Death Watch for the Estate Tax?

The idea of making death a taxable event infuriates some people. Winston Churchill called estate taxes an attempt to tax dead people rather than the living. Steve Forbes campaigned in favor of “no taxation without respiration.” Bruce Bartlett (1997) points out that a key plank in the Communist Manifesto was the abolition of inheritance rights. Opponents deride the “death tax” as inefficient, inequitable and complex, violating every norm of good tax policy. Supporters counter that the criticisms are overstated or wrong, and argue that a highly progressive tax that patches loopholes, helps provide equality of opportunity, breaks up concentrations of wealth and encourages charitable giving can’t be all bad. These debates raise a number of research questions for economists. In policy circles, the death watch for the U.S. estate and gift tax is on. In 1999, in a vote split almost completely along partisan lines, the Republican majority in Congress voted to phase out the estate tax over 10 years, but President Clinton vetoed the bill. In 2000, both Houses voted again to eliminate the tax, this time with significant Democratic support, and the bill was vetoed a second time. Additional legislation seems very likely in the near future.