Death Tax Leads To Death

America's Estate Tax was instituted by the revered Abraham Lincoln after the Civil War as a tax on the rich to pay off war debt. This was before America instituted an income tax (that come in the 1910s) and in a war torn nation Lincoln argued that the rich should be the ones to pay off the debt since the middle class and poor did most of the righting. Fair enough.

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But today America has an income tax, sales taxes and all other sorts of taxes including ones that only target the rich, such as a capital gains tax (which is a double-tax on investment). And the income tax is "progressive": pegged to income levels and the rich pay a higher bracket.

There is no question that today the affluent pay their "fair share". So why is the government still taxing them when they die? Can't one at least be free of the state's mooching grip in death and be let in peace? Not in a politician's world. To be fair, Republicans have tired to eliminate the tax. Starting first by cleverly (and cynically) re-branding it. It has gone a verbal transformation from Estate to Inheritance to, finally, Death Tax. Estate conjures up wealth, you know people with Estates?, and it sounds like a rich-man-only tax. But inheritance is broader. Many people live an inheritance to children and grandchildren, the average voters starts to worry that this tax may affect them. And, lastly, not every has an inheritance to bequeath but everyone dies and Death Tax just sounds awful: How dare the government tax my family on my behalf after I die? Now it has been transformed in perceptions as a wealthy tax which is in actuality paid by literally dozens of Americans into a tax which could burden the layman. Cynical and deceptive, but it is still a miserable tax.

And come this New Year's Eve it made lead to a lot of suspicious sudden deaths for old rich bags:

The Republican Party had long sought to repeal America’s inheritance tax, levied at a top rate of 55%. But ending it would have cost the Treasury too much tax revenue. The biggest viable reduction was a gradual cut in the rate to 45% and an increase in the exemption to $3.5m from 2002-09, followed by full repeal only in 2010, at the end of which year the whole tax package expires.

The right hoped that a later Congress would scrap the levy for good. If not, however, the old rates would be restored when the law expired—meaning that heirs whose parents die on the last day of 2010 will get a lot more money than those whose parents die the next day. Paul Krugman, a columnist for the New York Times, called the law the “Throw Momma From the Train Act”.

Will the children of the rich really “pull the plug on grandma”, as Barack Obama put it (in an admittedly different context)?

History suggests that some of them will. In Sweden, which scrapped its estate tax on January 1st 2005, people subject to the levy were 10% more likely to die that day than on the preceding New Year’s Eve, according to one study, by the University of Uppsala. The worse-off showed no such disparity. When Australia scrapped its tax in 1979, more than half of people with taxable estates who would have died during the tax’s last week managed to delay their passing to the following week, an Australian university study found. “You can picture the family gathering in the hospital room saying, ‘This is what dad would have wanted’,” says David Handler, an estate planner.

Isn't this evidence enough that this relic-of-a-past-era-tax should be the one that's finally put to rest?

Source: The Economist.