Goodbye, Estate Tax (for now)

The estate tax is now gone, one of the goals of President Bush.  But under current law, it will come back next year.

As I recall, the reason for this peculiar state of affairs was not, as Paul Krugman suggests, an attempt to hold down the official cost of the Bush tax cuts.  Indeed, back in 2001, what would happen in 2011 was outside the 10-year budget window, so rigging the official cost could not have been the motive for the return of the estate tax next year.  Rather, some legislative rule made it harder to pass changes in tax law that applied outside the 10-year window.

What should policy be toward the taxation of estates?  The economics profession is far from unanimous on this question.  Paul favors the estate tax.  I favor its repeal, for reasons I explained here.  I am not alone among economists: see also Ed Prescott, Martin Feldstein, Gary Becker, and Jeff Miron.  It is clear that our position will not persuade the current majority in Congress.