Two professors from the University of Michigan offered a paper
Two professors from the University of Michigan offered a paper entitled “Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity,” published by the National Bureau of Economic Research. It asked the rather ghoulish question of whether people can time their death to take advantage of changes in the estate tax.
This is hard evidence that taxes are great motivators in economic decisions.
• Whether to buy stocks or bonds
• When to realize capital gains or exercise a stock option.
• Deciding on how many hours to work if you are paid by the hour.
• How much to save and how much to invest.
• Whether to sign up for additional training or to take entrepreneurial risks.

There is also evidence that taxes are motivators in quasieconomic decisions.
• Since the penalty for being married increases across a year, fewer people marry in November and December relative to those who marry in the spring.
• This is also true for the timing of births. More babies are born during the last week in December than the first week in January.

Special occasions are also great motivators for the timing of death.
• People postpone their deaths to mark another birthday or anniversary.
• Some people want to live long enough to celebrate holidays. Among Jews, the number of deaths is lower before Passover and higher during the week thereafter.
• Death rates among the Chinese decrease during the week before the festival of the Harvest Moon and increase the week after.
• In New York City, 46 percent more persons died in the first week of the new millennium than in the last week of 1999.

So was it possible for these phenomena to be brought together? Would people time their deaths so that their heirs could realize benefits coming from changes in the estate tax?
“The economists found that a $1,000 tax saving increases the probability of dying just before a tax increase by 1 percent, while the same amount of saving increases the probability of dying just after a tax decrease by almost 2.5 percent. In other words, they not only found a behavioral response to changes in estate taxes, but they found that the response to tax cuts was stronger than it was to tax increases.”

1. What is the cost to government for imposing the estate tax?
2. What is the cost to the taxpayer for imposing the estate tax on him?
3. Does this case have anything to do with the ability-to-pay principle?
4. Does this case have anything to do with the benefit principle?
5. Is the person(s) who pay the tax different from the person who bears the burden of the tax?

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