Friday, January 1, 2010
With the estate tax repealed as of today, the economics literature suggests that we may see a surge of deaths (or, at least, reported deaths) among the wealthy elderly:
Joshua S. Gans (University of Melbourne) & Andrew Leigh (Australian National University), Toying with Death and Taxes: Some Lessons from Down Under (2006):
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. Although we cannot rule out the possibility that our results are driven by misreporting, our results imply that over the very short run, the death rate may be highly elastic with respect to the inheritance tax rate.
Wojciech Kopczuk (Columbia University, Economics Department) & Joel Slemrod (University of Michigan, Ross School of Business), Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity (2001):
This paper examines data from U.S. federal tax returns to shed light on whether the timing of death is responsive to its tax consequences. We investigate the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer, or dying sooner, could significantly affect estate tax liability. We find some evidence that there is a small death elasticity, although we cannot rule out that what we have uncovered is ex post doctoring of the reported date of death. However, the fact that we find that postponement, rather than acceleration, of death is more likely to occur suggests that this phenomenon is at last partly a real (albeit timing) response to taxation.