Tax Guru – Ker$tetter Letter

Dying To Save Taxes

The numbers used in discussions of tax laws by governments are all pure SWAGs, including the alleged $1.35 trillion total of the recently passed tax cut. The bean counters in Washington use static analysis to determine their numbers. They assume that people do not modify their behavior when the tax laws change. That is so wrong and has been proven wrong over & over in light of past tax laws. However, that never stops the politicians & their assistants in the media from spreading lies.

My entire career has been based on the fact that people do alter their behavior, often very drastically, due to the tax laws. Marriages & divorces are often influenced by the tax effects. I can give dozens of other examples. However, this story from last Friday’s Wall Street Journal shows just how infuential tax laws are in affecting people’s lives. When the tax law was changed a few years ago to increase the exemptions from estate tax over several years, I mentioned how it would be a good idea to live as long as possible to save on estate taxes. The study described in this article shows that there is in fact a correlation between when people die and the estate taxes in effect.

This is all the more ghoulish because of the just passed tax law that increases the exemptions from estate tax and then repeals it entirely for just one year, 2010. It’s scheduled to go back into place in 2011 if Congress doesn’t extend the repeal before then. Does this mean that a lot of wealthy people will be dying in 2010 to save the estate tax? Would you?

KMK