The death of a prolific taxpayer will immediately trigger the imposition of an estate tax on their assets, which will result in the state collecting even more tax revenue than if the taxpayer had remained alive.

Death is inevitable. Cutting off the production of future tax revenue now is always preferable to cutting off the production of future tax revenue later.

Also, it seems you've already dismissed this, but it must be said: killing hostages bad.

I agree. Everything about war is bad, and it's even worse if you lose.