If I've learned anything from the Pirates of the Caribbean ride at Disneyland, it's that dead men tell no tales; however, the rich ones still pay taxes which is good news, especially for those who can't afford Disneyland.
Some Americans are in favor of radically increasing the taxes on the rich while others want to drastically reduce the deductions, credits and other loopholes that rich people exploit with the help of their sweatshops full of tax attorneys. Regardless of where you stand, I don't give a shit. I'm ambivalent about taxing the rich, but I love the estate tax because it's special. It's not a tax on the rich; it's a tax on their kids. It's the "Fuck You, Kim Kardashian" tax.
I admit that the estate tax is a completely unfair tax. But since it will never affect me, I support it wholeheartedly. Just stop dicking around with it. What we've seen happen to the estate tax over the past four years is immoral. Yeah, I meant for that to sound judgey. In 2001, President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). From 2001 to 2009, EGTRRA gradually increased the estate tax exclusion from $675,000 up to $3.5 million and decreased the maximum rate from 55 percent down to 45 percent. Then in 2010, BOOM! No estate tax. The Promised Land for people who subscribe to Forbes. To make the legislation palatable, however, they slapped a sunset provision on it that would make everything snap back to a $1 million exclusion with a 55 percent rate in 2011.
Nothing did more to turn rich kids pro-life in 2009 like a temporary repeal of the estate tax in 2010.
But then in late 2010 congress finally acted. They didn't repeal the estate tax, nor did they allow it go back to its 2001/2002 levels. Nope. They arguably did the worst thing they could have done. They changed it to a reasonable level for two years and included a sunset provision that snaps it back to its 2001/2002 levels. Now, I like to repeatedly force celebutantes into ethical dilemmas just as much as the next guy, but eventually you start feeling bad afterwards.
So we're at that point again. If you were to die right now the estate tax exclusion would be $5.12 million with a maximum rate of 35 percent. In 69 days the exclusion drops to $1 million and the maximum rate increases to 55 percent. As a result, estate planners are currently advising their older clients to ride bullet bikes, to look only one way before crossing the street, and to vacation in Ciudad Juarez.
Studies show that the estate tax does affect the timing of the death of rich old guys. They even have a term for it. It's called "death elasticity."
Among those dying within two weeks before or after a change in the estate tax rate, a $10,000 potential tax savings increases the probability of dying before the tax hike by 1.6%.Of course, whether this was altruism on the part of the dying is up for debate. The authors point out that some decisions, such as whether to remain on life support or to “pull the plug” are made not by the dying person but by their heirs. Thus, it is not clear whether the authors’ findings were indicative of altruism on the part of the dying or cold manipulation on the part of would-be beneficiaries.
Take Roger Milliken. He was a textile magnate worth almost exactly $1 billion. He died on December 30, 2010, less than 48 hours before the estate tax kicked back in. His heirs were so happy that he lived a long and happy and not-too-long life. Had his niece not tripped over that cord in his hospital room, the entire family might have been out an extra $350 million.
I’m just saying Warren Buffett is 82. He’s not getting any younger, he’s not getting any richer, and he needs to be careful this Thanksgiving because cranberry sauce tastes a lot like poison.
(Want more estate tax laughs? Check out Greg Kyte's standup set on YouTube.)