So now we know why Warren Buffet is such a goo-goo about the estate tax, and why he thinks it's such a good idea to keep it.
It turns out, according to Jonathan Strong, that the life insurance industry, one of the strongest lobbies in Washington, DC, is against the repeal of the estate tax.
Now, why in the world would the life insurance industry care about the estate tax? Their job is life insurance, not railing about inequality and family dynasties, right?
Wrong. It appears that ten percent of the life insurance industry's revenues come from from people using life insurance to reduce their estate tax exposure. Life insurance proceeds don't count as part of an estate; thus the heirs get the money without paying a cut to Uncle Sam.
And wouldn't you know: Warren Buffet, presumably through Berkshire Hathaway, owns six life-insurance companies.
Really, the stench is getting unbearable. Another famous proponent of the estate tax is Bill Gates, Sr. He is a lawyer, and apparently notable as an estate-planning expert.
Estate planning is a phrase that means: rearranging your assets with an expensive lawyer so you can reduce your estate-tax exposure.
The joke about all this is that these days, unlike in the old days of the landed aristocracy, you don't need to worry about wealthy dynasties. The money accumulated by a successful billionaire entrepreneur usually gets dissipated in the next generation. Sometimes it gets dissipated early by his widow.
The estate tax does have the effect of making it very difficult to pass down a family business to the next generation, or worse, forcing the heirs to sell the business to Warren Buffet at fire-sale prices.
Oh, you didn't know that? Yes, it appears that one of Warren Buffet's specialties is buying family businesses on the cheap. It's a cosy little niche that exists because of the estate tax. Almost any family business worth a few million will have to be sold quickly in order to pay Uncle Sam's estate tax. And when you have to sell the family business quickly, chances are that you are not going to get a good price on it.
It's a universal law. Anything the government gets into ends up as a cesspool of corruption and crony capitalism. Because government is force, and politics is power.
Personally, I'm all in favor of the estate tax. But not at 55 percent. I'd say that an estate tax at a rate of five to ten percent would collect a nice little chunk of change but still keep family businesses going in the family. Alternatively, it would help heirs of a creative turn of mind become famous scientists and artists, as happened so often in the 19th century.
But an estate tax that low would put the noses of Warren Buffet and Bill Gates, Sr. out of joint. Not to mention the life-insurance industry.