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Fighting to end destructive double taxation

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The Wall Street Journal’s Primer on Capital Gains Taxation

Posted by Dan Mitchell on September 24, 2012

One of the principles of good tax policy and fundamental tax reform is that there should be no double taxation of income that is saved and invested. Such a policy promotes current consumption at the expense of future consumption, which is simply an econo-geek way of saying that it penalizes capital formation.

This isn’t very prudent or wise since every economic theory agrees that capital formation is key to long-run growth and higher living standards. Even Marxist and socialist theory is based on this notion (they want government to be in charge of investing, so they want to do the right thing in a very wrong way – think Solyndra on steroids).

To help explain this issue, the Wall Street Journal published a very good primer on taxing capital gains.

The editors begin with an uncontroversial proposition.

The current Democratic obsession with raising the capital gains tax comes from a mistaken belief that the preferential rate applied to the sale of a family business, farm or financial asset is a “loophole” that mainly benefits the rich.

They offer three reasons why this view is wrong, starting with a basic inequity in the tax code.

Far from being a loophole, the low tax rate applied to capital gains is beneficial and fair for several reasons. First, under current tax rules, all gains from investments are fully taxed, but all losses are not fully deductible. This asymmetry is a disincentive to take risks. A lower tax rate helps to compensate for not being able to write-off capital losses.

Next, the editors highlight the unfairness of not letting investors take inflation into account when calculating capital gains. As explained in this video, this can lead to tax rates of more than 100 percent on real gains.

Second, capital gains aren’t adjusted for inflation, so the gains from a dollar invested in an enterprise over a long period of time are partly real and partly inflationary. It’s therefore possible for investors to pay a tax on “gains” that are illusory, which is another reason for the lower tax rate.

This may not seem like an important issue today, but just wait ’til Bernanke gets to QE24 and assets are rising in value solely because of inflation.

The final – and strongest argument – is that any capital gains tax is illegitimate because it is double taxation. I think this flowchart is very helpful for those who want to understand the issue, but the WSJ’s explanation is very good as well.

Third, since the U.S. also taxes businesses on profits when they are earned, the tax on the sale of a stock or a business is a double tax on the income of that business. When you buy a stock, its valuation is the discounted present value of the earnings. The main reason to tax capital investment at low rates is to encourage saving and investment. If someone buys a car or a yacht or a vacation, they don’t pay extra federal income tax. But if they save those dollars and invest them in the family business or in stock, wham, they are smacked with another round of tax.

There’s also good research to back up this theory – some produced by prominent leftists.

Many economists believe that the economically optimal tax on capital gains is zero. Mr. Obama’s first chief economic adviser, Larry Summers, wrote in the American Economic Review in 1981 that the elimination of capital income taxation “would have very substantial economic effects” and “might raise steady-state output by as much as 18 percent, and consumption by 16 percent.”

Summers is talking about more than just the capital gains tax, so his estimate is best viewed as the type of growth that might be possible with a flat tax that eliminated all double taxation.

Nobel laureate Robert Lucas also thinks that such a reform would have large beneficial effects.

Almost all economists agree—or at least used to agree—that keeping taxes low on investment is critical to economic growth, rising wages and job creation. A study by Nobel laureate Robert Lucas estimates that if the U.S. eliminated its capital gains and dividend taxes (which Mr. Obama also wants to increase), the capital stock of American plant and equipment would be twice as large. Over time this would grow the economy by trillions of dollars.

So why aren’t these reforms happening, either the medium-sized goal of getting rid of the capital gains tax, or the larger goal of junking the corrupt internal revenue code for a simple and fair flat tax?

A big obstacle is that too many politicians believe in class-warfare tax policy, even though lower-income people are among the biggest victims when the economy is weak.

For more information, here’s my video explaining that the right capital gains tax rate is zero.

P.S. Some of you may be wondering why I didn’t make a Laffer Curve argument for a lower capital gains tax. The main reason is because I have no interest in maximizing revenue for the government. I simply want good policy, which is why the rate should be zero.

Posted in Capital Gains Tax | Comments Off

On Death Tax, the U.S. Is Worse than Greece, Worse than France, and Even Worse than Venezuela

Posted by Dan Mitchell on July 29, 2012

Considering that every economic theory agrees that living standards and worker compensation are closely correlated with the amount of capital in an economy (this picture is a compelling illustration of the relationship), one would think that politicians – particularly those who say they want to improve wages – would be very anxious not to create tax penalties on saving and investment.

