IRS to Ax Estate-Tax Cops

This is a few days old, but worth noting. The New York Times reported on Sunday that the Internal Revenue Service plans to layoff 45 percent of its staffmembers who are assigned to audit tax returns that qualify for the gift and estate taxes. This comes after Congress raised the threshold at which the estate tax kicks in, but opted not to repeal the estate tax entirely, which was the Bush administration's preferred outcome. Some IRS workers who are on the list to receive pink slips alleged in the Times that the cutbacks were intended as a de facto effort to abolish the estate tax law, even as it remains on the books.

The Times writes: "Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.

"...Mr. Brown dismissed as preposterous any suggestion that the I.R.S. was soft on rich tax cheats. He said that the money saved by eliminating the estate tax lawyers would be used to hire revenue agents to audit income tax returns, especially those from people making over $1 million."

If this is the case, I actually wonder whether the shift in resources will benefit entrepreneurs or hurt them. I would guess that fewer company owners qualify for the narrower estate tax but, depending on the size of the business they run and the way it is incorporated, more of them make more than $1 million a year. What do you think? Should the estate tax be dropped? And if you were the IRS and had to choose between auditing estate tax filings versus auditing individuals earning a million-plus, which would you prefer?

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman