Saturday, January 2, 2010

More Reasons to Abolish the Estate Tax: Think of the Baby Seals

Yesterday, we linked Greg Mankiw making a common-sense case to the common man about what happens when the ultra-rich get taxed -- it comes straight out of the common man's paycheck, only the common man is too stupid to know it. Manks linked Ed Prescott's arguments against "grave robbing": "our public employees have better things to do than construct estate tax codes" ... "Just think of all the time and resources that would be saved if people didn't have to hire expensive lawyers and clever accountants to get around the government's attempt to grab a share of their earthly bounty." He finally concludes "there is certainly no justification for such a tax." Harvard's Mary Feldstein says "the net impact of the estate tax is probably to reduce overall tax revenue." Gary Becker is also against the "death tax" since "they do little to reduce income or wealth inequality." You see, he Gary Becker, only supports large, grand measures to fight inequality, not by pussyfooting around with estate taxes on the ultra rich. And since GB worries about the common man, he's worried about the estate tax hitting "farmers and other owners of small businesses" which is why they "continue to be active politically in advocating much lower estate taxes, if not their complete abolition." Since most farmers and mom-and-pop small-businesses leave multi-million dollar estates...

Any other arguments against the Estate Tax? Here's a surprising and little-known fact: Every time a rich person pays estate taxes, a baby seal is harpooned and clubbed to death.

Thank G_d the grave-robbing of farmers and the senseless slaughter of baby seals has surceased...


  1. @ Ed Prescott. In terms of wasted resources, is the income really wasted if it's transferred to someone you hired to do a job for you at a profit to them? Aren't you helping to grow their business and increase their investment? You can't just look at it from the reduced consumption / investment point of view of the descendent (never mind that the reduced investment is not large enough to matter from a macro perspective). Also, since when did hiring someone to perform a job for me become "wasteful" to neoclassical economists? Um, isn't that how capitalism works?

    Does this explain the opposition to fiscal stimulus? Consumption is now a bad thing!

    @ Marty Feldstein

    I'm always a little baffled by the the reduced estate accumulation and blah blah blah argument for why it reduces revenue or doesn't generate it.

    Andrew Carnegie once said:

    "The parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and tempts him to lead a less worthy life."

    Why is it nobody ever bothered to study the effects on people who anticipate the large bequests? I know if I have a wealthy relative and I have a rough idea what I'm going to get and when, I will decrease my level of work over my lifetime and sit tight for my inheritance $$. What would be the reduced revenue effect if the estate tax was lifted entirely so I could be even more of a bum? Would actually a higher estate tax rate promote more economic efficiency because heirs wouldn't be lazy bums then? I'm not sure, but from a logical perspective I think the incentive to be a bum from the lift of the estate tax would outweigh the incentive to not accumulate a large estate. I hardily think this issue of if it really reduced revenue (seems unlikely to me) is settled at all.

    I'd actually argue the estate tax revenue generation would likely mimic a Laffer Curve of sorts where revenue would be maximized at some level that discourages heirs to not be too lazy, but does not discourage descendants from not accumulating a large estate (and I even question how realistic the behavioral response to the estate tax really are since there are a lot of empirical problems with sorting this out in the data).

    @ Gary Becker

    Is that why Becker is against the tax rates Democrats' set because they don't DO ENOUGH for income inequality? He must actually want a more progressive tax system! Is Becker, secretly, a Commie in disguise who has infiltrated the enemy at the University of Chicago? Does Becker keep a copy of Critique of the Gotha Program on his bookshelf? Hmm ...

    @ Baby Seals

    We always knew Republicans were conservationist at heart. The lower the estate tax rate, the less clubbed baby seals. Estate tax elimination would be an excellent conservation program that the environmental movement should get behind.

  2. Another "envy" article. Why don't you think up some good ways *you* could be paying more in taxes? The government needs the revenues.

  3. Hmmm, how could I be paying more in taxes? What would be a good way?

    I know: confiscatory taxation of whatever estate I leave my heirs, in excess of $5 million!

    Works for me!

  4. Ted: "Why is it nobody ever bothered to study the effects on people who anticipate the large bequests? I know if I have a wealthy relative and I have a rough idea what I'm going to get and when, I will decrease my level of work over my lifetime and sit tight for my inheritance $$."


    This only deadens the work and productivity incentives of *poor* people (inluding the majority of Americans). Rich people work harder, to ensure that they won't feel guilty about getting free money.

  5. Thanks again! You are so right that habits are learned and enforced by social behaiours and so the right social support can be invaluable when changing habits!

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