Taking a swipe at efforts to repeal the estate tax, billionaire Warren Buffett bequeathed $31 billion in Berkshire Hathaway Inc. common stock to the Bill and Melinda Gates Foundation yesterday to fight infectious diseases in the developing world and bolster American education.
Effectively doubling the giving power of the world's largest charitable foundation, Buffett laid plans to give away the bulk of his estimated $44 billion fortune to the Gates foundation along with charities run by his children. The move puts the wealth of the two richest men in the world together to address global health and poverty issues in what observers said could herald a new age of philanthropy.
``This has been coming for the past 50 years," Buffett said. ``The exact method became clear in the last year, but there's never really been any other plan in terms of where the money should go. I'm not an enthusiast for dynastic wealth when there are 6 billion people who have much poorer lives."
Nicknamed the ``Oracle of Omaha" for his uncanny ability as an investor, Buffett became the world's second-richest man by putting money in undervalued companies with growth potential. Unlike some of his contemporaries, he has been a longtime critic of inherited wealth.
Asked about recent efforts to repeal the estate tax, Buffett said he would ``hate to see the estate tax gutted." Thursday, the House voted 269-156 to abolish the tax for all but the wealthiest Americans; the Senate is to take up the issue this week.
``I can't think of anything that's more counter to a democracy that dynastic wealth," he said. ``The idea that you win the lottery the moment you're born: It just strikes me as outrageous." Buffett, along with Bill Gates's father, William H. Gates, a Seattle-based lawyer, have been among some of the most outspoken -- and well-heeled -- critics of repealing the estate tax.
Supporters of the estate tax said Buffett's statements fall in line with iconic business tycoons of the past.
``This is a tax cut for Paris Hilton," said Representative Richard E. Neal, Democrat of Massachusetts. The estate tax is ``entirely consistent with the position of the Rockefeller and Carnegie families. They believed it was a bad idea to recycle family wealth."
Dennis Falk, who runs noestatetax.org and a campaign against the tax in Washington state, said extremely rich Americans like Gates and Buffett can form foundations to protect their estates and ensure their families live comfortably despite an estate tax while most Americans affected by the tax can't.
``It's wrong to use death as a triggering device to levy taxation," said Falk. ``It is a direct attack on the free enterprise system and it's a direct attack upon the middle class and businessmen."
Foundation executives were more focused on the ripple effect that the contributions by Gates and Buffett could have on other big business names.
``I think that what we're seeing is a second golden age of philanthropy," said Jeff Martin, a spokesman for the Council on Foundations, an association of foundations and corporate-giving programs. ``Exactly a century ago, we had the Carnegies, Rockefellers, and the Mellon families. But more recently in the late 1990s with the tech boom, we've had a surge in the number of foundations."
Buffett's announcement comes just a week after Gates said he would step aside from day-to-day activities at Microsoft Corp. to spend more time on the foundation. Now with about $60 billion within its reach, the Gates foundation is on track to give away at least $3 billion each year beginning in 2009. Buffett's gift comes in the form of 10 million class B shares of Berkshire Hathaway Corp. that will flow into the foundation at 5 percent of the outstanding shares per year.
Paul Grogan of the Boston Foundation called it unusual that Buffett decided to join forces with an existing charity, rather than create one in his own name, as the Carnegies and Rockefeller did.
``It's unprecedented. Instead of setting up his own foundation, which he certainly has a capacity to do, he is in effect joining the Gates foundation," Grogan said. ``He's obviously not interested in any ego gratification."
He said that while the problems the Gates foundation is tackling demand enormous resources and could gain from scaling up, there's also advantage from having funds compete with different approaches.
Gates and his wife, Melinda, said they would use the money to fight diseases in the Third World like AIDS, tuberculosis, and malaria along with microfinancing ventures that can help rural areas develop credit markets and lending opportunities.
``Our key rule is to go in where the market isn't going to come in and come up with a solution," Bill Gates said. He added, ``There's no reason that we shouldn't be able to treat the top 20 diseases."
Buffett said the donation wouldn't affect his leadership of Berkshire Hathaway or the company's market valuation. Berkshire's Class A shares fell $600, or less than 1 percent, to $91,500 and the Class B shares fell $28 to $3,043 in New York Stock Exchange Composite trading.
Kim-Mai Cutler can be reached at firstname.lastname@example.org.