Yet the United States imposes very harsh tax burdens on capital formation, largely thanks to multiple layers of tax on income that is saved and invested.

But we compound the damage with very high tax rates, including the highest corporate tax burden in the developed world.

And the double taxation of dividends and capital gains is nearly the worst in the world (and will get even worse if Obama’s class-warfare proposals are approved).

To make matters worse, the United States also has one of the most onerous death taxes in the world. As you can see from this chart prepared by the Joint Economic Committee, it is more punitive than places such as Greece, France, and Venezuela.

Who would have ever thought that Russia would have the correct death tax rate, while the United States would have one of the world’s worst systems?

Fortunately, not all U.S. tax policies are this bad. Our taxation of labor income is generally not as bad as other industrialized nations. And the burden of government spending in the United States tends to be lower than European nations (though both Bush and Obama have undermined that advantage).

And if you look at broad measures of economic freedom, America tends to be in – or near – the top 10 (though that’s more a reflection of how bad other nations are).

But these mitigating factors don’t change the fact that the U.S. needlessly punishes saving and investment, and workers are the biggest victims. So let’s junk the internal revenue code and adopt a simple and fair flat tax.

Posted in Death Tax | Comments Off

The Right Capital Gains Tax Rate Is Zero

Posted by Dan Mitchell on April 14, 2012

The silly debate about the “Buffett Rule” is really an argument about the extent to which there should be more double taxation of income that is saved and invested.

Politicians conveniently forget that dividends and capital gains get hit by the corporate income tax. And since America now has the developed world’s highest corporate income tax rate, it’s adding insult to injury to tax the income again. Actually, it’s adding injury to injury!

No wonder Ernst and Young found that the United States has a very anti-competitive system for taxing dividends and capital gains. (perhaps it’s time to copy the clever British campaign against punitive double taxation)

If you believe in fairness, the right capital gains tax rate is zero. John Goodman of the National Center for Policy Analysis, has a good explanation.

Income tax time is an appropriate moment to go to the heart of President Obama’s complaint about the taxes Warren Buffett and other rich people pay, or don’t pay. What the president is really complaining about is that the tax rate on capital gains is too low. But there is a more basic question to be asked: why tax capital gains at all?

That’s a very good question, because a capital gain isn’t income. It’s an asset that has increased in value. But the tax only applies on the gain if you sell the asset.

But why does an asset, such as shares of stock, rise in value? According to finance research, asset prices rise in value when there’s an expectation that there will be a greater after-tax stream of future income. But that income will be taxed (at least once!) when it materializes, so why tax it before it even happens? John hits the nail on the head.

The companies will realize their actual income and they will pay taxes on it. If the firms return some of this income to investors (stockholders), the investors will pay a tax on their dividend income. If the firms pay interest to bondholders, they will be able to deduct the interest payments from their corporate taxable income, but the bondholders will pay taxes on their interest income. Here is the bottom line: There is no need for the IRS to tax the bets that people make along the way — as stock prices gyrate up and down. Eventually all the income that is actually earned will be taxed when it is realized and those taxes will be paid by the people who actually earned the income.

Amen. John is exactly right. He’s making the same arguments I put forward in my video on capital gains taxation.

By the way, the capital gains tax isn’t indexed for inflation. So if you bought an asset 30 years ago and it’s doubled in value, you’ve actually lost money after adjusting for inflation. Yet the IRS will tax you. Sort of adding injury to injury to injury.

Finally, I like how John closes his column.

…why not avoid all these problems by reforming the entire tax system along the lines of a flat tax? The idea behind a flat tax can be summarized in one sentence: In an ideal system, (a) all income is taxed, (b) only once, (c) when (and only when) it is realized, (d) at one low rate.

In this awful period leading up to tax day, isn’t it nice to at least dream of a tax system that is simple, fair, and non-corrupt?

Posted in Capital Gains Tax | Comments Off

Romney: A Total Failure on Double Taxation

Posted by Dan Mitchell on January 24, 2012

Last night’s GOP debate did nothing to change my sour opinion of Mitt Romney.

