Buffett: Keep Federal Estate Tax

Billionaire Warren Buffett, one of the world's richest people, told the U.S. Senate Finance Committee on Wednesday that Congress should keep the federal estate tax rather than repeal it to help a few rich Americans like him.

"I think we need to ... take a little more out of the hides of guys like me," Buffett told the Senate Finance Committee.

One of the world's richest biggest philanthropists, Buffett has been outspoken against efforts, mostly by Republicans, to repeal the federal tax on inheritances or reduce the rate. Such a repeal, Democrats argue, would amount to a huge windfall for the wealthiest U.S. families.

The fate of the levy effectively will be decided during next year's presidential and congressional elections.

Estates worth up to $2 million this year and next will be exempt from federal estate tax. Portions of estates above that threshold will be taxed at 45 percent.

In 2009, the exemption level rises to $3.5 million, and by 2010 the estate tax will be repealed, but only for a year.

Unless Congress changes the law, it comes roaring back in 2011 with a lowered exemption threshold of $1 million and a top rate of 55 percent.

Buffett said inheritance taxes preserve a measure of meritocracy, and with it opportunity, by recycling portions of great wealth through public coffers.

"The resources of society, I don't think, should pass along in terms of an aristocratic dynasty of wealth," Buffett told the panel. "I believe in keeping equality of opportunity as much as you can in this country."

Supporters of repealing the tax say it is particularly hard on small farms and businesses whose heirs may have to liquidate assets to pay the levies.

"Instead of the free market determining when assets are bought or sold, the death tax makes that determination," said Republican Sen. Chuck Grassley. "There is something fundamentally wrong when the government swoops in after a funeral to take a cut of what that person had worked their whole life for, and has already paid taxes on at least once."

According to the Internal Revenue Service, out of almost 2.5 million deaths in 2004, only about 19,300 estates paid the estate tax, said the committee's Democratic chairman, Max Baucus, who supports repeal of the tax.

Lawmakers and interest groups on both sides of the debate see several potential compromises, perhaps by freezing the exemption rate at $3.5 million and capping the tax rate at 35 percent.