Democracy, taxes, and wealth

New York University Law Review

Volumn 76, Issue 3, 2001, Pages 825-872

  Repetti, James R ^a  

^a NONE

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EID: 26444526808     PISSN: 00287881     EISSN: None     Source Type: Journal    
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References (343)

1. Congress passed a bill repealing the estate tax in 1999. Death Tax Elimination Act, H.R. 8, 106th Cong. (1999). However, President Clinton vetoed the bill and House Republicans failed to override the veto. Ryan J. Donmoyer, House Fails to Override Clinton Veto of Estate Tax Repeal Bill, 88 Tax Notes 1292, 1292 (2000).
2. Franklin D. Roosevelt, Message to Congress (June 19, 1935), in H.R. Rep. No. 74-1681, at 2 (1935).
3. Edward N. Wolff, Top Heavy app. at 62 tbl.A-1 (1995).
4. Id. Net worth is defined as the value of real estate, securities, cash and demand deposits, pension plans, unincorporated businesses, and interests in trusts, less debt. Id. at 1.
5. The growth rate of multifactor productivity for the period 1929-1996 was as follows: 1928-1950 1.90% 1950-1964 2.35% 1964-1972 2.07% 1972-1979 1.12% 1979-1988 0.90% 1988-1996 0.67% Robert J. Gordon, U.S. Economic Growth Since 1870: One Big Wave?, 89 Am. Econ. Rev. 123, 124 (1999).
6. Wolff, supra note 3, app. at 62 tbl.A-1.
7. Edward N. Wolff, Recent Trends in the Size Distribution of Household Wealth, J. Econ. Persp., Summer 1998, at 131, 135.
8. Id. at 149.
9. Bruce Ackerman & Anne Alstott, The Stakeholder Society 95 (1999); see also Wolff, supra note 3, at 23 fig.5-1 (comparing wealth distribution in United States and United Kingdom from 1920 to 1990).
10. For reviews of various justifications for the estate tax, see, for example, Mark L. Ascher, Curtailing Inherited Wealth, 89 Mich. L. Rev. 69, 87-99 (1990) (reviewing reasons to curtail inheritance, including leveling playing field and increasing charitable giving);
11. Charles Davenport & Jay A. Soled, Enlivening the Death-Tax Death-Talk, 84 Tax Notes 591, 597-602 (1999) (reviewing justifications for estate tax, including raising revenue, progressivity, and diminishing concentrations of wealth);
12. Louis Eisenstein, The Rise and Decline of the Estate Tax, 11 Tax L. Rev. 223, 235-36 (1956) (describing Roosevelt's justification for estate tax as means of preventing overconcentration of wealth);
13. Michael J. Graetz, To Praise the Estate Tax, Not to Bury It, 93 Yale L.J. 259, 269-73 (1983) (describing role of estate tax in providing progressivity in tax system);
14. Harry L. Gutman, Reforming Federal Wealth Transfer Taxes After ERTA, 69 Va. L. Rev. 1183, 1190-92 (1983) (discussing role of estate tax in ensuring that wealth derived from tax-preferred sources is subject to tax);
15. James R. Repetti, The Case for the Estate and Gift Tax, 86 Tax Notes 1493, 1494-1500 (2000) (reviewing estate tax objectives of raising revenues, preventing wealth concentration and family dynasties, encouraging charitable contributions, and making income tax more progressive).
16. See infra Parts I.B.3 and I.B.4.
17. See infra Part I.C.
18. See infra note 142.
19. See infra notes 39-48 and accompanying text.
20. See infra part I.C.2.
21. See infra note 142.
22. For excellent discussions of this debate, see Ronald Chester, Inheritance, Wealth, and Society 11-33 (1982); Ascher, supra note 10, at 76-84.
23. John Locke, Two Treatises of Government 206-07, 210 (Peter Laslett ed., Cambridge Univ. Press 1988) (1690);
24. see also Barry W. Johnson & Martha Britton Eller, Federal Taxation of Inheritance and Wealth Transfers, in Inheritance and Wealth in America 61, 62 (Robert K. Miller, Jr. & Stephen J. McNamee eds., 1998) (summarizing Locke's theories on property inheritance).
25. See Chester, supra note 17, at 13-14 (explaining Locke's theories).
26. Jeremy Bentham, Principles of the Civil Code, in The Theory of Legislation 88, 122 (C.K. Ogden ed., Harcourt, Brace & Co. 1931) (1802).
27. John Stuart Mill, Principles of Political Economy 808 (W.J. Ashley ed. Longmans, Green & Co. 1923) (1848).
28. 2 William Blackstone, Commentaries *10-*13; see also Chester, supra note 17, at 19 (noting Blackstone's criticism of natural law argument).
29. John Rawls, A Theory of Justice 277 (1971).
30. Edward J. McCaffery, The Uneasy Case for Wealth Transfer Taxation, 104 Yale L.J. 283, 295-96 (1994). In the text I place quotation marks around the word "liberal" because, as Eric Rakowski has stated, "[l]iberalism is a woolly doctrine, a canopy sheltering a colorful array of theories . . . ."
31. Eric Rakowski, Transferring Wealth Liberally, 51 Tax L. Rev. 419, 419 (1995). See infra Part II.C for a discussion of the empirical evidence that suggests that taxation has a minimal effect on saving.
32. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations 391 (Edwin Cannan ed., Univ. of Chi. Press 1976) (1776).
33. David Ricardo, Principles of Political Economy and Taxation 107 (Prometheus Books 1996) (1817).
34. E.g., Douglas Holtz-Eakin, The Death Tax: Investments, Employment, and Entrepreneurs, 84 Tax Notes 782 (1999) (arguing that estate taxes adversely affect entrepreneurial activity).
35. But see James R. Repetti, Entrepreneurs and the Estate Tax, 84 Tax Notes 1541 (1999) (arguing that Holtz-Eakin's methodology in fact shows that estate taxes do not materially affect saving and entrepreneurial activity).
36. Leon Faucher, Property, in 3 Cyclopedia of Political Science, Political Economy and of the Political History of the United States 383, 389-390 (John J. Lalor ed., New York, Charles E. Merrill & Co., 1888).
37. See generally Louis Kaplow, A Note on Subsidizing Gifts, 58 J. Pub. Econ. 469 (1995).
38. Alexis de Tocqueville, 1 Democracy in America 48 (Henry Reeve trans., Alfred A. Knopf 1945) (1835).
39. Letter from Thomas Jefferson to James Madison (Sept. 6, 1789), in 5 The Writings Of Thomas Jefferson 115-16 (Paul Leicester Ford ed., 1895) (quotation marks omitted).
40. 1 The Complete Writings of Thomas Paine 251 (Philip S. Foner ed., 1969).
41. Peter Dobkin Hall & George E. Marcus, Why Should Men Leave Great Fortunes to Their Children?, in Inheritance and Wealth in America, supra note 18 at 139, 142.
42. Prescott v. Tarbell, 1 Mass. (1 Will.) 204, 208 (1804).
43. Mass. Gen. Laws ch. 87 § 1 (1818); see also Hall & Marcus, supra note 33, at 145 (noting enactment of trust legislation in Massachusetts).
44. Theodore Roosevelt, Speech at the House of Representatives Office Site (April 14, 1906), quoted in Chester, supra note 17, at 60.
