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

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Author Info
Joel Slemrod
Wojciech Kopczuk

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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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7960.

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Date of creation: Oct 2000
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Handle: RePEc:nbr:nberwo:7960

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H2 - Public Economics - - Taxation, Subsidies, and Revenue
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

References listed on IDEAS
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    Other versions:
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  1. William G. Gale & Joel B. Slemrod, 2001. "Rethinking the Estate and Gift Tax: Overview," NBER Working Papers 8205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Louis Kaplow, 2000. "A Framework for Assessing Estate and Gift Taxation," NBER Working Papers 7775, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. James M. Poterba & Scott Weisbenner, 2000. "The Distributional Burden of Taxing Estates and Unrealized Capital Gains at the Time of Death," NBER Working Papers 7811, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Miguel Angel Barberán Lahuerta, 2006. "Redistribution and progressivity of taxes on inheritances and donations and analysis with data of panel," Hacienda Pública Española, IEF, vol. 177(2), pages 25-55, April. [Downloadable!]
  5. Laura de Pablos Escobar, 2006. "The Personal Wealth Taxes: The Inheretance and Gift Taxes and the Net Wealth Tax in Spain," International Studies Program Working Paper Series, at AYSPS, GSU paper0606, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  6. Marco Cagetti & Mariacristina De Nardi, 2004. "Taxation, entrepreneurship and wealth," Working Papers 632, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  7. 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. [Downloadable!] (restricted)
  8. CREMER, Helmuth & PESTIEAU, Pierre, 2004. "The tax treatment of intergenerational wealth transfers," CORE Discussion Papers 2004062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  9. Helmuth Cremer, Pierre Pestieau, 2003. "Wealth Transfer Taxation: A Survey," Economics Working Paper Archive 394, Levy Economics Institute, The. [Downloadable!]
    Other versions:
  10. Rebelein, Robert P., 2005. "Intergenerational Strategic Behavior and Crowding Out in a General Equilibrium Model," Vassar College Department of Economics Working Paper Series 74, Vassar College Department of Economics. [Downloadable!]
  11. Holger Strulik & Volker Grossmann, 2008. "Should Continued Family Firms Face Lower Taxes than other Estates?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  12. Thomas Piketty & Emmanuel Saez, 2001. "Income Inequality in the United States, 1913-1998 (series updated to 2000 available)," NBER Working Papers 8467, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Douglas Holtz-Eakin & Donald Marples, 2001. "Distortion Costs of Taxing Wealth Accumulation: Income Versus Estate Taxes," NBER Working Papers 8261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Shinichi Nishiyama, 2002. "Bequests, Inter Vivos Transfers, and Wealth Distribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 892-931, October. [Downloadable!] (restricted)
  15. Miguel Ángel Barberán Lahuerta, 2006. "Transmisiones gratuitas de riqueza "mortis causa" e "inter vivos"; análisis diferenciado de su comportamiento respecto al objetivo de la redistribución," Economic Working Papers at Centro de Estudios Andaluces E2006/15, Centro de Estudios Andaluces. [Downloadable!]
  16. Wojciech Kopczuk & Joel Slemrod, 2001. "Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity," NBER Working Papers 8158, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Elin Halvorsen and Thor O. Thoresen, 2005. "The relationship between altruism and equal sharing. Evidence from inter vivos transfer behavior," Discussion Papers 439, Research Department of Statistics Norway. [Downloadable!]
  18. Marco Cagetti & Mariacristina De Nardi, 2007. "Estate taxation, entrepreneurship, and wealth," Working Paper Series WP-07-08, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  19. Wojciech Kopczuk & Emmanuel Saez, 2004. "Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns," NBER Working Papers 10399, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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