Death Taxes and Death

Under current federal law, the inheritance tax will drop from 45% to 0% of the estate's value on January 1, 2010, then rise from 0% to 55% on January 1, 2011. Our Congressmen, being pure and trusting souls, apparently didn't notice that this provided incentives for shenanigans, such as, oh, suicide and murder. But two economists have investigated whether the more minor changes of the past had any effect on the death rate:

"Dying to Save Taxes: Evidence from Estate Tax Returns
on the Death Elasticity" by Wojciech Kopczuk and Joel B. Slemrod:

Abstract: This paper examines data from U.S. federal tax returns to shed light on whether the timing of death is responsive to its tax consequences. We investigate the temporal pattern of deaths around the time of changes in the estate tax system periods when living longer, or dying sooner, could significantly affect estate tax liability. We find some evidence that there is a small death elasticity, although we cannot rule out that what we have uncovered is ex post doctoring of the reported date of death. However, the fact that we find that postponement, rather than acceleration, of death is more likely to occur suggests that this phenomenon is at last partly a real (albeit timing) response to taxation.

So, that's good news -- people tend to stay alive longer to take advantage of upcoming tax cuts (or their loved ones forget to report their deaths) rather than "Kind Hearts and Coronets"-style murders.

On the other hand, I suspect that this one year suspension of the estate tax is unprecedented in magnitude of the effect.

(Of course, the drafters of the legislation weren't as naive as I claimed above -- I'm sure Karl Rove has a complicated plan to make the suspension permanent. The GOP will argue that the suspension must be made or permanent or it will provide an incentive to murder Granny.)

My published articles are archived at iSteve.com -- Steve Sailer