Epstein Takes on Paul Krugman in Forbes Column

Krugman Got It Wrong
Richard A. Epstein
Forbes.com
March 9, 2010

A recent Paul Krugman zinger laments how Democrats and Republicans inhabit parallel universes. He left no doubts which one he lives in. As a libertarian who finds it difficult to be consistently loyal to either party, let me say why in this instance the Republicans have not behaved as badly as Krugman's caustic rhetoric suggests on three issues: unemployment benefits, the estate tax and health care. In his view, only hard and insensitive elitists worry about the second. In hard times, all the action should go on the first and third items, where his impatient more-now-is-better mentality flourishes, almost without reason.

So let's start with the estate tax and ask whether a tax that exempts 99.75%, of all estates, as the Democrats propose, is better than one that just abolishes the tax altogether. I vote for the latter. The estate tax operates as the third tax on the accumulation of wealth--after progressive taxes on earnings and savings. That heavy state and federal key drives many people to take grotesque steps to minimize their liabilities, which in part explains why only 0.25% of the people pay it. By forcing these dumb maneuvers, the tax distorts the accumulation and transfer of capital in ways that could easily reduce the production of wealth that could be subject to an income tax. Only if you think that hitting the most productive portions of the population is the right way to instill a sense of national unity would you want to keep this ship afloat.