45. Act of September 8, 1916, ch. 463, 39 Stat. 777-780, 1002 (1916).
46. Irving Fisher, Some Impending National Problems, 24 J. Pol. Econ. 694, 711 (1916).
47. Philippe Aghion et al., Inequality and Economic Growth: The Perspective of the New Growth Theories, 37 J. Econ. Lit. 1615, 1617 (1999).
48. E.g., Aghion et al., supra note 39, at 1617-18; Roberto Perotti, Growth, Income Distribution, and Democracy: What the Data Say, 1 J. Econ. Growth 149, 154 (1996).
49. E.g., Alberto Alesina & Dani Rodrik, Distribution, Political Conflict and Economic Growth: A Simple Theory and Some Empirical Evidence, in Political Economy, Growth, and Business Cycles 23, 34 (Alex Cukierman et al. eds., 1992) [hereinafter Alesina & Rodrik, Distribution] (describing results of model where increases in income shares of wealthiest population segments are associated with decreases in growth);
50. Alberto Alesina & Dani Rodrik, Distributive Politics and Economic Growth, 109 Q.J. Econ. 465, 481 (1994) [hereinafter Alesina & Rodrik, Distributive Politics] (summarizing results of study as indicating that income inequality and subsequent growth are negatively correlated);
51. François Bourguignon, Growth, Distribution, and Human Resources, in En Route to Modern Growth: Latin America in the 1990s at 43, 58 (Gustav Ranis ed., 1994) (describing inverse relationship between income inequality and growth suggested by study);
52. Perotti, supra note 40, at 159 (finding that growth is positively associated with income equality); Torsten Persson & Guido Tabellini, Growth, Distribution, and Politics, in Political Economy, Growth, and Business Cycles, supra, at 11-15, 18 [hereinafter Persson & Tabellini, Growth] (concluding that income inequality is bad for growth);
53. Torsten Persson & Guido Tabellini, Is Inequality Harmful for Growth?, 84 Am. Econ. Rev. 600, 607, 617 (1994) [hereinafter Persson & Tabellini, Inequality] (same). It is important to note that rapid growth occasionally can occur, even with high concentrations of income, because many factors influence growth. For example, one commentator has suggested that the rapid growth in the late 1990s was attributable to an explosive increase in the use of computers. Pam Woodall, Survey: The New Economy, The Economist, Sept. 23, 2000, insert after 66, at 11-19. The studies of twenty-five years or more obviously span periods of both rapid growth and recession. The authors of the studies constructed multiple regression models that included several factors, in addition to income concentration, that may impact growth. The authors then tested their models using empirical data for the periods. The results of the regression models in all the studies show that there is statistically significant negative correlation between income concentration at the beginning of the period and subsequent growth. That is, high income concentration appears to be related to poor growth during the period, accounting for all other parameters included in the regression models. The findings of the long-term studies suggest that even in periods of rapid productivity growth, high concentrations of income cause slower growth than it otherwise would have been. Thus, wealth concentration is a serious matter, even during periods of high growth.
54. Alesina & Rodrik, Distribution, supra note 41, at 34-43;
55. see also Alesina & Rodrik, Distributive Politics, supra note 41, at 481.
56. Alesina & Rodrik, Distribution, supra note 41, at 23, 34-43;
57. see also Alesina & Rodrik, Distributive Politics, supra note 41.
58. Persson & Tabellini, Growth, supra note 41, at 18;
59. see also Klaus Deininger & Lyn Squire, New Ways of Looking at Old Issues: Inequality and Growth, 57 J. Dev. Econ. 259, 266-69 (1998) (finding that inequality in initial land distribution in 1960 correlated with poor economic growth for period 1960-1992).
60. Perotti, supra note 40, at 182.
61. Persson & Tabellini, Inequality, supra note 41.
62. George R.G. Clarke, More Evidence on Income Distribution and Growth, 47 J. Dev. Econ. 403, 422-24 (1995).
63. Andrew Glyn & David Miliband, Introduction to Paying for Inequality: The Economic Cost of Social Injustice 1, 2-3 (Andrew Glyn & David Miliband eds., 1994).
64. Id. at 3 (reprinting data from World Bank and Organisation for Economic Cooperation and Development).
65. Robert J. Barro, Inequality, Growth, and Investment 32 (Nat'l Bureau of Econ. Res., Working Paper No. 7038, 1999).
66. Abhijit V. Banerjee & Esther Duflo, Inequality and Growth: What Can the Data Say? 2 (Mass. Inst. Tech., Working Paper No. 00-09, 2000).
67. Andrea Brandolini & Nicola Rossi, Income Distribution and Growth in Industrial Countries, in Income Distribution and High-Quality Growth 69, 87-89 (Vito Tanzi & Ke-young Chu eds., 1998);
68. Hongyi Li & Heng-Fu Zou, Income Inequality is Not Harmful for Growth: Theory and Evidence, 2 Rev. Dev. Econ. 318, 327 (1998) (finding "significant, positive association" between income inequality and economic growth).
69. Banerjee & Duflo, supra note 51, at 17-18.
70. Aghion et al., supra note 39, at 1615.
71. Id. at 1620.
72. Simon Kuznets, Economic Growth and Income Inequality, 45 Am. Econ. Rev. 1, 7-8, 12-18 (1955);
73. see also Simon Kuznets, Quantitative Aspects of the Economic Growth of Nations: Distribution of Income by Size, 11 Econ. Dev. & Cultural Change, Jan. 1963, Part II, at 1, 67-69 [hereinafter Kuznets, Quantitative Aspects].
74. Kuznets, Quantitative Aspects, supra note 56, at 67-69.
75. See Josef Zweimüller, Inequality, Redistribution, and Economic Growth 3-5 (Inst. for Empirical Res. in Econ., Univ. of Zurich, Working Paper No. 31, Jan. 2000) (noting increase in wealth concentration in industrialized countries); Deininger & Squire, supra note 44, at 275-76 (noting that inequality in several industrial countries has increased recently); supra text accompanying notes 3-9 (discussing same in United States).
76. E.g., Zweimüller, supra note 58, at 3-5; Deininger & Squire, supra note 44, at 278.
77. Alesina & Rodrik, Distribution, supra note 41, at 23 (arguing that concentrated wealth in democracies leads to lower growth because growth-enhancing capital resources are taxed);
78. Persson & Tabellini, Growth, supra note 41, at 9 (discussing theory that higher taxes discourage investment, and that investment is prediction for growth);
79. Persson & Tabellini, Inequality, supra note 41, at 600 (presenting theory that policies like taxation that result in less private accumulation of capital also result in less growth);
80. see also Giuseppe Bertola, Factor Shares and Savings in Endogenous Growth, 83 Am. Econ. Rev. 1184, 1191-92 (1993) (noting effects of distribution of wealth on fiscal policy and growth).
81. Alesina & Rodrik, Distribution, supra note 41, at 23;
82. Alesina & Rodrik, Distributive Politics, supra note 41, at 478-79.
83. Alesina & Rodrik, Distribution, supra note 41, at 43.
84. Charles Garrison & Feng-Yao Lee, Taxation, Aggregate Activity and Economic Growth: Further Cross-Country Evidence on Some Supply-Side Hypotheses, 30 Econ. Inquiry 172 (1992).
