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The Federal Estate Tax: History, Law, and Economics

95 Pages Posted: 2 Apr 2010 Last revised: 11 Aug 2017

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: July 1, 2017


This manuscript traces the evolution of the estate tax since its enactment. It provides a brief legislative history and description of the structure and features of the tax through 2016. Next it reviews the fiscal contribution of each of the estate and gift taxes through the turbulent recent years. In addition, it provides trends on the number of individuals and households touched by the tax as reflected by the number of returns filed over time through 2016. Furthermore, it also provides a comprehensive review of the behavioral effects of the tax. Estate and gift taxes may have considerable implications for economic behavior. The latter include the effects on saving, labor supply, charitable giving, migration, capital gains realizations, and timing of transfers among others.

The estate tax is the only wealth tax levied by the Federal government. It was enacted in 1916, and its scope was expanded to encompass gifts as well. It evolved over the years into the current Unified Transfer Tax which consists of the estate, gift, and generation skipping transfers taxes. The major features of the tax in effect in 2016 reflect a maximum tax rate of 40 percent and an exemption of $5,450,000 (indexed $5,000,000), with a full exemption for spousal and charitable bequests. The tax provides for a deduction for state death taxes, which replaces the more generous pre-2002 credit for such taxes.

The revised text expands on previous drafts by covering recent changes in the estate tax as well as documenting their consequences.

Keywords: Estate Tax, Gift Tax, History, Behavioral Effects

JEL Classification: H24, H31

Suggested Citation

Joulfaian, David, The Federal Estate Tax: History, Law, and Economics (July 1, 2017). Available at SSRN: or

David Joulfaian (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

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