Thursday, January 03, 2008

Everything Old is "New" Again

by Ken Houghton

Via Mark Thoma, the Tax Foundation discusses the timing of births (somehow without considering that eighteen years out might be a better time in one's earnings life cycle to take a deduction).

But the 'graf that catches attention is this one:
A similar issue is scheduled to take place 23 months from now with the estate tax. Under current law, it will be nonexistent in 2010, but will come back in full force in 2011. This could possibly lead to some difficult decisions having to be made in December 2010 regarding the value of one's living a few extra months or years relative to the financial gain to heirs of a zero estate tax bill.

Now where have we seen that before?

Paul Krugman in the NYT 30 May 2001 ("Bad Heir Day," via the PKarchive):
There's a scene in the 1966 British comedy "The Wrong Box" in which the son of an irascible plutocrat pushes his father's wheelchair along the top of a cliff, responding with a dutiful "Yes, father" to each outpouring of verbal abuse. Then the old man waves his hand at the industrial landscape below, and declares, "When I'm gone, all this will be yours." "Yes, father," replies the son — and pushes him off the cliff.

That scene came back to me as I delved further into the absurd piece of tax legislation that a House-Senate conference devised and that George W. Bush triumphantly signed last weekend. The Bush tax plan was always peculiar: in order to hide the true budget impact, its authors delayed many of the biggest tax cuts until late into the 10-year planning period; repeal of the estate tax, in particular, was put off to 2010. But even that left the books insufficiently cooked, so last week the conferees added a "sunset" clause, officially causing the whole bill to expire, and tax rates to bounce back to 2000 levels, at the beginning of 2011.

So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives. Maybe they should have called it the Throw Momma From the Train Act of 2001.

UDATE: Anonymous in comments notes that the Tax Foundation has been hitting this issue since late 2005, with this giggle, and three substantive pieces.

The Tax Foundation is, of course, shocked to discover what Krugman and his readers have known for nearly seven years.

Labels: , ,

The Tax Foundation has actually known this for a long time too. They've just repeated it again. And I would recommend reading this blog post about a rather funny story:
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?