Don’t You Dare Say “Death Tax”!

by Andy Grewal — Wednesday, Apr. 22, 2015

In a prior post, I discussed how I thought the use of the phrase “IRS Code,” as opposed to “Internal Revenue Code,” reflected some sloppiness on the part of the speaker, but that the phrasing was not inherently misleading. Here, I want to discuss whether another phrase that triples the blood pressure of the typical tax academic, the “Death Tax,” is inherently misleading.

This question seems to have an obvious answer if you just look at the tax code. In several spots, Congress itself refers to taxes that are imposed at death as “death taxes.” Section 303, titled “Distributions in redemption of stock to pay death taxes,” generally provides special treatment for the proceeds of stock sold to pay various estate, inheritance, legacy, and succession taxes. This section shows that Congress itself sometimes uses “Death Tax” to refer to various taxes imposed after death. Surely it’s not inherently misleading to use the same shorthand that Congress uses when referring to the wealth transfer tax regime.

Nonpartisan congressional committees also follow Congress’s lead. The Staff of the Joint Committee on Taxation, which enjoys a sterling reputation for avoiding political nonsense, recently published areport that frequently uses “death tax” in describing various State-level or foreign wealth transfer tax regimes, and more coyly refers to “death-related taxes” in describing federal taxes.

So does this prove that it’s always appropriate to use “Death Tax”? Of course not. Persons using “Death Tax” are, through their various statements, frequently trying to establish the mistaken impression that Congress is trying to punish someone for dying or trying to pilfer family heirlooms. But that’s not the case. Ultimately, the various death-related taxes are intended to impose a tax on the transfer of wealth. It would be best for people to understand that purpose and then decide for themselves the desirability of our current regime.

Also, the frequently preferred alternative phrasing — the “Estate Tax” — is itself subject to perversion. That phrasing can be used to further the mistaken belief that wealth transfer taxes apply only to those with physical estates (that is, those with land, mansions, horse-drawn carriages and all that other good stuff). But until relatively recently, wealth transfer taxes were imposed on amounts that could not possibly equate with the value of a fabulous land estate. “Estate Tax” thus suffers from the same potential shortcomings as “Death Tax.”

So where does this leave us? I’d go back to what I said about “IRS Code” and emphasize that context determines whether a particular term is being used in a misleading way. My own preference is “wealth transfer tax,” which admittedly doesn’t accurately capture taxes imposed on the recipient. In any event, I don’t begrudge those who prefer phrasing different from mine. A person who blindly criticizes someone for using “Death Tax” or anything but their preferred phrasing is, ironically, the one guilty of engaging in misleading political attacks.

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