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Sunday, October 30, 2011

Landsburg: How the Death Tax Hurts the Poor

Wall Street Journal op-ed, How the Death Tax Hurts the Poor, by Steven E. Landsburg (University of Rochester, Department of Economics):

I'm sure there's a lot to be said for rich people, but they sure do consume a lot of resources. I wish they'd leave more for the rest of us. That's why I oppose the death tax.

The death tax sends a powerful message to rich people: "You can't leave everything to your heirs, so spend now, before it's too late. Burn more fuel. Demand more timber for your mansions, more steel for your private planes, and more fiberglass for your yachts.''

Then all those resources—the fuel and timber, the steel and fiberglass—become unavailable to build factories, so the rest of us get worse jobs at lower wages. Those resources are unavailable to build farm equipment, so we all pay higher food prices. They're unavailable to build roads and schools and hospitals.

I don't begrudge anyone the fruits of his labor. But the death tax encourages people to pick extra fruit, leaving the trees a little barer for the rest of us. ...

Every tax discourages work, and every tax discourages risk-taking. That's sad but true, and it's a reason to hesitate before you raise any tax. But the death tax is a double whammy, compounding the damage by encouraging overconsumption. (The same is true, incidentally, of taxes on interest and dividends.) So my message is this: If you must tax the rich, please do it in a way that minimizes the collateral damage to the poor.

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Comments

and if you buy this argument, let me know as I have this friend who just happens to be a Nigerian prince that is worth millions but needs your assistance to get the money.

Posted by: Marcus A. | Oct 30, 2011 6:23:20 AM

The more people spend, the more jobs they create. So the death tax is good by that same measure.

Posted by: anon | Oct 30, 2011 1:16:17 PM

So how did the poor do in the 2001-2010 decade when the Estate Tax was cut substatially? Pretty good, if the objective was to creat whole lot more of them.

How does someone like Landsburg get faculty position?

Posted by: Sid F | Oct 30, 2011 2:34:17 PM

Oh, that is so weak it hurts my brain.

Posted by: Matt | Oct 30, 2011 5:58:27 PM

The death tax sends a powerful message to rich people: "You can't leave everything to your heirs, so spend now, before it's too late. Burn more fuel. Demand more timber for your mansions, more steel for your private planes, and more fiberglass for your yachts."

Wow, that's... extraordinarily stupid, even for a WSJ editorial.

Posted by: Ugh | Oct 30, 2011 6:33:03 PM

Just goes to show: There's good money in bad economics.

Posted by: jim harper | Oct 30, 2011 9:49:34 PM

"Every tax discourages work, and every tax discourages risk-taking." Absolute nonsense--prove it. This conservative canard lies at the heart of every conservative economic analysis. I just don't believe it. I am part of the over-the-hill-gang, but I still remember the excitement of my first paying job and the anticipation of the receipt of my first money independent of my parents. I absolutely could not have cared less about the taxes taken out of my paycheck--in fact it made me feel like a contributing member of the community. Taxes did not discourage me from working in any way, shape, or form. Nor can I remember the thought of taxes discouraging me from any subsequent employment or risk-taking.

Posted by: Publius Novus | Oct 31, 2011 7:02:52 AM

Agree with Ugh, this is stupid even by WSJ standards.

There are plenty of problems with the estate tax system. The biggest is that the system is a huge welfare program for lawyers and life insurance companies.

The idea that all taxes discourage work and entrepreneurship is just fundamentally wrong (and I'm a Reagan conservative).

Posted by: save_the_rustbelt | Oct 31, 2011 7:39:11 AM

This reminds me of when Ron Paul received endorsements from Stormfront, a white supremacy group, for his libertarian positions.

Posted by: ry | Oct 31, 2011 8:01:29 AM

The author is an economist not a tax expert. I think the message is "if you tax rich people poor people will suffer". Once again the economist draws conclusions without any evidentiary support. In fact there is empirical evidence that contradicts his conclusion that amassing fortunes in a small group of people will help the larger group. Game theory demonstrates a contrary conclusion (a/k/a monopoly). In addition, the analysis of the cause of the great depression also demonstrates that the general economy is worse off. This author makes bold and unsupported statements. Attorneys could have their Bar licenses revoked by engaging in such fraud and deception. Perhaps PhDs should also be revoked-especially ones in enggaged ineconomics.

Posted by: Nick Paleveda MBA J.D. LL.M | Oct 31, 2011 9:01:41 AM

Are there a lot of steel planes?

Posted by: Anonymous | Oct 31, 2011 9:09:01 AM

Inheritance taxes send the message:

Donate money to programs that help train hacks cloaked in academic respectability who will argue that your taxes should be lower. We'll call them "economists."

Posted by: Anon | Nov 1, 2011 6:03:44 AM