Are People Killing Themselves Over The Estate Tax?

In what is surely one of the strangest stories to come out of the election,  a Republican member of Congress says that some of her elderly constituents are so worried about their families being stuck with an estate tax bill that they are planning to kill themselves before it expires at the end of the year.

These people — who were not identified — “plan to discontinue dialysis and other life-extending medical treatments,”  The Associated Press says, citing U.S. Rep. Cynthia Lummis (R-WY).

Apparently, this is not a new idea.  As the Wall Street Journal noted this summer, estate planning attorneys are worried that people will pull the plug on relatives who don’t die before 2011 when the estate tax reverts to a $1 million exemption with a top 55% rate.  Is this a reason for suicide?

Lummis and other Republicans have labeled the estate tax “the death tax,” even though it’s a levy on inherited wealth, not death.  Most people don’t have to worry about it.  The Urban-Institute Brookings Tax Policy Center estimates that 99.7 percent of estates pay no tax at all. Though critics often say that the tax hurts small business, the researchers estimate that only 80 small businesses would pay the tax in 2009.  Moreover, the U.S. can’t afford to repeal it.

“Permanent repeal of the estate tax would cost almost $1.3 trillion over the first ten years in which its cost would be fully felt, 2012-2021,” according to the liberal Center on Budget and Policy Priorities.  “This includes $1 trillion in lost revenue and $277 billion in increased interest payments on the national debt.”

Any argument for the estate tax is being drowned out this election in a sea of anti-tax rhetoric.  Republicans who support abolishing the tax also want the Bush tax cuts, which are due to expire at the end of the year, made permanent.  Some conservatives including David Stockman argue that the U.S. can’t afford to keep them.

Getting back to the estate tax,  it’s hardly surprising that the anti- “death tax” messages are scaring voters.   Who wants their relatives stuck with a huge tax bill after they pass away?  Really rich people sure don’t. The families of several billionaires, such as George Steinbrenner, were lucky to inherit sizeable fortunes this year when the tax was suspended.

Much of the hysteria around the tax is overblown.

First of all, the estate tax is probably one of the first things on the Republican’s agenda should they take over one or both houses of Congress.  There is a good chance it will be cut back or phased-out entirely, so bumping off a grandparent probably is not necessary.

–Jonathan Berr