85. Perotti, supra note 40, at 171.
86. Id. at 170-71. One controversial study has found statistical support for the argument that higher marginal taxes are responsible for negative effects on the level of economic activity in countries with concentrated wealth. Reinhard B. Koester & Roger C. Kormendi, Taxation, Aggregate Activity and Economic Growth: Cross-Country Evidence on Some Supply-Side Hypotheses, 27 Econ. Inquiry 367 (1989). However, Charles Garrison and Feng-Yao Lee have concluded that the study's findings are the result of skewed data. Garrison & Lee, supra note 63, at 172.
87. Roberto Perotti, Political Equilibrium, Income Distribution, and Growth, 60 Rev. Econ. Stud. 755, 771-72 (1993).
88. See Aghion et al., supra note 39, at 1622, 1648-49 (suggesting that redistribution of wealth from rich to poor increases productivity, because marginal productivity of investment for rich is lower than that for poor, particularly for investment in education); Woojin Lee & John E. Roemer, Income Distribution, Redistributive Politics, and Economic Growth, 3 J. Econ. Growth 217, 233 (1998) (arguing that, although high tax rate theoretically could reduce private investment, it also boosts public investment in activities, such as education, that promote productivity);
89. see also Gilles Saint Paul & Thierry Verdier, Inequality, Redistribution and Growth: A Challenge to the Conventional Political Economy Approach, 40 Eur. Econ. Rev. 719, 725-26 (1996) (noting that redistribution via public education and crime reduction is not necessarily harmful for growth);
90. cf. William Easterly & Sergio Rebelo, Fiscal Policy and Economic Growth: An Empirical Investigation, 32 J. Monetary Econ., 417, 419, 421-22 (1993) (observing that public investment in transportation and communications positively affects growth rates but noting that effects of income tax are difficult to isolate empirically).
91. Perotti, supra note 40, at 171-72.
92. Ackerman & Alstott, supra note 9, at 160. For studies supporting this summary, see Robert Haveman & Barbara Wolfe, Succeeding Generations: On the Effects of Investments in Children 188 (1994) (noting "high correlation between being a teenage unmarried mother and a wide variety of indicators of low achievement (e.g., failing to complete high school, being on welfare, being poor, and being out of the labor force)");
93. Christopher Jencks, Rethinking Social Policy: Race, Poverty, and the Underclass 136-37 (1992) (explaining Chicago study that suggests strong correlation between pregnancies of unwed mothers and economic level of neighborhood);
94. Susan E. Mayer, What Money Can't Buy: Family Income and Children's Life Chances 44 (1997) (describing study showing that children from low-income families are more likely to have behavior problems, to become pregnant as teenagers, and to drop out of high school);
95. Jeanne Brooks-Gunn, Greg J. Duncan & Nancy Maritato, Poor Families, Poor Outcomes: The Well-Being of Children and Youth, in Consequences of Growing Up Poor 1, 10 (Greg J. Duncan & Jeanne Brooks-Gunn eds., 1997) (citing study showing that "income's effects on intelligence and verbal test scores [in the early childhood years] are quite large - about one-third of a standard deviation");
96. Robert Haveman & Barbara Wolfe, The Determinants of Children's Attainments: A Review of Methods and Findings, 33 J. Econ. Literature 1829, 1855-63 (1995) (describing studies that show strong correlation between family income level and child education as well as likelihood of teenage pregnancy);
97. cf. Sanders Korenman & Jane Miller, Effects of Long-Term Poverty on Physical Health of Children in the National Longitudinal Survey of Youth, in Consequences of Growing up Poor, supra, at 70, 97-98 (finding correlation between poverty and poor physical health).
98. Gary Solon, Intergenerational Income Mobility in the United States, 82 Am. Econ. Rev. 393, 403-04 (1992);
99. David J. Zimmerman, Regression Toward Mediocrity in Economic Stature, 82 Am. Econ. Rev. 409, 427 (1992).
100. Oded Galor & Joseph Zeira, Income Distribution and Macroeconomics, 60 Rev. Econ. Stud. 35, 40 (1993); Perotti, supra note 40, at 152.
101. Galor & Zeira, supra note 71, at 41, 43; Perotti, supra note 40, at 152.
102. Perotti, supra note 40, at 177-82.
103. Id.
104. Id.
105. Id.
106. Id. at 173-77.
107. Id. at 151; see also Jess Benhabib & Aldo Rustichini, Social Conflict and Growth, 1 J. Econ. Growth 125, 125-26 (1996) (noting study that found that investment rates are negatively correlated with political instability).
108. Perotti, supra note 40, at 173-75, 182.
109. For articles asserting that an objective of democracy is to give all participants an equal voice, see, for example, Edward B. Foley, Equal-Dollars-Per-Voter: A Constitutional Principle of Campaign Finance, 94 Colum. L. Rev. 1204, 1204 (1994);
110. David A. Strauss, Corruption, Equality, and Campaign Finance Reform, 94 Colum. L. Rev. 1369, 1382 (1994).
111. Anthony Gierzynski, Money Rules: Financing Elections in America 11-12 (2000).
112. Id. at 11.
113. Id. at 12.
114. Id.
115. Id. at 11-12.
116. Id. at 11.
117. E.g., id.; see also Robert A. Dahl, Who Governs? Democracy and Power in an American City 227 (1961) (describing how numerous old American cities have undergone political revolution whereby government became controlled by nonelite);
118. cf. John P. Heinz et al., The Hollow Core: Private Interests in National Policy Making 392-93 (1993) (asserting that elites prefer policy decisions to be minimally acceptable to potential participants to keep them inactive and to prevent dilution of their own influence).
119. Gierzynski, supra note 81, at 11-12.
120. Stephen Ansolabehere & James M. Snyder, Jr., Money and Institutional Power, 77 Tex. L. Rev. 1673, 1676-77 (1999) (explaining arguments that wealth is power and that campaign contributions buy influence);
121. see also Nelson W. Polsby, Community Power and Political Theory 88 (1963) (noting strong political influence of one member of economic elite but speculating that this person's influence grew from political experience, not economic status).
122. Though not identified at the time of publication, it was later revealed that Muncie, Indiana was the setting for the Middletown studies. See, e.g., John Herbers, How They're Doing in Muncie, Ind., N.Y. Times, Apr. 18, 1982, § 7 (Book Reviews), at 11
123. (reviewing Theodore Caplaw et al., Middletown Families: Fifty Years of Change and Continuity (1982)).
124. Robert S. Lynd & Helen Merrell Lynd, Middletown: A Study in American Culture (1929).
125. Robert S. Lynd & Helen Merrell Lynd, Middletown In Transition: A Study in Cultural Conflicts (1937).
126. Others also have argued that wealthy individuals and corporations exert too much influence over the media in their communities. E.g., Ben H. Bagdikian, The Media Monopoly 5-6 (5th ed. 1997) ("'Market dominant' corporations in the mass media have dominant influence over the public's news, information, public ideas, popular culture, and political attitudes.");
127. Michael Parenti, Inventing Reality: The Politics of News Media 33-37 (2d ed. 1993) (discussing influence of corporate owners and advertisers over media content).
