2017 Articles

Soldiers with Fortunes? Rethinking the Tax Treatment of Fallen Combatants

Cooper, Jeffrey A.

Section 2201 of the Internal Revenue Code provides a partial estate tax exemption for members of the armed forces who die in, or as a result of, combat operations. In this Article, I explore the origins of this exemption and assess the extent to which it serves three important policy goals: (1) reducing financial and administrative burdens on military families, (2) incentivizing military service, and (3) avoiding the moral hazard of the government being able to “profit” (through increased tax revenues) as a result of combat deaths.

Through this analysis, I conclude that this arguably well-intentioned provision does little to serve these three policy ends. I urge Congress to abandon the provision and replace it with expanded, simplified, income tax relief for the families of those lost in combat. This income tax relief will better serve the enumerated policy goals than does the current combat exemption, offering more meaningful relief to more typical military families.