During a discussion about tax reform, he attacked Newt Gingrich for the supposed crime of not wanting to double tax capital gains. Here’s how Politico reported the exchange.

Newt Gingrich joked about Romney’s 15 percent tax rate, saying: “I’m prepared to describe my flat tax as the Mitt Romney flat tax.” Romney jumped in to ask: Do you tax capital gains at 15 percent or zero percent? Gingrich’s answer: Zero. “Under that plan, I’d have paid no taxes in the last two years,” Romney said, alluding to the fact that all his income is from investments.

Romney’s remarks are amazingly misguided. Getting rid of the capital gains tax doesn’t result in a tax rate of zero. It simply means that there is no second layer of tax on top of the punitive 35 percent corporate income tax.

I’ve had to correct Warren Buffett when he makes this mistake. One would think, though, that GOP presidential candidates would have a better understanding of taxation.

In addition to being wrong on policy, Romney also is politically tone deaf. By demagoguing against Gingrich’s tax plan, he lends credibility to the dishonest claims that his personal tax rate is “too low.”

In a column for today’s Wall Street Journal, John Berlau and Trey Kovacs of the Competitive Enterprise Institute explain how the GOP candidates should deal with this issue.

The former Bain Capital CEO and Massachusetts governor caused a brouhaha last week when he estimated the tax rate on his investment income at 15%. “How unfair!” pundits exclaimed, noting that the top marginal rate for wage income is more than 30%. The tax rate on investors is unfair, but for the opposite reason. Our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges is one of the highest in the world. …This double taxation brings the effective tax rate on investment income to as much as 44.75%. In other words, after the combined top tax rates hit $100 of corporate income, $55.25 remains for the investor. And this figure doesn’t even include various state and local taxes, or the death tax. Moreover, like the rest of us, Mr. Romney paid income taxes before investing… Mr. Romney and other presidential candidates should use the opportunity of releasing their tax returns to make an important policy statement. They should include not only their individual returns, but information about the taxes their corporations pay. …In this way the candidates can help explode the myth of the U.S. as a low-tax nation. As Cato Institute tax experts Chris Edwards and Daniel J. Mitchell write in their book, “Global Tax Revolution,” while the U.S.’s “overall tax burden . . . is lower than in many other nations,” the country “imposes more punishing taxes on savings and investment than many advanced economies.” The most popular tax reforms—from the “9-9-9 plan” of former candidate Herman Cain to flat tax proposals—all have in common the reduction or elimination of double taxation on investment. …If the traditional disclosure of tax returns is elevated into a “teachable moment” about the burdens of double taxation, all Americans could be winners.

The authors are very kind to reference the book Chris and I wrote, but I mostly like this article because it does such a good job of explaining double taxation.

I made many of the same points in my video on capital gains taxation.

And keep in mind that the capital gains tax isn’t indexed for inflation, so the rate of double taxation in many cases is far higher than these estimates suggest.

As illustrated by this chart, double taxation is a serious self-inflicted barrier to American growth and competitiveness. Too bad Republicans are too short-sighted to address this issue intelligently.

Posted in Uncategorized | Comments Off

Explaining the Perverse Impact of Double Taxation with a Chart

Posted by Dan Mitchell on September 28, 2011

Whether I’m criticizing Warren Buffett’s innumeracy or explaining how to identify illegitimate loopholes, I frequently write about the perverse impact of double taxation.

By this, I mean the tendency of politicians to impose multiple layers of taxation on income that is saved and invested. Examples of this self-destructive practice include the death tax, the capital gains tax, and the second layer of tax of dividends.

Double taxation is particularly foolish since every economic theory – including socialism and Marxism – agrees that capital formation is necessary for long-run growth and higher living standards.

Yet even though this is a critically important issue, I’ve never been satisfied with the way I explain the topic. But perhaps this flowchart makes everything easier to understand (click it for better resolution).

There are a lot of boxes, so it’s not a simple flowchart, but the underlying message hopefully is very clear.

1. We earn income.

2. We then pay tax on that income.

3. We then either consume our after-tax income, or we save and invest it.

4. If we consume our after-tax income, the government largely leaves us alone.

5. If we save and invest our after-tax income, the government penalizes us with as many as four layers of taxation.

You don’t have to be a wild-eyed supply-side economist to conclude that this heavy bias against saving and investment is not a good idea for America’s long-run prosperity.