128. For example, it is alleged that the Dupont family suppressed stories and editorials when they owned the largest newspapers in Delaware. Bagdikian, supra, at 42. Hollywood has expressed the theme as well. Frank Capra's classic movie It's a Wonderful Life portrayed a wealthy miser inflicting misery on his community. It's a Wonderful Life (Liberty Films 1946); see also William S. Blatt, Minority Discounts, Fair Market Value, and the Culture of Estate Taxation, 52 Tax L. Rev. 225, 250 (1997) (studying how wealth concentration has surfaced as popular concept and pointing to It's a Wonderful Life).
129. Lynd & Lynd, supra note 91, at 475 (footnote omitted).
130. Id. at 476.
131. Lynd & Lynd, supra note 92, at 360-61 (footnote omitted).
132. See infra text accompanying note 110.
133. See infra text accompanying notes 104-141.
134. 2 U.S.C. § 441b (1994).
135. Id. § 441a(a)(1)(A).
136. Id. § 441a(a)(2)(A).
137. 11 C.F.R. §§ 114.1, 114.6 (2000).
138. Id. §§ 114.5(b)-(d).
139. See Buckley v. Valeo, 424 U.S. 1, 39-51 (1976) (per curiam) (holding unconstitutional, inter alia, $1000 limit on expenditures "relative" to political candidates).
140. FEC Advisory Opinion 1978-10 (Part A) (Aug. 29, 1978), reprinted in Campaign Practices Guide: Federal Election Commission Advisory Opinions 1975-1984 (Cong. Q., ed. 1988);
141. FEC Advisory Opinion 1976-72, reprinted in Campaign Finance Reform: A Sourcebook 187-89 (Anthony Corrado et al., Brookings Inst. eds. 1997), available at http:// www.brook.edu/gs/cf/sourcebk/chap6.pdf; see also Gierzynski, supra note 81, at 45 (noting effects of congressional amendments to Federal Election Commission Act and FEC advisory opinions).
142. Gierzynski, supra note 81, at 45.
143. Id. (footnote omitted).
144. The Center For Responsive Politics, The Big Picture: The Money Behind the 1998 Elections, at Small Donations/Large Individual Donors/PACs, http://www.opensecrets.org/ pubs/bigpicture2000/overview/donations.ihtml (last visited Apr. 13, 2001);
145. id. at Who Paid for This Election?, http://www.opensecrets.org/pubs/bigpicture2000/overview/ who_paid.ihtml (last visited Apr. 13, 2001).
146. John Green et al., The Center for Responsive Politics, Individual Congressional Campaign Contributors: Wealthy, Conservative and Reform-Minded, at http:// www.opensecrets.org/pubs/donors/donors.htm (June 9, 1998).
147. Id.
148. Gierzynski, supra note 81, at 60.
149. E.g., Alan I. Abramowitz, Explaining Senate Election Outcomes, 82 Am. Pol. Sci. Rev. 385 (1988);
150. Charles Stewart III, A Sequential Model of U.S. Senate Elections, 14 Legis. Stud. Q. 567 (1989).
151. E.g., Sarah M. Morehouse, Money Versus Party Effort: Nominating for Governor, 34 Am. J. Pol. Sci. 706 (1990);
152. Samuel C. Patterson, Campaign Spending in Contests for Governor, 35 W. Pol. Q. 457, 475-76 (1982).
153. E.g., Gregory A. Caldeira & Samuel C. Patterson, Bringing Home the Votes: Electoral Outcomes in State Legislative Races, 4 Pol. Behav. 33 (1982) (discussing elections in California and Iowa);
154. Anthony Gierzynski & David Breaux, Legislative Elections and the Importance of Money, 21 Legis. Stud. Q. 337 (1996) (analyzing twelve state legislative elections);
155. Michael W. Giles & Anita Pritchard, Campaign Expenditures and Legislative Elections in Florida, 10 Legis. Stud. Q. 71 (1985) (examining Florida House elections).
156. Abramowitz, supra note 112, at 397.
157. Id.
158. Morehouse, supra note 113, at 722.
159. See generally Janet Grenzke, Money and Congressional Behavior, in Money, Elections, and Democracy: Reforming Congressional Campaign Finance 143 (Margaret Latus Nugent & John R. Johannes eds., 1990) (surveying studies);
160. Richard A. Smith, Interest Group Influence in the U.S. Congress, 20 Legis. Stud. Q. 89 (1995) (same).
161. See Grenzke, supra note 118, at 150-51 (summarizing studies).
162. Woodrow Jones, Jr. & K. Robert Keiser, Issue Visibility and the Effects of PAC Money, 68 Soc. Sci. Q. 170, 170 (1987) (citing Senate vote on deregulation of trucking industry as example of closer association between campaign contributions and legislative results).
163. H.R. 4040, 97th Cong. (1981).
164. Jean Reith Schroedel, Campaign Contributions and Legislative Outcomes, 39 W. Pol. Q. 371, 373-74, 383 (1986).
165. E.g., Michael Evans Begay, Michael Traynor & Stanton A. Glantz, The Tobacco Industry, State Politics, and Tobacco Education in California, 83 Am. J. Pub. Health 1214 (1993) (examining tobacco industry's influence on California legislature);
166. Stanton A. Glantz & Michael E. Begay, Tobacco Industry Campaign Contributions Are Affecting Tobacco Control Policymaking in California, 272 JAMA 1176 (1994) (same);
167. Fred Monardi & Stanton A. Glantz, Are Tobacco Industry Campaign Contributions Influencing State Legislative Behavior?, 88 Am. J. Pub. Health 918 (1998) (examining tobacco industry's influence on state legislatures in six states).
168. But see Jay K. Dow & James W. Endersby, Campaign Contributions and Legislative Voting in the California Assembly, 22 Am. Pol. Q. 334 (1994) (finding no effect of contributions by business groups or labor unions on California legislators).
169. Laura I. Langbein, Money and Access: Some Empirical Evidence, 48 J. Pol. 1052, 1057-61 (1986) (suggesting relationship between contribution size and access).
170. Id. at 1060-61.
171. E.g., J. David Gopoian, What Makes PACs Tick? An Analysis of the Allocation Patterns of Economic Interest Groups, 28 Am. J. Pol. Sci. 259, 262-63 (1984) (discussing PAC desire to garner and maintain access); see also Smith, supra note 118, at 93-97 (summarizing studies evaluating influence of interest group contributions on voting discussions).
172. Thomas Stratmann, The Market for Congressional Votes: Is Timing of Contributions Everything?, 41 J.L. & Econ. 85, 109-10 (1998) (summarizing results of study that show that date of legislative event and motivation to influence congressional voting are important determinants of contribution timing).
173. Peter T. Calcagno & John D. Jackson, Political Action Committee Spending and Senate Roll Call Voting, 97 Pub. Choice 569, 582 (1998) (concluding that Senate voting participation is increasing because of PAC contributions).
174. Id. at 582.
175. Janet M. Box-Steffensmeier & J. Tobin Grant, All in a Day's Work: The Financial Rewards of Legislative Effectiveness, 24 Legis. Stud. Q. 511, 519 (1999).
176. I.R.C. § 1 et seq. (1994).
177. Gierzynski, supra note 81, at 86.
178. Jeffrey Milyo, Electoral and Financial Effects of Changes in Committee Power: The Gramm-Rudman-Hollings Budget Reform, The Tax Reform Act of 1986, and the Money Committees in the House, 40 J.L. & Econ. 93, 97 (1997).
