Pre-Vote Estate Tax Debate Heats Up As Scholars Disavow Their Own Work
June 7, 2006
With a tip from the Tax Foundation’s new summary of estate taxation, New York Times reporter David Cay Johnston forced Brookings economist Henry Aaron to recant his previous work on estate taxation, as reported in today’s paper.
A renowned public finance economist, Aaron and co-author Alicia Munnell had written that the estate tax was so complex and riddled with avoidance schemes that the cost of complying with the tax was as high as the revenue that the tax brings in.
From the conclusion of their study Reassessing the Role for Wealth Transfer Taxes:
“In the United States, resources spent on avoiding wealth transfer taxes are of the same general magnitude as the yield, suggesting that the ratio of excess burden to revenue of wealth transfer taxes is among the highest of all taxes.”
This dollar-for-dollar estimate of estate tax compliance costs is now inconvenient for Aaron, who regrets that it provides ammunition for advocates of repeal because he has always supported estate taxation despite the administrative nightmare it causes.