insurance premiums purchased to defend against the death tax?” said Jim Martin, chairman of the anti-death tax 60 Plus Association, in a statement.
Some companies are inventory rich but cash poor. A farm may have acres and acres of land worth millions, but little cash in the bank. When the farmer dies, however, all of his wealth, both land and cash, is subject to the estate tax. To shield from this tax burden, and so that the family doesn’t need to sell assets in order to pay the tax, people purchase life insurance policies.
The life insurance industry is one of the biggest proponents of a high estate tax.
“They sell products that protect against it,” Schoening Strategies President and Family Business Coalition Chairman Palmer Schoening told The Daily Caller News Foundation. “They sell what are called second-to-die, and other policies that basically bring them premiums of about $12-15 billion a year.”
Other estimates put the number around $17.4 billion per year from life insurance premiums — nearly the same amount the Treasury received in death tax receipts in 2011, $17.6 billion.
A 2010 report showed that the last time there was a debate over the death tax, the life insurance lobby was a “key force pushing against repeal of the estate tax as the tax creates demand for their insurance,” The Daily Caller reported.
“The life insurance industry’s lobbying presence in D.C. is huge – larger than almost any other industry sector. According to the report, life insurers spent $10 million per month on lobbying in the first half of 2010.”
Warren Buffett owns seven life insurance companies within his holdings of Berkshire Hathaway.