The Federal Estate Tax: History, Law, and Economics

Posted: 2 Apr 2010 Last revised: 27 Jul 2018

See all articles by David Joulfaian

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

Date Written: February 1, 2018

Abstract

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 2018 reflect a maximum tax rate of 40 percent and an exemption of $11,180,000 (indexed $10,000,000 to 2011), 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.

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

JEL Classification: H24, H31

Suggested Citation

Joulfaian, David, The Federal Estate Tax: History, Law, and Economics (February 1, 2018). Available at SSRN: https://ssrn.com/abstract=1579829 or http://dx.doi.org/10.2139/ssrn.1579829

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

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

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