179. Pub. L. 98-180, 97 Stat. 1128 (1983).
180. Pub. L. 97-300, 96 Stat. 1322 (1982).
181. H.R. 4277, 98th Cong. (1984).
182. Richard L. Hall & Frank W. Wayman, Buying Time: Moneyed Interests and the Mobilization of Bias in Congressional Committees, 84 Am. Pol. Sci. Rev. 797 (1990).
183. Id. at 809-10, 813-15; see also Diana Evans, Before the Roll Call: Interest Group Lobbying and Public Outcomes in House Committees, 49 Pol. Res. Q. 287 (1996) (examining relationship between interest group contributions and congressional committee activities).
184. Hall & Wayman, supra note 137, at 810-11.
185. Gierzynski, supra note 81, at 86.
186. Shaun Bowler et al., Ballot Propositions and Information Costs: Direct Democracy and the Fatigued Voter, 45 W. Pol. Q. 559, 564 (1992) (stating that study of ballot initiatives in California indicates positive correlation between campaign spending against proposition and percentage of vote against proposition).
187. Henry J. Aaron & Alicia H. Munnell, Reassessing the Role for Wealth Transfer Taxes, 45 Nat'l Tax J. 119, 131 (1992) (finding that fifty-two percent of wealth is inherited based on life-cycle saving approach);
188. William G. Gale & John Karl Scholz, Intergenerational Transfers and Accumulation of Wealth, J. Econ. Persp., Fall 1994, at 145, 156-57 (finding that inheritance accounts for at least fifty-one percent of net worth accumulation when bequests are included);
189. Laurence J. Kotlikoff & Lawrence H. Summers, The Role of Intergenerational Transfers in Aggregate Capital Accumulation, 89 J. Pol. Econ. 706, 722 (1981) (determining that majority of wealth held in 1974 was inherited).
190. But see Franco Modigliani, The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth, J. Econ. Persp., Spring 1988, at 15, 18-19 (summarizing studies that show inherited wealth is less than twenty percent of individuals' total wealth).
191. Dinesh D'Souza, The Billionaire Next Door, Forbes, Oct. 11, 1999, at 50, 50.
192. Id.
193. See Paul Ryan, Inheritance: Symbols and Illusion, in Paying for Inequality, supra note 48, at 196-97 (arguing that when family businesses are passed down, adverse outcomes are likely in successor generations, since energy and ability of founder-owner are gone).
194. John M. Keynes, 9 The Collected Writings of John Maynard Keynes 299 (Royal Econ. Soc'y ed., 1972).
195. This parallels one of the concerns that motivated adoption of the Federal Trade Commission Act, 15 U.S.C. § 41 (1994). Legislators were concerned that businesses controlling large amounts of wealth would use it to the detriment of citizens. See, e.g., Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 Hastings L.J. 65, 118-119 (1982) (describing legislators' fears regarding power of big business to dominate democracy).
196. Melvin L. Oliver et al., "Them That's Got Shall Get": Inheritance and Achievement in Wealth Accumulation, in 5 Research in Politics and Society: The Politics of Wealth and Inequality 69, 73-74 (Richard E. Ratcliff et al. eds., 1995)
197. (attributing quote to Alexis de Tocqueville, 2 Democracy in America app. 5 (London: Saunders & Otley, 1835)).
198. The foregoing review of the harmful effects of wealth also might support a highly progressive income tax to reduce the wealth of those creating it. However, I favor a wealth transfer tax because it probably has less of an impact on savings than a highly progressive income tax. See text accompanying notes 221-233. For an excellent analysis of the role of a progressive income tax, see generally Martin J. McMahon, Jr. & Alice A. Abreu, Winner-Take-All Markets: Easing the Case for Progressive Taxation, 4 Fla. Tax Rev. 1, 12-21 (1998).
199. See supra notes 66-67, 69-69 and accompanying text.
200. E.g., Joel C. Dobris, A Brief for the Abolition of All Transfer Taxes, 35 Syracuse L. Rev. 1215 (1984);
201. John E. Donaldson, The Future of Transfer Taxation: Repeal, Restructuring and Refinement, or Replacement, 50 Wash. & Lee L. Rev. 539 (1993);
202. Charles O. Galvin, To Bury the Estate Tax, Not To Praise It, 52 Tax Notes 1413 (1991); McCaffery, supra note 24.
203. E.g., Joseph M. Dodge, Beyond Estate and Gift Tax Reform: Including Gifts and Bequests in Income, 91 Harv. L. Rev. 1177 (1978).
204. E.g., William D. Andrews, The Accessions Tax Proposal, 22 Tax. L. Rev. 589 (1967).
205. E.g., David Shakow & Reed Shuldiner, A Comprehensive Wealth Tax, 53 Tax L. Rev. 499 (2000).
206. See, e.g., Laura E. Cunningham, Remember the Alamo: The IRS Needs Ammunition in Its Fight Against the FLP, 86 Tax Notes 1461, 1461-63 (2000) (discussing methods by which estate planners exploit current transfer tax system, including family limited partnerships);
207. Joseph M. Dodge, Redoing the Estate and Gift Taxes Along Easy-to-Value Lines, 43 Tax L. Rev. 241, 244 (1988) (outlining loopholes existing in current transfer tax system and proposing reforms to prevent undervaluation of gratuitous transfers); Gutman, supra note 10, at 1262-69 (discussing problems in current structure such as deferral of estate tax and special use valuation).
208. See, e.g., McCaffery, supra note 24, at 320 (stating that for very wealthy, economic effects of estate tax regime favor consumption over savings).
209. Office of Mgmt. and Budget, Budget of the United States Government, Historical Tables 41 tbl.2.5 (2000).
210. The 1999 revenues from the estate and gift tax were $27.8 billion. Office of Mgmt. and Budget, supra note 157, at 41 tbl.2.5. Data found in David Campbell, Michael Parisi, and Brian Balkovic, Individual Income Tax Returns, 1998, in IRS, Statistics of Income Bulletin, Fall 2000, at 8, 34-38 tbl.2 [hereinafter IRS Bulletin], shows the total 1998 tax liability of individuals with adjusted gross income from $1 to $15,000 was $7.8 billion, and the total 1998 tax liability of individuals with adjusted gross incomes between $15,000 and $30,000 was $40.8 billion. Statistics for the 1999 individual income tax were not available at the time this article was written.
211. B. Douglas Bernheim, Does the Estate Tax Raise Revenues?, in 1 Tax Policy and the Economy 113, 135 (Lawrence H. Summers ed., 1987).
212. Id. at 124-26.
213. Id. at 126-31.
214. Id. at 126.
215. Id. at 127.
216. David Joulfaian, The Federal Estate and Gift Tax: Description, Profile of Taxpayers, and Economic Consequences 21 (Off. of Tax Analysis, U.S. Dept. of the Treasury, Paper No. 80, Dec. 1998).
217. James Poterba, Estate and Gift Taxes and Incentives for Inter Vivos Giving in the United States 10 (Nat'l Bureau of Econ. Res., Working Paper No. 6842, Dec. 1998), http:// papers.nber.org/papers/W6842.
