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Estate and Gift Tax Incentives and Inter Vivos Giving


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  • Joulfaian, David
  • McGarry, Kathleen
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    The estate tax has received a great deal of attention from policy makers and the public in recent years. Yet we know little about its effect on the transfer of wealth. In this paper we explore the effect of the tax on inter vivos giving. In particular, we look at the degree to which wealthy individuals exploit the potential for tax–free transfers as a means of spending–down their estates, and examine the responsiveness of inter vivos transfers over time to changes in the tax law. To address these questions we employ two data sets, each with important strengths and weaknesses. Using panel data from the Health and Retirement Study (HRS) we find that many of the wealthy fail to take advantage of the gift tax annual exemption to make tax–free transfers in any given year. Even those who do make a transfer in one year, often do not repeat the transfer annually and transfer far less than the tax law would allow. We then use data from linked gift and estate tax returns to examine giving over a much longer period. We find in the aggregate that there are sizable shifts in the timing of giving in response to tax changes, but again, the wealthy appear to transfer very little during their lifetimes. Overall, we conclude that while taxes are an important consideration in transfer behavior of the rich, their behavior is not universally consistent with a tax minimization strategy.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 57 (2004)
    Issue (Month): 2 (June)
    Pages: 429-44

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    Handle: RePEc:ntj:journl:v:57:y:2004:i:2:p:429-44

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    Cited by:
    1. Marta Melguizo Garde, 2007. "La motivación de las transmisiones lucrativas entre generaciones de una familia: modelos teóricos y evidencia empírica," Hacienda Pública Española, IEF, vol. 181(2), pages 81-118, June.
    2. Ohlsson, Henry, 2009. "The legacy of the Swedish gift and inheritance tax, 1884-2004," Working Paper Series, Center for Fiscal Studies 2009:13, Uppsala University, Department of Economics.
    3. Stewart, Charles Jr., 2006. "Gross national accumulation," Business Horizons, Elsevier, vol. 49(2), pages 105-113.
    4. Nordblom, Katarina & Ohlsson, Henry, 2005. "Tax avoidance and intra-family transfers," Working Papers in Economics 164, University of Gothenburg, Department of Economics.
    5. Jon Bakija & Joel Slemrod, 2004. "Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns," NBER Working Papers 10645, National Bureau of Economic Research, Inc.
    6. James R. Hines Jr., 2013. "How Important Are Perpetual Tax Savings?," NBER Chapters, in: Tax Policy and the Economy, Volume 27, pages 101-124 National Bureau of Economic Research, Inc.


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