Under Kash’s post on the repeal of the estate tax, reader Rupert posted a Wall Street Journal op-ed with the title Hiltonomics. Yes, the Wall Street Journal is defending shifting the tax burden away from deprived Paris Hilton onto the rest of us. Their thesis is that now that she does not have to worry about paying taxes, she will somehow consume less. I’d rather think that the working poor get to enjoy her consumption even more as they watch cable television.
But let’s take on this 45% nominal tax rate that they mention. What they fail to tell their readers is how the game is worked by the estate planning tax attorneys. Let’s say part of the estate is the family business that has value equal to $100 million. Don’t think the attorneys will let the IRS collect $45 million when they can hire hack some hack appraiser that will produce some “analysis” that claims the business’s fair market value is only $40 million. Why would an appraiser risk their professional reputation in this way? Money and lots of it. But now that this tax is being repealed, this particular cottage industry will die up. So how can these tax cheat enablers reap large rewards for sophisticated dishonesty? As you are filling out your tax returns and writing a large check to the IRS tomorrow, I hope to say more.
Update: I’ve been trumped by a Medium Lobster.