By the way, Hong Kong’s simple and fair flat tax eliminate all those extra layers of taxation.

That’s the benefit of real tax reform such as a flat tax. You get a low tax rate, but you also get rid of double taxation so that the IRS only gets one bit at the apple.

Posted in Capital Gains Tax, Death Tax, Dividends Tax | Comments Off

Warren Buffett’s Fiscal Innumeracy

Posted by Dan Mitchell on August 15, 2011

Warren Buffett’s at it again. He has a column in the New York Times complaining that he has been coddled by the tax code and that “rich” people should pay higher taxes.

My first instinct is to send Buffett the website where people can voluntarily pay extra money to the federal government. I’ve made this suggestion to guilt-ridden rich people in the past.

But I no longer give that advice. I’m worried he might actually do it. And even though Buffett is wildly misguided about fiscal policy, I know he will invest his money much more wisely than Barack Obama will spend it.

But Buffett goes beyond guilt-ridden rants in favor of higher taxes. He makes specific assertions that are inaccurate.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

His numbers are flawed in two important ways.

1. When Buffett receives dividends and capital gains, it is true that he pays “only” 15 percent of that money on his tax return. But dividends and capital gains are both forms of double taxation. So if he wants honest effective tax rate numbers, he needs to show the 35 percent corporate tax rate.

Moreover, as I noted in a previous post, Buffett completely ignores the impact of the death tax, which will result in the federal government seizing 45 percent of his assets. To be sure, Buffett may be engaging in clever tax planning, so it is hard to know the impact on his effective tax rate, but it will be signficant.

2. Buffett also mischaracterizes the impact of the Social Security payroll tax, which is dedicated for a specific purpose. The law only imposes that tax on income up to about $107,000 per year because the tax is designed so that people “earn” a corresponding retirement benefit (which actually is tilted in favor of low-income workers).

Imposing the tax on multi-millionaire income, however, would mean sending rich people giant checks from Social Security when they retire. But nobody thinks that’s a good idea. Or you could apply the payroll tax to all income and not pay any additional benefits. But this would turn Social Security from an “earned benefit” to a redistribution program, which also is widely rejected (though the left has been warming to the idea in recent years because their hunger for more tax revenue is greater than their support for Social Security).

If we consider these two factors, Buffett’s effective tax rate almost surely is much higher than the burden on any of the people who work for him.

But this entire discussion is a good example of why we should junk the corrupt, punitive, and unfair tax code and replace it with a simple flat tax. With no double taxation and a single, low tax rate, we would know that rich people were paying the right amount, neither too much based on class-warfare tax rates nor too little based on loopholes, deduction, preferences, exemptions, shelters, and credits.

So why doesn’t Buffett endorse this approach? Tim Carney offers a very plausible answer.

For more information about why class-warfare taxes are misguided, this video may be helpful.

Posted in Capital Gains Tax, Death Tax, Dividends Tax | Tagged: , , , , , , , | Comments Off

Time to Get Rid of the Corporate Income Tax?

Posted by Dan Mitchell on February 18, 2011

Here’s a video arguing for the abolition of the corporate income tax. The visuals are good and it touches on key issues such as competitiveness.

I do have one complaint about the video, though it is merely a sin of omission. There is not enough attention paid to the issue of double taxation. Yes, America’s corporate tax rate is very high, but that is just one of the layers of taxation imposed by the internal revenue code. Both the capital gains tax and the tax on dividends result in corporate income being taxed at least two times.

These are points I made in my very first video, which is a good companion to the other video.

There is a good argument, by the way, for keeping the corporate tax and instead getting rid of the extra layers of tax on dividends and capital gains. Either approach would get rid of double taxation, so the economic benefits would be identical. But the compliance costs of taxing income at the corporate level (requiring a relatively small number of tax returns) are much lower than the compliance costs of taxing income at the individual level (requiring the IRS to track down the tens of millions of shareholders).

Indeed, this desire for administrative simplicity is why the flat tax adopts the latter approach (this choice does not exist with a national sales tax since the government collects money when income is spent rather than when it is earned).

But that’s a secondary issue. If there’s a chance to get rid of the corporate income tax, lawmakers should jump at the opportunity.

