Warren Buffett lives a simple life, steers clear of politics, and has gifted more than half of his vast fortune to good causes, promising that virtually all the rest will follow.
Yet even the 94-year-old investor who runs Berkshire Hathaway is cutting out the taxman and setting his children up to wield massive influence once he’s gone, an expert on wealth inequality tells Business Insider.
Chuck Collins is the director of the inequality program at the Institute for Policy Studies, and the author of “The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions.”
He told Business Insider why $100 billion fortunes are dangerous, how they could be cut down to size, and why even Buffett shouldn’t be let off the hook.
Collins’ responses have been edited for length and clarity.
There are more than a dozen people each worth more than $100 billion. What do you think about that?
These concentrations of wealth are a reflection of a system failure. A healthy capitalist and democratic society must put some brake on the concentration of wealth and power to prevent it from distorting democracy.
Forty years of tax, wage, and other policies have funneled wealth to the top — rather than see it broadly distributed through higher wages for workers or paying a fair share of taxes.
What do you think about someone like Warren Buffett, who lives a relatively simple life and has pledged to give virtually all of his vast fortune away?
Buffett is not a conspicuous consumer. Even his private jet was initially named the “Indefensible.” And Buffett does less to aggressively wield his power and influence in the public sphere. You don’t see his name on the list of big political donors. And he and Bill Gates started The Giving Pledge to encourage other billionaires to give to philanthropy.
But most of Buffett’s wealth will flow in the form of donations to the tax-exempt family foundations run by his three kids, rather than paying estate taxes or taxes on appreciated gains. On the positive side, he’s not creating private wealth dynasties. But his children will become philanthropic titans by wielding taxpayer-subsidized private power through enormous charitable foundations upon his death.
Buffett has gifted Berkshire stock worth billions to his children’s charities since 2006. He plans to give almost all his remaining $140 billion fortune to a charitable trust when he dies. His three kids will be the named trustees and will have to agree unanimously on how the money is used.
How would you tackle the problem of wealth inequality at a scale where individuals can amass net worth of $100 billion-plus?
As a society, we should adapt several public policies to discourage such democracy-distorting levels of private wealth:
1. A progressive annual wealth tax, with rates becoming steeper as wealth goes above $1 billion.
2. A meaningful inheritance tax, taxing wealth transfers at death. For this to be effective, we have to crack down on the massive wealth-hiding industry.
3. A cap on the charitable deduction so that wealthy people, like Buffett, don’t get to opt out entirely of paying taxes.
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