Richard Thaler says the positions that Republicans take on the estate tax will be revealing:
Estate Tax Issue Offers Quick Test for Congress, by Richard Thaler, Commentary, NY Times: After their election victory on Tuesday, Republican leaders in the House promised progress on many fronts, including a turn toward more fiscal discipline and less economic uncertainty.
They have a chance to start work on these goals almost immediately, because the lame-duck Congress soon will face a pressing issue that directly concerns both themes: the estate tax. The uncertainty imbedded in this tax was actually written into the law in 2001 by a Republican-controlled Congress.
In what some wags have called the “throw momma from the train” provision, the law stipulated that the estate tax would disappear in 2010, only to reappear in 2011 at the lower exemption level and higher rates that were in place in 2001. (To give proper credit, this provision should really be called the “planned Bush tax increase.”) The law has made 2010 the best time for tax-conscious rich people to die.
Right now, no one has any idea what rules will be in place in January... What should Congress do? The most important step would be to end the uncertainty by legislating a permanent set of rules. ...
The Congressional Joint Committee on Taxation estimates that eliminating the estate tax would cost about $500 billion over the next decade. The Obama proposal, if indexed to inflation, reduces that loss of revenue by about half. Some Republicans will want to hold out for a complete elimination of the tax and may try to postpone acting until the new Congress convenes. If a spike in deaths occurs in late December, we will know whom to blame.
So let’s be serious. There are lots of ways to spend $250 billion. Trim the deficit, improve education, support the troops, or make sure heiresses like Paris Hilton have the proper attire for trips to St.-Tropez. At this time in our history, which of them seem prudent?