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Cramer Wrong on Death Tax

Written By : Brian Garst
September 12, 2010

On his Mad Money program, Jim Cramer recently listed 8 items to get the economy moving.  He was dead wrong to include a retroactive reinstatement of the death tax in the list. For the sake of argument, I’ll pretend like he didn’t contradict himself by also calling for a freeze on the Bush tax cuts (which included the elimination of the death tax) through 2013, and instead just focus on the incorrect claims he made regarding the death tax.

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Cramer said that the death tax is “the most painless form of a tax,” and that reinstating it allows for “a huge pick-up in revenue, a reduction in the deficit, and no damage done to the economy.” He is wrong on every count.

Directly, death taxes only contribute 1% to federal revenues, so there would be no huge pick-up. And when the economic damage done by the death tax is accounted for, it actually costs the government revenue.

Contrary to Cramer’s claim, the death tax does significant damage to the economy. In fact, economist Stephen Entin found that “[death taxes] probably do the most damage to output and income per dollar of revenue raised of all the taxes in the U.S. tax system.” By discouraging investment and savings, the death tax ultimately reduces both total jobs and wage growth. If Mr. Cramer wants to find ways to help the economy, he should look to decrease government distortions, rather reintroduce those that have previously been eliminated.

Cross-posted at Double Taxed. Double Taxed is the website for the Double Taxation Working Group, a collection of the most influential free-market think tanks and taxpayer groups committed to eliminating the capital gains, dividends and death taxes, and serves as a warehouse of information and research on these destructive instances of double taxation.

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