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29 April 2009

A Natural Experiment for the Death Tax

In 2010 the death/estate tax is repealed for one year. In my mind this will create a natural experiment. The name is fairly self explanatory.

Anyways here's what the death tax rates are for various years for an individual estate:

2005, 1.5 million, 47%
2006, 2 million, 46%
2007, 2 million, 45%
2008, 2 million, 45%
2009, 3.5 million, 45%
2010, exempt
2011, 1 million, 55%

So for example if someone dies today (2009) with a net worth of 5 million their heirs will pay 45% of 1.5 million - $675,000.

There are many reasons for and against the death tax, not that it matters, but I tend to be in favor of it. The fact that currently you can inherit 3.5 million dollars tax free is pretty insane. Regardless of the political consequences of all this the fact remains that in 2010 there is no death tax.

There may be no effect at all but you have to imagine that at least a few 80 year olds in bad health will be dropping dead at their own hands in late 2010. Maybe? It's possible at least.

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