218. I.R.C. § 2503(b) (1994 & West Supp. 2001) excludes gifts of up to $10,000 per donee that a taxpayer makes each year.
219. Poterba, supra note 165, at 15, 18.
220. A study found that in 1981, the average adjusted gross income of the children of decedents who died in 1982 with gross estates exceeding $10 million was $271,254 in 1981 dollars. David Joulfaian, The Distribution and Division of Bequests: Evidence from the Collation Study 42 tbl.11D (Off. of Tax Analysis, U.S. Dept. of the Treasury, Paper No. 71, Aug. 1994).
221. I.R.C. § 1(g) (1994 & West Supp. 2000); Rev. Proc. 99-42, 1999-46 I.R.B. 568 (providing cost-of-living adjustments for 2000).
222. I.R.C. § 1(e) (1994 & West Supp. 2000); Rev. Proc. 99-42, 1999-46 I.R.B. 568 (providing cost-of-living adjustments for 2000).
223. Bernheim, supra note 159, at 131-32.
224. Id. at 131.
225. Id. at 127 tbl.2, 131-32.
226. Introduction to The Capital Gains Controversy: A Tax Analyst's Reader 1 (J. Andrew Hoerner ed., 1992).
227. See Mervyn A. King & Dan Fullerton, The Taxation of Income from Capital 221-22 (1984) (explaining common assumption that nominal capital gains tax rate should be halved due to deferral advantage and halved again due to increase of basis at death and selective realization of losses); see also The Capital Gains Controversy, supra note 174, at 1 (noting that accrued gains disappear upon death).
228. See, e.g., Noël B. Cunningham, The Taxation of Capital Income and the Choice of Tax Base, 52 Tax L. Rev. 17, 41 (1996) (demonstrating how investors can reduce burden of normative income tax on capital income to amount equal to borrowing rate on net capital investment times tax rate).
229. Joulfaian, supra note 164, at 31.
230. Id.
231. Joulfaian, supra note 164, tbl.24. Joulfaian computed the figures from the 1982 Estate Collation File. Id.
232. Id.
233. See supra note 157 and accompanying text.
234. William G. Gale & John Karl Scholz, Intergenerational Transfers and the Accumulation of Wealth 1-2 (Inst. for Res. on Poverty Discussion, Paper No. 1019-93, 1993) (summarizing studies);
235. Henry J. Aaron & Alicia H. Munnell, Reassessing the Role for Wealth Transfer Taxes, 45 Nat'l Tax J. 119, 131 (1992) (noting that statistics support finding that 52% of wealth is inherited); see also Kotlikoff & Summers, supra note 142, at 721, 730 (determining that 78% of wealth is inherited). But see Modigliani, supra note 142, at 21 (arguing that only 15.5% to 18.5% of total wealth is inherited).
236. See supra text accompanying notes 6-7.
237. But see G.P. Verbit, Do Estate and Gift Taxes Affect Wealth Distribution? Part I, 117 Tr. & Est. 598, 598 (1978) (arguing that since wealth concentration has not changed, estate tax has no effect).
238. John Laitner, Simulating the Effects on Inequality and Wealth Accumulation of Eliminating the Federal Gift and Estate Tax (Apr. 17, 2000) (unpublished manuscript, on file with New York University Law Review).
239. Laitner, supra note 185, at 2.
240. The net estate tax paid with respect to 1997 taxable returns was $16.63 billion, and the aggregate taxable estates reported on such returns was $68.14 billion. Barry Johnson & Jacob Mikow, Federal Estate Tax Returns, 1995-1997, in IRS Bulletin, supra note 158, at 107-08 tbl.1c.
241. E.g., Charles T. Clotfelter, Federal Tax Policy and Charitable Giving 222-52 (1985);
242. Gerald Auten & David Joulfaian, Charitable Contributions and Intergenerational Transfers, 59 J. Pub. Econ. 55 (1996);
243. David Joulfaian, Charitable Bequests and Estate Taxes, 44 Nat'l Tax J. 169 (1991). It is important to note, however, that estimates of price elasticities, which measure the percentage change in charitable giving to the percentage change in the after-tax cost of making the gift, vary considerably. Id. at 173-75 (attributing range of elasticity to factors including wealth, type of charity, marital status, age, and sex). Joulfaian suggests that the sensitivity of charitable contributions to the estate tax depends on the nature of the recipient. He found that bequests to religious organizations and schools are the most sensitive to the presence of the estate tax, while bequests to foundations and the arts and humanities are the least sensitive. Id. at 174-75.
244. Columns 4 and 6 are the author's calculations. Columns 1, 2, 3, and 5 are from Johnson & Mikow, supra note 187, at 103-06 tbl.1c.
245. Joulfaian, supra note 168, at 6.
246. Id. at 11.
247. Id. at 42.
248. An important exception to this rule is contained in I.R.C. § 2503(b) (1994 & West Supp. 2000), which exempts annual gifts of $10,000 or less per donee.
249. E.g., McCaffery, supra note 24, at 320 ("[F]or the very wealthy, economic effects of any estate tax regime favor consumption over savings . . . .").
250. See supra note 182 and accompanying text.
251. B. Douglas Bernheim, Taxation and Saving 5 (Nat'l Bureau of Econ. Res., Working Paper No. 7061, Mar. 1999).
252. Id.
253. E.g., id. ("There is no theoretical presumption that either effect dominates.").
254. William G. Gale & Maria G. Perozek, Do Estate Taxes Reduce Saving?, in Rethinking Estate and Gift Taxation (forthcoming 2001) (manuscript at 6, on file with New York University Law Review);
255. see also Michael D. Hurd, Mortality Risk and Bequests, 57 Econometrica 779, 797-802 (1989) (finding that most bequests "are accidental, the result of mortality risk").
256. E.g., Gary S. Becker, A Theory of Social Interactions, 82 J. Pol. Econ. 1063, 1079 (1974) ("[A] 'family's' utility function is the same as that of one of its members not because this member has dictatorial power over other members, but because he (or she!) cares sufficiently about all other members to transfer resources voluntarily to them.").
257. E.g., B. Douglas Bernheim, Andrei Shleifer & Lawrence H. Summers, The Strategic Bequest Motive, 93 J. Pol. Econ. 1045, 1046 (1985) ("[T]estators use bequests to influence the behavior of potential beneficiaries. Such influence may be overt, as when parents threaten to disinherit miscreant offspring, or more subtle, as when parents reward more attentive children with family heirlooms.").
258. Lester C. Thurow, Generating Inequality: Mechanisms of Distribution in the U.S. Economy 141 (1975) (arguing that economic power helps explain "why more individuals do not use the tax loophole of transferring their assets before death");
259. Christopher D. Carroll, Why Do the Rich Save So Much?, in Does Atlas Shrug? The Economic Consequences of Taxing the Rich 465, 466 (Joel B. Slemrod ed., 2000) (concluding that "direct wealth accumulation motive is indispensable in explaining at least some of the observed [saving] behavior of the very wealthy").
260. Bernheim, supra note 196, at 29-31.
261. Id. In this regard it should be noted, however, that in the 1992 Survey of Consumer Finance, only two percent of wealthy households stated that providing an inheritance was the most important reason to save, and only four percent of wealthy households indicated that providing an inheritance was among the top five reasons for saving. Carroll, supra note 202, at 472.
