Point/Counterpoint - The Estate Tax

Point/Counterpoint - The Estate Tax

Recently, a Wall Street Journal article proffered several points in support of the estate tax. In response, a Forbes.com blog provided several counterpoints. Below is a brief overview of the points and counterpoints.


For the Estate Tax:

1. Exemptions and deferred payment rules protect small businesses and family farms.

2. An estate tax provides revenue with little adverse supply-side economic impact. The net effect increases demand because the funds are spent, as opposed to saving/paying debt with inheritance.

3. The estate tax promotes meritocracy and a land of opportunity by avoiding the accumulation of inherited wealth.

4. Billions in federal revenue have been lost because of Congress' failure to restore the estate tax for this year (a time of stressed financial conditions).

Source: Robert Rubin And Julian Robertson, Bring Back the Estate Tax Now; Allowing it to lapse has cost us billions of dollars in revenue this year, The Wall Street Journal (September 1, 2010)


Against the Estate Tax:

1. A new tax should not be enacted when the government needs more money because of lean times.  This supports multiplying taxes without end.

2. It is a mistake to assume that spending levels are independent of taxation levels. 

3. The estate tax is a horrible tax in that it is an erratic tax on savings.

4. The estate tax's effects reach beyond death. 

5. At its current levels, the estate tax cannot be seen as a design to break up great concentrations of wealth.

6. There is a low probability that the government will spend the money and thus improve welfare over the private alternative.

7. The estate tax disrupts small businesses.

Sources: Richard Epstein, Let the Estate Tax Die a Merciful Death, Forbes (September 2, 2010), at http://blogs.forbes.com/richardepstein/2010/09/02/let-the-estate-tax-die-a-merciful-death/

Gerry W. Beyer, Pointing Out Fallacies in Pro-Estate Tax Arguments, Wills, Trusts & Estates Prof Blog (September 7, 2010), at http://lawprofessors.typepad.com/trusts_estates_prof/2010/09/pointing-out-fallacies-in-pro-estate-tax-arguments.html