The producer of this video, WildCard Productions, calls it "a tribute to the greatest band’s greatest album". It is, of course, the Revolver album released in 1966, often cited as one of the greatest albums in rock music history, The song on the video, “Taxman”, was written and performed by George Harrison.
Harrison performs the song in the role of a taxman in a tongue-in-cheek manner. He was inspired to write "Taxman" when he discovered how much he was earning after accounting for taxes. As Harrison said,
"’Taxman" was when I first realised that even though we had started earning money, we were actually giving most of it away in taxes.
At the time, the top tax brackets in the U.K. and the U.S. were extremely high, 95% and 70% respectively. But that was then and this is now when tax rates are lower.
And it’s about the low tax rates in this country that Paul Ferraresi says, Hold Onto Your Wallets, in his blog, Financial Planning for Smart People. He reminds us that the 2001 and 2003 tax cuts are set to expire December 31, 2010. And regardless of Presidential politics, taxes will go up in the future. Taxpayers, he says, should meet with their advisers immediately to take action on strategies in 2007 with lower rates and do similar planning to take action in 2008.
But what about the estate tax which was also part of that tax reduction legislation? The 2001 tax bill increased exemption amounts and reduced tax rates through 2009 with a complete repeal of the estate tax coming in 2010. But that repeal is only effective if a person dies in 2010. Unless there is a change in the law before then, the tax law completely reverts in 2011 to what it was prior to the enactment of the 2001 tax act: lesser exemptions and higher rates.
Is it possible, then, for a taxpayer to follow Mr. Ferraresi’s advice about tax planning under these circumstances? Would a taxpayer actually die to avoid taxes? Marc Abraham discusses exactly that in his article, Dying To Beat the Taxman on his Improbable Research Blog. He writes about a study by Joel Slemrod and Wojciech Kopczuk that looked at what happened when the estate tax rate substantially increased on eight occasions. That occurred twice in 1917, and once each in 1924, 1932, 1934, 1935, 1940 and 1941. They also looked at what happened when the estate tax was decreased on five other occasions: in 1919, 1926, 1942, 1983 and 1984.
Their study, Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity, indicated, they said, that there is a small death elasticity. In other words, there is evidence that some people will themselves to survive a bit longer if their heirs will have a smaller estate tax liability. As to the obvious other reason for this evidence, they said "we cannot rule out that what we have uncovered is ex-post doctoring of the reported date of death".
So let me conclude this discussion where I began: with "Taxman". Here’s George Harrison’s last stanza:
Now my advice for those who die, (taxman)
Declare the pennies on your eyes. (taxman)
‘Cause I’m the taxman,
Yeah, I’m the taxman.
And you’re working for no one but me.