Albatross!

Further evidence that night must follow day: yesterday Casey drew attention to a numbers-laden New York Times editorial on estate tax repeal. Today, well, we get this from the Augusta (Georgia) Chronicle:

Without congressional action the death tax - a.k.a. the estate tax, which is currently being phased out - will be resurrected in its entirety after 2010 - at a whopping 60 percent confiscatory rate.

It's always refreshing to see editorial boards making data-free assertions about the estate tax, using the "death tax" rhetoric to try to carry the day. But the Chronicle boldly takes this approach one step further, using data that is simply misleading to assert that the tax they call "a moral and economic albatross" must be repealed.

It's true that before 2001 the estate tax did have a top marginal rate of 60 percent. Your estate had to have a taxable value (that is, the leftover value after subtracting the basic exemption from the estate tax, deductions for charitable bequests, and any other deductions that cut the portion of the estate that is subject to tax) of over $10 million, which means that pretty much nobody paid it.

It's also true that the 60 percent figure is a marginal rate, which means that most of the value of these high-dollar estates is being taxed at lower rates. Only taxable estate value above $10 million gets the top rate.

So, with that in mind, here are two numbers that are a bit more relevant: 37 and 18. 37 percent is what you get when you look at the estate tax paid by the very wealthiest estates (over $20 million gross value in 2001) and take that as a percentage of the taxable estate. And 18 percent is what you get what you divide this group's tax by the total value of the estate, including the exempt parts. (The raw data is on the IRS website, here.)

In other words, the real impact of the estate tax on even the very wealthiest estates is a lot less than the "confiscatory" top rate would suggest.

The estate tax does have one very real problem, I think, that absolutely must be addressed-- much of the public has been scared into thinking (inaccurately) that they will someday end up paying it. With editorials like the Chronicle's, it's a bit easier to see how the public could end up so badly misinformed.