Manks links his own CEA Chair speech on why estate taxes need to be abolished.
Until yesterday, a $10 million estate would get taxed at less than 30%. Greg's first argument was that the estate tax is not actually that progressive, b/c, even though it only falls on the ultra-rich, sometimes the kids of the ultra-rich are uber-lazy, and hence not rich until they get their inheritance.
This was his lede...
I can share an anecdote here to bolster Greg's point. A friend of my parents had two aunts who inherited a very large estate ($30 mill plus). He was just waiting for them to die -- it turns out the last aunt lived to be more than 100, by that time the guy was in his late 40s, living a horrific middle-class lifestyle. The day his last aunt finally croaked, however, he, predictably quit his job to become a full-time amateur golfer and globe-trotter.
Your aunts aren't worth $30 mill? Don't worry, Greg says that "the repeal of the estate tax would stimulate growth and raise incomes for everyone, even those who never receive a bequest."
You see, Greg Mankiw, Harvard man, is just looking out for the little guy who is too dumb to look out for his own interests. "The average worker" Greg says, "has little reason to know that his weekly paycheck is smaller because of the existence of the estate tax."
Greg then goes on to argue that repealing the estate tax will raise revenue...
That's it. Greg Mankiw is almost too stupid for me to blog, even in jest. There is just no conceivable way behavioral responses to the estate tax are that strong. People who grew up rich but who have low incomes in adulthood will still get lots of money they do not deserve even with an estate tax. And the idea that economic growth is really that sensitive to taxes on capital is crazy -- after all, both Clinton and Bush cut capital gains taxes, so that now, LT gains for someone in my bracket are not taxed at all, whereas just a few years ago I'd have paid 20%.
A simple, bare-bones economic model used by Mankiw and many leading Macroeconomists might imply that this will increase the capital stock by as much as 40%, and GDP by 15%.
Except, when capital gains taxes are cut the result could not be more different. Greg-- time to update those priors buddy.