Wyoming Rep. Lummis: Estate tax rise has some planning death

Casper Star-Tribune article "Wyoming Rep. Lummis: Estate tax rise has some planning death" (October 30th, 2010) discusses a cause that Corrections has championed for years but that has been relatively unreported in the media. The estate tax is set to rise from 0% this year to 55% next year for gifts in excess of over $3,000,000. Cynthia Lummis reports an unintended consequence of this tax hike.  She does not, however, note how the same incentives encourage murder.

U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31.

In terms of numbers, this most importantly captures small businesses and farms with high levels of capital that are transferred from one generation to the next (hence its mention in a local Wyoming newspaper). Remember that the business does not have to have revenues in excess of $3,000,000, but worth of over $3,000,000.  The death tax has several marginal tax rates, depending on wealth, as displayed graphically below.

If it hasn't earned it previously, the estate tax certainly earns its nickname "death tax" because of the manner in which it currently incentivizes death.  This will come in the form of both voluntary death, as the article notes, such as suicide, or involuntary death, such as a child murdering their elderly parents.  We can graph out the increasing incentive children have to murder their parents--upwards of $3,000,000, they gain about $1,500,000.  Certainly, when store clerks are murdered for less than $100 in a robbery, it is not overly difficult to imagine these incentives meeting a threshold for murder.  Below, we graph the "benefit to murder" created by a hike in the estate tax (click to enlarge).

We note that our analysis foregoes inclusion of the $1,000,000 exclusion allowed for in 2011. Our core point will of course remain the same.

Perhaps the most interesting note is not how much death taxes encourage murder, but how regulatory uncertainty motivates murder.  It could well be that the coming tidal wave of Republicans in Congress will roll back the estate tax.  However, this will occur after it is too late for prospective inheritors to murder their parents.  Therefore, it may be in their interest to pre-emptively murder their parents, even if they think a Republican congress will roll back the estate tax.  In this sense, not only will a hike in the estate tax cause murder, but we can also say that regulatory uncertainty kills.