262. Gale & Perozek, supra note 199, at 21-28.
263. Id. at 32.
264. Becker, supra note 200, at 1077; Gale & Perozek, supra note 199, at 32.
265. Seymour Fiekowsky, The Effect on Saving of the United States Estate and Gift Tax, in Federal Estate and Gift Taxes 228, 234-35 (Carl S. Shoup ed., 1966).
266. Wojciech Kopczuk & Joel Slemrod, The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors, in Rethinking Estate and Gift Taxation (forthcoming 2001) (manuscript at 16-21, on file with New York University Law Review).
267. Id. at 32.
268. For descriptions of various techniques to reduce value, see, for example, Cunni ngham, supra note 155, at 1461-62 (discussing how wealth can disappear through use of family limited partnerships); Alan L. Feld, The Implications of Minority Interest and Stock Restrictions in Valuing Closely-Held Shares, 122 U. Pa. L. Rev. 934 (1974) (discussing discounts available for minority stock interests and shares subject to transfer restrictions);
269. Mary Louise Fellows & William H. Painter, Valuing Close Corporations for Federal Wealth Transfer Taxes: A Statutory Solution to the Disappearing Wealth Syndrome, 30 Stan. L. Rev. 895 (1978) (explaining transfer of minority shares of close corporations as tax avoidance strategy).
270. Cunningham, supra note 155, at 1464-65.
271. See, e.g., Alan J. Auerback & Joel Slemrod, The Economic Effects of the Tax Reform Act of 1986, 35 J. Econ. Literature 589, 615-18 (1997) (discussing evidence of income shifting rather than income creation);
272. Nada Eissa, Tax Reforms and Labor Supply, in 10 Tax Policy and the Economy 119, 147 (James M. Poterba ed., 1996) (explaining that "income response observed in the tax return data is due more to factors other than labor market participation, such as shifting of income and compensation decisions");
273. Joel B. Slemrod, The Economics of Taxing The Rich, in Does Atlas Shrug?, supra note 202, at 17-18 (discussing "substantial evidence" of timing, financial, and accounting responses).
274. See, e.g., Eric M. Engen, William G. Gale & John Karl Scholz, The Effects of Tax-Based Saving Incentives on Saving and Wealth 46 (Nat'l Bureau of Econ. Res., Working Paper No. 5759, Sept. 1996) (finding that "less than ten percent of 401(k) contributions represent new saving"); Auerback & Slemrod, supra note 213, at 603-04 (finding low saving response to high after-tax rate of return).
275. Engen et al., supra note 214, at 45-48 (concluding that tax incentives for savings have little or no effect on level of saving); Jonathan Skinner & Daniel Feenberg, The Impact of the 1986 Tax Reform on Personal Saving, in Do Taxes Matter? The Impact of the Tax Reform Act of 1986, at 50, 72-73 (Joel Slemrod ed., 1990) (concluding that "link between the aftertax rate of return and personal saving is weak" and finding tax effects on types of saving instead);
276. see also Bernheim, supra note 196, at 47-48 (providing excellent survey of studies); E. Philip Howrey & Saul M. Hymans, The Measurement and Determination of Loanable-Funds Saving, in 3 Brookings Papers on Economic Activity 662, 663-67 (Arthur M. Okin & George L. Perry eds., 1978) (demonstrating that one study's finding of "positive and significant saving elasticity . . . [was] extremely sensitive" to sample period and modeling features).
277. But see Michael J. Boskin, Taxation, Saving, and the Rate of Interest, 86 J. Pol. Econ. S3 (1978) (finding that income tax rates influence saving).
278. Skinner & Feenberg, supra note 215, at 72.
279. See Bernheim, supra note 196, at 50 ("[T]he assumptions required for valid aggregation are extremely restrictive."); Robin Broadway & David Wildasin, Taxation and Savings, in The Economics of Tax Policy 55, 73 (Michael P. Devereaux ed., 1996) ("Overall, it would be fair to say that empirical analysis of aggregate consumption data has been inconclusive in its findings about the effects of interest rates on savings.").
280. Alan S. Blinder, Distribution Effects and the Aggregate Consumption Function, 83 J. Pol. Econ. 447, 472 (1975) (finding that greater income equalization will have little or no effect on aggregate consumption);
281. John Y. Campbell & N. Gregory Mankiw, Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence, in NBER Macroeconomics Annual 1989, at 185, 186 (Olivier Jean Blanchard & Stanley Fisher eds., 1989) (finding that "predictable movements . . . in consumption cannot be explained as a rational response to movements in real interest rates");
282. Robert E. Hall, Intertemporal Substitution in Consumption, 96 J. Pol. Econ. 339, 350-51 (1988) (explaining that "consumption growth has generally stuck fairly close to its average value no matter what has happened to real interest rates").
283. E.g., Orazio P. Attanasio & Guglielmo Weber, Consumption Growth, the Interest Rate and Aggregation, 60 Rev. Econ. Stud. 631, 632 (1993) (identifying sources of aggregation bias and finding "substantial differences between estimates of intertemporal substitution obtained from aggregate and average cohort data").
284. Bernheim, supra note 196, at 50. For examples of studies using household data, see Orazio P. Attanasio & Martin Browning, Consumption over the Life Cycle and over the Business Cycle, 85 Am. Econ. Rev. 1118, 1119 (1995) (concluding that household-specific factors "have an important influence on intertemporal-allocation decisions");
285. Orazio P. Attanasio & Karen E. Dynan, How Prudent Are Consumers?, 101 J. Pol. Econ. 1104, 1109 (1993) (finding little evidence of "precautionary motive" in consumer saving behavior);
286. Attanasio & Weber, supra note 219, at 647 (finding higher elasticity of intertemporal substitution using average cohort data rather than aggregate data); Emily C. Lawrance, Poverty and the Rate of Time Preference: Evidence from Panel Data, 99 J. Pol. Econ. 54, 72 (1991) (finding strong differential effects based on household income and time preference rates);
287. David E. Runkle, Liquidity Constraints and the Permanent-Income Hypothesis: Evidence from Panel Data, 27 J. Monetary Econ. 73, 90-91 (1991) (arguing that panel data model supports permanent-income hypothesis);
288. Matthew D. Shapiro, The Permanent Income Hypothesis and the Real Interest Rate: Some Evidence from Panel Data, 14 Econ. Letters 93, 98-99 (1984) (explaining rejection of permanent income hypothesis as problem of liquidity constraints);
289. Stephen P. Zeldes, Consumption and Liquidity Constraints: An Empirical Investigation, 97 J. Pol. Econ. 305, 338 (1989) (finding that borrowing constraints affect consumption).
290. Bernheim, supra note 196, at 50.
291. See, e.g., Sheldon Solomon et al., A Terror Management Theory of Social Behavior: The Psychological Functions of Self-Esteem and Cultural Worldviews, in 24 Advances in Experimental Social Psychology 93, 101-02 (Mark P. Zanna ed., 1991) (describing cultural strategies that help repress anxiety about one's mortality).
292. See, e.g., Sigmund Freud, Thoughts for the Times on War and Death (1915), reprinted in 4 Collected Papers 288, 304 (Ernest Jones ed., Joan Riviere trans., 1959) (describing attitude toward death as "unmistakable tendency to 'shelve' death, to eliminate it from life");
293. Avery D. Weisman, On Dying and Denying: A Psychiatric Study of Terminality 13 (1972) ("The primary paradox is that while man recognizes that death is universal, he cannot imagine his own death. The belief is illogical, but persistent . . . .").
