The Estate Tax

One last post for the start of this blog. The year 2010 is the year of the disappearance of the estate tax. That means if grandma has a lot of valuable things where even the current exemption would lead to taxing her estate upon her expiration, you should do everything in your power to keep her alive until next year and then make sure she expires then (it is ghoulish, but I am trying my best to make a point as to how crazy this is).

A recent post on Tax Vox states that some are trying to quantify the economic effects. The post correctly points to the difficult problems of determining the economic effects of the tax.

However, one part troubled me. That was the very end of the post. Anyone who says that he wants the policy to guide things fails to realize that this rhetoric led to the failure in the last round. As Michael Graetz and Ian Shapiro point out in Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth stories matter more than policy arguments. The policy arguments perhaps serve as the groundwork, but you need a narrative. Indeed, many psychologists have pointed this out; tragedies seem less real without people attached to them.

Thus, it seems as though we have not learned our mistakes from the last time, and failed to make the debate about Paris Hilton. That said, I kind of want some more comprehensive reform. Instead of renewing the estate tax, I think policy makers should review Professor Batchelder's proposal for an inheritance tax. Of course the one minor fault I have with her is that she did not go further in her proposal, as I think it would likely still have political feasibility. However, I wish someone would look at this and come up with a story.