Soldiers with Fortunes? Rethinking the Tax Treatment of Fallen Combatants

Abstract

From the Revolutionary War to the battle against international terrorism, American history has been shaped by military conflict. That national history also reflects an ongoing effort to thank those who have served in our nation’s armed forces and to honor those who have fallen in combat. Like much in our national consciousness, such as our desires to incentivize energy efficiency, higher education, and home ownership, our quest to honor our fallen heroes has shaped modern tax policy. The tax code contains a litany of tax relief provisions targeted toward members of the nation’s military, including statutes providing relief from income and estate taxes for those who die in combat operations. In this article, I explore the origins, justification and operation of the estate tax relief offered to those who fall in combat (hereinafter the “combat exemption” or “the estate tax exemption”), currently codified in Section 2201 of the Internal Revenue Code (hereinafter “the Code”). I contend that while well-intentioned, the combat exemption is a poorly-targeted provision that does little to address the plight of those left behind by our fallen heroes. I urge Congress to abandon the provision and instead to offer greater, simplified, income tax relief to the families of those lost in combat.