It's 2010, and Estate Tax Comes Back in January
What are the effects of the return of the estate tax? Well, in a well-put-together study (PDF), we have these notes:
This paper examines the impacts of a higher estate tax rate on asset accumulation, small and family businesses’ cost of capital, investment outlays, desire to hire, size of payrolls and jobs. In each instance, raising the estate tax has significant negative impacts. In particular, letting the tax rate rise to 60% will cost as much as 1.5 million jobs, and even a more modest rate of 15% could diminish hiring by over 350,000 jobs.
Other impacts on small and family businesses:
Raising the “hurdle rate” of return required for investment by 34 basis points
Reducing capital outlays by 7.8%
Decreasing the probability of new hiring by 8.3%
Cutting the size of payrolls by 2.5%
This is consistent with prior studies of the estate tax such as this (1996), this (2004), and this (2010). And, since it hits small businesses hard, this is not that surprising.
What might be surprising, though, is what I learned as a lawyer who was doing estate tax planning: paying estate tax is an OPTION if you're rich enough. You don't have to. There are a lot of ways to plan around it, and once it's in place, a lot of reasons to plan around it so that it never impacts the estate at all. So if you're really rich, you don't have to bother with it. It's only if you aren't that it has a chance of gutting your business. And this is the law being restored: the one that allows the rich to avoid the whole thing by paying lawyers to figure out how not to pay it. How fair can you get?
This paper examines the impacts of a higher estate tax rate on asset accumulation, small and family businesses’ cost of capital, investment outlays, desire to hire, size of payrolls and jobs. In each instance, raising the estate tax has significant negative impacts. In particular, letting the tax rate rise to 60% will cost as much as 1.5 million jobs, and even a more modest rate of 15% could diminish hiring by over 350,000 jobs.
Other impacts on small and family businesses:
Raising the “hurdle rate” of return required for investment by 34 basis points
Reducing capital outlays by 7.8%
Decreasing the probability of new hiring by 8.3%
Cutting the size of payrolls by 2.5%
This is consistent with prior studies of the estate tax such as this (1996), this (2004), and this (2010). And, since it hits small businesses hard, this is not that surprising.
What might be surprising, though, is what I learned as a lawyer who was doing estate tax planning: paying estate tax is an OPTION if you're rich enough. You don't have to. There are a lot of ways to plan around it, and once it's in place, a lot of reasons to plan around it so that it never impacts the estate at all. So if you're really rich, you don't have to bother with it. It's only if you aren't that it has a chance of gutting your business. And this is the law being restored: the one that allows the rich to avoid the whole thing by paying lawyers to figure out how not to pay it. How fair can you get?