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Estate Tax: Ezra Klein is Wrong!

Handing money over
Stockbyte | Getty Images
Handing money over

There are plenty of respectable arguments to have about the estate tax. But the Washington Post's Ezra Klein recently made a pretty ridiculous claim:

So if you hear politicians worrying about the 55 percent rate, remember that when it was last in place, fewer than 5,000 people were affected every year. It’s simply not that big a part of the tax code, and the idea that “millions” of families and small businesses would be affected by a return to Clinton rates is just plain wrong.

You cannot measure the importance of a tax by how many people pay it. A better question is: how many people pay to avoid it.

"Estate planning" is a huge and profitable business in the United States and the estate tax is one of the primary drivers of this business. It's a total dead-weight cost on the economy, resulting in huge misallocations of capital just to avoid paying tax penalties. But it sure makes a lot of money for lawyers and accountants.

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