January 1 brought a new year, but January 20 will remind us of the follies of a president who was inaugurated 8 years ago. I realize that picking at an old scab is tedious. But the subject of this blog post is a feature of the tax law that was enacted early in the Bush Administration: the abolition of the estate tax in 2010. The Republicans would not settle for abolishing the estate tax on estates of less than $100 million; they insisted that it be eliminated completely. But here is the thing. As with other parts of their pro-capital-motivated tax cuts, in order to make up for the loss in revenue so that ten-year projections of budget deficits would not look so bad, at the same time that they reduced the estate tax to zero for 2010, they legislated that it would bounce back to its old level in 2011 (a tax rate of roughly half of everything above $1 million). So that means that someone with a $100-million estate who has the “good fortune” to die in 2010 pays no estate tax at all, whereas someone who holds on until 2011 pays roughly $50 million to the government in taxes, and someone who dies in 2009 pays almost as much. We are really talking about his heirs, of course.
Consider the implication. If old Uncle Joe is very sick in 2009, it is now worth a huge amount of money to his heirs to keep him artificially alive until January 1, 2010. After that, they can pull the plug whenever convenient (so long as it is before the end of 2010), because “Uncle Joe would not have wanted to be kept alive in this way indefinitely.” It is my understanding that an Intensive Care Unit can do this for many terminally ill patients. But it is expensive. The family of wealthy patients will have to endow some hospital wings, or commission some private units of their own, in order to create sufficient ICU capacity. The creation of ICUs is a business worth jumping into right away.
Six years ago , I used to say this as a joke. It was widely assumed that this absurdity in the tax law would be fixed, to smooth out somewhat over time the level of estate that is exempt from taxation. But now it seems too late to enact a huge increase in 2010 estate taxes relative to existing legislation. Furthermore the Obama Administration is not likely to start raising taxes on the wealthy (even such a no-brainer as this tax) until the economy begins to recover from the current recession. Unless any tax lawyers or medical experts can tell me the flaw in my logic, tax-motivated ICU production in 2009 seems a serious proposition. Can I patent this business plan?
Originally published at Jeff Frankel’s Weblog and reproduced here with the author’s permission.