294. Economists also have noted that people tend heavily to discount future events. David I. Laibson et al., Self-Control and Saving for Retirement, in 1 Brookings Papers on Economic Activity 91 (William C. Brainard & George L. Perry eds., 1998).
295. Joseph A. Pechman, Federal Tax Policy 234-35 (5th ed. 1987).
296. James M. Poterba, The Estate Tax and After-Tax Investment Returns, in Does Atlas Shrug?, supra note 202, at 330.
297. Poterba, supra note 225, at 339 tbl.10.6.
298. Id.
299. Id.
300. Id. at 338.
301. Stephen F. Davis & Joseph J. Palladino, Psychology 457 (2d ed. 1997) (observing that young adults "rarely think of their own death," while older adults do).
302. Carroll, supra note 202, at 472.
303. See 1997 Research Findings: The Arthur Andersen/MassMutual American Family Business Survey '97 [hereinafter 1997 Family Business Survey], at http:// www.massmutual.com/fbn (last visited Apr. 12, 2001) (reporting that 23.8% of respondents have only "some" or no understanding of estate tax due upon their deaths).
304. Id.
305. See Douglas Holtz-Eakin et al., Estate Taxes, Life Insurance, and Small Business 1-2 (Nat'l Bureau of Econ. Res., Working Paper No. 7360, Sept. 1999) (summarizing criticisms).
306. Id.
307. 1997 Family Business Survey, supra note 232 (noting that sixty-seven percent of respondents reported that life insurance represents primary source of funds to cover estate taxes).
308. Holtz-Eakin et al., supra note 234, at 23.
309. Id. at 8.
310. Id. at 8, 10-11. The percentage rate varied depending on how "liquid assets" were defined. Id. at tbl.1.
311. Id. at 9, 25 n.16 (noting that "there are many ways to avoid estate tax" and describing provisions for tax deferral and "phenomenon" of businesses being undervalued when passing through probate).
312. I.R.C. § 2057(a)(1)-(2) (1994 & Supp. IV 1998).
313. Id. §§ 2010 (1994 & Supp. IV 1998), 2057(a)(3)(A) (West 2000).
314. I.R.C. § 2057(a)(3)(A) limits the unified credit exclusion amount to a maximum deduction of $625,000 where the maximum deduction of $675,000 is claimed under I.R.C. § 2057. Id. § 2057(a)(3)(A) (West 2000).
315. Leonard E. Burman, Estate Taxes and the Angel of Death Loophole, 76 Tax Notes 675, 675 (1997) ("The estate tax is an exclusive tax, directly affecting fewer than 2 percent of decedents. Most owners of small businesses . . . do not pay it . . . .").
316. Author's calculations based on Johnson & Mikow, supra note 187, at 102-06 tbl.1c.
317. I.R.C. § 2032A (1994 & Supp. IV 1998).
318. Id. § 2032A(a)(2). For estates in which decedents died after 1998, the $750,000 may be adjusted for inflation. Id. § 2032A(a)(3).
319. Despite the benefit of § 2032A, it is interesting to note that in 1995 only 0.6% of all returns for decedents used § 2032A. Johnson & Mikow, supra note 187, at 79. It is also interesting that only 0.4% of the gross assets reported in all 1997 estate tax returns were farm assets. Id. at 102 tbl.1c.
320. Johnson & Mikow, supra note 187, at 79 fig.I.
321. I.R.C. § 6166 (Supp. IV 1998).
322. Id. § 6601(j)(1)(A), (j)(2) (1994 & Supp. IV 1998).
323. Id. § 6601(j)(1)(B).
324. Martha Britton Eller, Federal Taxation of Wealth Transfers, 1992-1995, in 1RS Bulletin, supra note 158, at 8, 15.
325. James R. Repetti, Minority Discounts: The Alchemy in Estate and Gift Taxation, 50 Tax L. Rev. 415, 424-25, 427, 429 (1995).
326. Id. at 428-29.
327. Davenport & Soled, supra note 10, at 614.
328. Johnson & Mikow, supra note 187, at 102, 104 tbl.1c.
329. E.g., Holtz-Eakin, supra note 27, at 790 (concluding that "substantial evidence suggests the estate tax imposes considerable compliance and administrative costs").
330. See supra notes 155, 211-12 and accompanying text.
331. Davenport & Soled, supra note 10, at 619.
332. Id. at 621 ("Determining the amount that could possibly be attributed to the estate tax is difficult."); see also Alicia H. Munnell & C. Nicole Ernsberger, Wealth Transfer Taxation: The Relative Role for Estate and Income Taxes, New Eng. Econ. Rev., Nov./ Dec. 1988, at 3, 19 (attempting to estimate compliance costs).
333. See, e.g., Davenport & Soled, supra note 10, at 622-24 (comparing their own research estimate that estate tax compliance costs equal $6000 per person with another study finding average spending of $19,908 in legal fees, $11,940 in accounting fees, and $11,212 on other advisers for estate planning).
334. Joseph H. Astrachan & Roger Tutterow, The Effect of Estate Taxes on Family Business: Survey Results, 9 Fam. Bus. Rev. 303, 303, 304 (1998).
335. Id. at 306 tbl.2.
336. See, e.g., Craig Aronoff & John Ward, Succession: The Final Test of Greatness 1 (1992) ("[S]uccession planning is the most critical task to secure the future of private enterprise in America. . . . [T]he failure to plan for succession is the greatest current threat to the survival of family business.");
337. see also Ivan Lansberg, Succeeding Generations: Realizing the Dreams of Families in Business 1-9 (1999) (explaining generally importance of planning in successful leadership transitions).
338. Most of the practitioners are members of a luncheon group in Boston that meets monthly at the Boston Union Club to discuss issues in tax law and estate planning.
339. See supra note 264 and accompanying text.
340. The way that family limited partnerships result in low valuations is quite simple. An asset placed into a partnership normally has a reduced value because each partner's access to, and control over, the asset is limited by the existence of the partnership. This is particularly true for limited partners who have little voice in the conduct of the partnership. Of course, all partners acting in concert could eliminate obstacles to access and control. But our current method of valuation does not permit the identity of co-owners or the likelihood that they will cooperate with one another to be considered in valuing the assets that are placed into a partnership. Repetti, supra note 254, at 444, 452. The result is that placing a business into a family limited partnership can reduce significantly the value of its real estate for estate tax purposes. Id. at 452.
341. See supra notes 211-212 and accompanying text for a description of how family limited partnerships reduce the value of assets placed therein.
342. See Estate of Bright v. United States, 658 F.2d 999, 1005 (5th Cir. 1981) (en banc) (holding that "family attribution should not apply to lump a decedent's stock with that of related parties for estate tax valuation purposes"); Rev. Rul. 93-12, 1993-1 C.B. 202, 203 (ruling that "a minority discount will not be disallowed solely because a transferred interest, when aggregated with interests held by family members, would be part of a controlling interest").
343. See Repetti, supra note 254, at 485-86 (arguing for tax provision that includes value of control in valuing certain minority interests in assets).