[FoRK] A plea for the death tax
J. Andrew Rogers
andrew at ceruleansystems.com
Sat Feb 21 19:28:28 PST 2009
On Feb 21, 2009, at 2:05 PM, Russell Turpin wrote:
> It has become a shibboleth among the right wing that the death tax is
> the worst of all taxes.
That is not a true characterization of the right-wing. They foolishly
obsess over the income tax; if they were economically literate they
would be obsessing over the capital gains tax, and to a lesser extent
corporate taxes. Death tax is more of a fringe interest, like flag
It is not so much that the death tax is the "worst of all taxes",
since it is pretty much near the top of the list in terms of
minimizing adverse economic consequences, but that it is unfair in the
sense that the aggregate tax rate on that money is outrageously high.
There are those that worry about the impact on small businesses, which
is a valid concern but way overplayed by those that are against the
There are other more legitimate concerns (see below).
> March is the month that I think we should trade the income tax
> entirely for a
> death tax. Even if it would have to be at an onerous rate to achieve
> revenue neutrality. Let me prosper while I live, and not worry about
> 1099s. And then when I'm dead, the government can have its due.
Unfortunately, if you taxed every man, woman, and child that drops
dead at 100% of assets with no exemptions or deductions, it would be
*revenue negative*. Income tax generates over a trillion dollars a
year, but two million and change Americans die in a given year.
Since the average estate value at death is much less than $500k, I'd
say this won't work unless I missed something really obvious.
> Then there are the economic benefits. People respond to incentives. A
> penalty on death will cause people to figure out ways to live longer.
> If the only certainties are death and taxes, what better way to
> minimize their effect that to set them against each other?
People responding to incentives is also the counter-argument. When
the government's income is based entirely on the number of people that
die, with a very strong economic preference for people dying around
the age of 50-60, the government's incentives are no longer aligned
with the individual's.
There is a lot of precedent for suggesting that one will almost
certainly see systemic behavior by the government to maximize revenue
even to the detriment of the population, a straightforward
evolutionary dynamic. Offhand, there have been numerous cases
involving civil forfeiture and questionable rationing of healthcare
that were based in large part on maximizing revenue available to the
government, never mind the selective neglect that is the mark of
bureaucracies the world over.
While death taxes are not a bad idea in an abstract economic sense,
they have some very negative incentive issues that are currently below
the noise floor. If you make death taxes one of the primary sources
of tax revenue, there will unavoidably be problems with the government
systematically attempting to expand their tax base. It is a
significant moral hazard. The lack of a significant negative feedback
loop is problematic; at least with the income tax you have a Laffer
J. Andrew Rogers
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