Posted in Capital Gains Tax, Dividends Tax | Comments Off

Living in New Jersey May Be Bad, but Dying in New Jersey Is Worse

Posted by Dan Mitchell on February 9, 2011

New Jersey gets abused by comedians as being some sort of dump, but there are some scenic parts of the state.

So it actually can be a nice place to live. That being said, it’s not a good place to die. Here’s a chart from the American Family Business Foundation that was featured in a recent Wall Street Journal editorial.

As you can see, New Jersey has the nation’s most punitive death tax. Most of the blame belongs to the 35 percent federal tax, but successful residents of the Garden State lose an additional 19 percent of their assets when they die. As the WSJ opined:

Here’s some free financial advice: Don’t die in New Jersey any time soon. If you have more than $675,000 to your name and you die in the Garden State, about 54% may go to the IRS and the tax collectors in Trenton. Better not take your last breath in Maryland either. The tax penalty for dying there is half of a lifetime’s savings. That’s the combined tab from the new federal estate tax rate of 35% and Maryland’s inheritance and death taxes. Maybe they should rename it the Not-So-Free State. …Family business owners, ranchers, farmers and wealthy retirees can avoid that tax by relocating to Arizona, Florida, Georgia, Idaho, South Carolina and other states that don’t impose inheritance taxes. There are plenty of attractive places to go. New research indicates that high state death taxes may be financially self-defeating. A 2011 study by the Ocean State Policy Research Institute, a think tank in Rhode Island, examined Census Bureau migration data and discovered that “from 1995 to 2007 Rhode Island collected $341.3 million from the estate tax while it lost $540 million in other taxes due to out-migration.” Not all of those people left because of taxes, but the study found evidence that “the most significant driver of out-migration is the estate tax.” After Florida eliminated its estate tax in 2004, there was a significant acceleration of exiles from Rhode Island to Florida.

At the risk of stating the obvious, the correct death tax rate is zero, as I’ve explained for USA Today. Indeed, I also cited evidence from Australia and the United States about how people will take extraordinary steps to avoid this wretched form of double taxation.

New Jersey has lots of problems. All of those problems will be easier to fix if successful people don’t leave the state. Sounds like another issue for Governor Christie to address.

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The Good, the Bad, and the Ugly of the Tax Deal

Posted by Dan Mitchell on December 7, 2010

Compared to ideal policy, the deal announced last night between congressional Republicans and President Obama is terrible.

Compared to what I expected to happen, the deal announced last night is pretty good.

In other words, grading this package depends on your benchmark. This is why reaction has been all over the map, featuring dour assessments from people like Pejman Yousefzadeh and cheerful analysis from folks such as Jennifer Rubin.

With apologies to Clint Eastwood, let’s review the good, the bad, and the ugly.

The Good

The good parts of the agreement is the avoidance of bad things, sort of the political version of the Hippocratic oath – do no harm. Tax rates next year are not going to increase. The main provisions of the 2001 and 2003 tax acts are extended for two years – including the lower tax rates on dividends and capital gains. This is good news for investors, entrepreneurs, small business owners, and other “rich” taxpayers who were targeted by Obama. They get a reprieve before there is a risk of higher tax rates. This probably won’t have a positive effect on economic performance since current policy will continue, but at least it delays anti-growth policy for two years.

On a lesser note, Obama’s gimmicky and ineffective make-work-pay credit, which was part of the so-called stimulus, will be replaced by a 2-percentage point reduction in the payroll tax. Tax credits generally do not result in lower marginal tax rates on productive behavior, so there is no pro-growth impact.  A lower payroll tax rate, by contrast, improves incentives to work. But don’t expect much positive effect on the economy since the lower rate only lasts for one year. People rarely make permanent decisions on creating jobs and expanding output on the basis of one-year tax breaks.

Another bit of good news is that the death tax will be 35 percent for two years, rather than 55 percent, as would have happened without an agreement, or 45 percent, which is what I thought was going to happen. Last but not least, there is a one-year provision allowing businesses to ”expense” new investment rather than have it taxed, which perversely happens to some degree under current law.

The Bad

The burden of government spending is going to increase. Unemployment benefits are extended for 13 months. And there is no effort to reduce spending elsewhere to “pay for” this new budgetary burden. A rising burden of federal spending is America’s main fiscal problem, and this agreement exacerbates that challenge.

