Buffet, the Insurance Industry and the Death Tax
Warren Buffett: Chief Lobbyist For The Insurance Industry
Old man Buffett gets a lot of credit for arguing in favor of the estate tax. We’ve never been able to figure that one out, though. He’s already exempted most of his wealth from the tax by donating it to a charity run by his buddy, Bill Gates. And even if you taxed his estate at a rate of 90%, his progeny would still be wealthy. He’s got enough money that he basically doesn’t have to care about taxes.
Not everyone is so fortunate. Although few inheritances are actually subject to the estate tax, millions are spent to avoid it. And a good amount of that is spent in ways that help make Warren Buffett even richer. You see, old Buffett is not exactly a disinterested party in the estate tax debate, and his advocacy of the tax is not exactly a selfless sacrifice. Because he is invested heavily in the insurance industry, he stands to lose a lot of dough if the estate tax every got repealed.
Tim Carney (who is the brother of one of our editors) explains how the insurance industry is lobbying like crazy to preserve the estate tax. Buffett is the industry’s most prominent lobbyist.
Death tax is a lifeline for insurance industry [Washington Examiner]
dealbreaker.com
Commentary - Timothy P. Carney: Death tax is a lifeline for insurance industry
Nov 16, 2007 2:00 AM (2 days ago) by Timothy P. Carney, The Examiner
WASHINGTON (Map, News) - Democrats eager to preserve the federal estate tax — the fate of which is currently being debated by the Senate Finance Committee — portray the levy as a grand equalizer and argue that killing the tax would help only the ultrarich.
The real beneficiaries of repealing the tax, however, would not be Paris Hilton and her ilk, but the countless small businessmen, family farmers, and retired parents and grandparents who now have to spend billions to avoid paying it.
It’s only natural, then, that estate planning businesses — including the life insurance industry — are lobbying to save the estate tax.
Currently, inheritances over $2 million are taxed, and the top rate is 45 percent. Because of Republican budget chicanery when they passed the “estate tax repeal” in 2001, the estate tax will disappear for one year (2010) before returning permanently in its full glory of 55 percent and a $1 million exemption in 2011. For the past three years, Congress has been discussing a permanent repeal of the estate tax, or at least increasing the exemption.
Investment mogul and estate tax defender Warren Buffett testified before Congress Wednesday that only 0.5 percent of the Americans who die this year will pay the estate tax, or, as he put it, “You would have to attend 200 funerals to be at one at which the decedent’s estate owed a tax.”
What Buffett ignores is that you’d probably only have to attend a handful of funerals before you attended one where the family spent countless hours and sunk thousands or millions of dollars into avoiding the estate tax.
Enter the multibillion-dollar estate planning industry. If you invest your money in certain ways, give small annual gifts, or buy annuities or life insurance, you can eliminate or reduce your estate tax liability. All of these activities are less efficient, more costly and more time-consuming than what you would do absent the threat of a death tax — but they all make money for somebody.
The American Council of Life Insurers (ACLI) spent $9.6 million on lobbying last year and is on pace to spend more than $10 million this year — and that’s on top of the lobbying efforts by its individual members, the life insurance companies. Why? One life insurance industry lobbyist estimated last year that the industry gets about 10 percent of its business through estate planning.
Frank Keating is ACLI’s president, and he lobbies Capitol Hill on tax issues. When he was a Republican governor of Oklahoma, Keating wrote a piece for the newsletter of Americans for Tax Reform that read, in part, “I believe death taxes are un-American.”
He tied the death tax to “failed collectivist schemes of the past” and praised President Bush’s plan to abolish the federal estate tax. As head of ACLI, he changed his tune and began supporting the death tax, telling the Seattle Post-Intelligencer, “I am institutionally and intestinally against huge blocs of inherited wealth.”
But ACLI is hardly a Republican institution. One of Keating’s lobbying colleagues at ACLI is Kimberly Dorgan, wife of Democratic Sen. Byron Dorgan, who supports the estate tax. Also, since Keating has taken over — and since permanent repeal of the estate tax has been a recurring theme on the Hill — ACLI has shifted its donation pattern.
Before he ran the group, ACLI’s PAC favored Republican candidates by more than a two-to-one ratio. In the 2006 cycle, and so far in the 2008 cycle, ACLI has given more to Democrats, according to the Center for Responsive Politics.
Also, the PACs of the top life insurance companies — Met Life, Prudential and New York Life — all gave more to Democrats in 2006 and the first three quarters of the 2008 cycle.
And old Warren Buffett, whose intentions in all likelihood are pure, also owns insurance companies. He bought the life insurance business of Safeco, whose 2002 annual report worried about the risks posed by “changes in tax laws ... that decrease the usefulness of life insurance products for estate-planning purposes.”
Warren Buffet, Kimberly Dorgan and Frank Keating are helping end the threat to their industry and in the process assuring that future generations of insurance salesmen and estate planners will thrive because the death tax lives.
Examiner columnist Timothy P. Carney is senior reporter for the Evans-Novak Political Report. His column appears on Fridays.
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