The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors

54 Pages Posted: 11 Oct 2000 Last revised: 14 Sep 2001

See all articles by Joel B. Slemrod

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Wojciech Kopczuk

Columbia University - Graduate School of Arts and Sciences - Department of Economics; Columbia University - School of International & Public Affairs (SIPA); National Bureau of Economic Research (NBER)

Date Written: October 2000

Abstract

Using estate tax return data from 1916 to 1996, we investigate the impact of the estate tax on reported estates, which reflects the impact of the tax on both wealth accumulation and avoidance. An aggregate measure of reported estates is generally negatively correlated with summary measures of the level of estate taxation, holding constant other influences. In pooled cross-sectional analysis that makes use of individual decedent information, the relationship between the concurrent tax rate and the reported estate is fragile and sensitive to the set of instruments that are used to capture exogenous tax rate variation. However, the negative effect of taxes appears to be stronger for those who die at a more advanced age and with a will, both of which are consistent with the theory of how estate taxes affect altruistic individuals. Finally, we find that the tax rate that prevailed at age 45 or ten years before death is more clearly (negatively) associated with reported estates than the tax rate prevailing at death. Future research should concentrate on developing lifetime measures of the effective tax rates and on better measurements of the effective tax rate for married couples.

Suggested Citation

Slemrod, Joel B. and Kopczuk, Wojciech, The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors (October 2000). NBER Working Paper No. w7960. Available at SSRN: https://ssrn.com/abstract=245583

Joel B. Slemrod (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

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National Bureau of Economic Research (NBER)

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Wojciech Kopczuk

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

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New York, NY 10027
United States

Columbia University - School of International & Public Affairs (SIPA)

420 West 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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