But the fiscal cost is probably trivial compared to the human cost. Academic research is quite thorough on this issue, and it shows that paying people to remain out of work has a significantly negative impact on employment rates. This means many people will remain trapped in joblessness, with potentially horrible long-term consequences on their work histories and habits.

The agreement reinstates a death tax. For all of this year, there has not been a punitive and immoral tax imposed on people simply because they die. So even though I listed the 35 percent death tax in the deal in the “good news” section of this analysis because it could have been worse, it also belongs in the “bad news” section because there is no justification for this class-warfare levy.

The Ugly

As happens so often when politicians make decisions, the deal includes all sorts of special-interest provisions. There are various special provisions for politcally powerful constituencies. As a long-time fan of a simple and non-corrupt flat tax, it is painful for me to see this kind of deal.

Moreover, the temporary nature of the package is disappointing. There will be very little economic boost from this deal. As mentioned above, people generally don’t increase output in response to short-term provisions. I worry that this will undermine the case for lower tax rates since observers may conclude that they don’t have much positive effect.

To conclude, I’m not sure if this is good, bad, or ugly, but we get to do this all over again in 2012.

Posted in Capital Gains Tax, Death Tax, Dividends Tax, Economic Growth, Government Spending, Legislation | Tagged: , , , , , , | Comments Off

Should We Blame Obama, Rangel, and Baucus if People Die to Escape the Death Tax?

Posted by Dan Mitchell on October 31, 2010

The death tax is a punitive levy that discourages saving and investment and causes substantial economic inefficiency. But it’s also an immoral tax that seizes assets from grieving families solely because someone dies. The good news is that this odious tax no longer exists. It disappeared on January 1, 2010, thanks to the 2001 tax cut legislation. The bad news is that the death tax comes back with a vengeance on January 1, 2011, ready to confiscate as much as 55 percent of the assets of unfortunate families.

I’ve criticized the death tax on many occasions, including one column in USA Today explaining the economic damage caused by this perverse form of double taxation, and I highlighted a few of the nations around the world that have eliminated this odious tax in another column for the same paper.

Politicians don’t seem persuaded by these arguments, in part because they feel class warfare is a winning political formula. President Obama, House Ways & Means Committee Chairman Charlie Rangel, and Senate Finance Committee Chairman Max Baucus have been successful in thwarting efforts to permanently kill the death tax. But I wonder what they’ll say if their obstinate approach results in death?

Congresswoman Cynthia Lummis of Wyoming is getting a bit of attention (including a link on the Drudge Report) for her recent comments that some people may choose to die in the next two months in order to protect family assets from the death tax. For successful entrepreneurs, investors, and small business owners who might already be old (especially if they have a serious illness), there is a perverse incentive to die quickly.

U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31. Lummis…said many ranchers and farmers in the state would rather pass along their businesses — “their life’s work” — to their children and grandchildren than see the federal government take a large chunk. “If you have spent your whole life building a ranch, and you wanted to pass your estate on to your children, and you were 88 years old and on dialysis, and the only thing that was keeping you alive was that dialysis, you might make that same decision,” Lummis told reporters.

The class-warfare crowd doubtlessly will dismiss these concerns, but they should set aside their ideology and do some research. Four years ago, two Australian scholars published an article on this issue in Topics in Economic Analysis & Policy, which is published by the Berkeley Electronic Press. Entitled “Did the Death of Australian Inheritance Taxes Affect Deaths?”, their paper looked at the roles of tax, incentives, and death rates. The abstract has an excellent summary.

In 1979, Australia abolished federal inheritance taxes. Using daily deaths data, we show that approximately 50 deaths were shifted from the week before the abolition to the week after. This amounts to over half of those who would have been eligible to pay the tax. …our results imply that over the very short run, the death rate may be highly elastic with respect to the inheritance tax rate.

And here’s a graph from the article, which shows how many affected taxpayers managed to delay death until the tax went away.

Obama and other class-warfare politicians now want to run this experiment in reverse. I already noted in another blog post that there are Americans who are acutely aware of the hugely beneficial tax implications if they die in 2010. In other words, Congresswoman Lummis almost certainly is right.

I don’t actually think that Obama, Rangel, Baucus and the rest of the big-government crowd should be blamed for any premature deaths that occur. But I definitely think that they should be asked if they feel any sense of guilt, remorse, and/or indirect responsibility.

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