Sunday, September 16, 2012
Huffington Post: Why Progressives Should Want to End the Estate Tax, Too, by Scott Drenkard (Tax Foundation):
[T]here is a large and growing body of research by economists that generally lean left-of-center pointing toward repeal of the estate tax....
Nobel laureate economist Joseph Stiglitz, who served as chairman on Bill Clinton's Council of Economic Advisors, authored a paper which argued that the estate tax actually increases inequality by reducing savings and driving up returns on capital (which largely benefit wealthy holders of capital).
Economist Larry Summers, former Treasury Secretary under President Clinton, co-authored a paper in 1981 that showed that the estate tax has severe impacts on the accumulation of privately held capital. Using Summers' methodology, a July 2012 study by the Joint Economic Committee Republicans showed that since its inception, the estate tax has reduced the capital stock by approximately $1.1 trillion. ...Perhaps the worst aspect of the estate tax is how uneven its impact is in practice. By utilizing careful estate planning, many wealthy taxpayers are able to shield much of their income from taxation upon their death. The people that tend to get hit the hardest are those that die unexpectedly, or, like farmers, have their assets tied up in illiquid holdings.
The estate planning industry has grown in size over the years as estate law becomes more complex. Three studies have even found that the compliance costs associated with the collection of the estate tax are actually higher than the amount of revenue the tax brings in! Almost the entire estate planning industry can be thought of as economic waste, because it would not exist without the estate tax, and the high-skilled labor and capital utilized in that industry would be applied to other, more productive economic endeavors if the estate tax were repealed.
Upon careful examination, we find that at worst, the estate tax can break down family businesses and increase inequality, but even at its best, it simply creates large compliance costs, which are a drag on the economy.