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Do estate and gift taxes affect the timing of private transfers?

  • Bernheim, B. Douglas
  • Lemke, Robert J.
  • Scholz, John Karl

Proposals to alter the estate tax are contentious and have been debated largely in an empirical vacuum. This paper examines time series and cross-sectional variation to identify the effects of gift and estate taxation on the timing of private transfers. The analysis is based on data from the 1989, 1992, 1995, and 1998 waves of the Surveys of Consumer Finances. Legislative activity during this period reduced the tax disadvantage of bequests relative to gifts. Moreover, the magnitude of this reduction differed systematically across identifiable household categories. We find that households experiencing larger declines in the expected tax disadvantages of bequests substantially reduced inter vivos transfers relative to households experiencing small declines in the tax disadvantages of bequests. This implies that the timing of transfers is highly responsive to applicable gift and estate tax rates. These conclusions are based both on simple comparisons of the probability of giving across different time periods and groups, and on empirical specifications that control for a variety of potentially confounding factors, such as systematic changes in the fraction of wealth attributable to unrealized capital gains. The results also provide evidence of a systematic bequest motive for some high-wealth households.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 88 (2004)
Issue (Month): 12 (December)
Pages: 2617-2634

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Handle: RePEc:eee:pubeco:v:88:y:2004:i:12:p:2617-2634
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  3. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
  4. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
  5. B. Douglas Bernheim & Robert J. Lemke & John Karl Scholz, 2001. "Do Estate and Gift Taxes Affect the Timing of Private Transfers?," NBER Working Papers 8333, National Bureau of Economic Research, Inc.
  6. 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.
  7. Shleifer, Andrei & Summers, Lawrence H. & Bernheim, B. Douglas, 1986. "The Strategic Bequest Motive," Scholarly Articles 3721794, Harvard University Department of Economics.
  8. 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.
  9. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  10. Joulfaian, David, 1991. "Charitable Bequests and Estate Taxes," National Tax Journal, National Tax Association, vol. 44(2), pages 169-80, June.
  11. McGarry, Kathleen, 2001. "The cost of equality: unequal bequests and tax avoidance," Journal of Public Economics, Elsevier, vol. 79(1), pages 179-204, January.
  12. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
  13. Joel Slemrod & Wojciech Kopczuk, 2000. "The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors," NBER Working Papers 7960, National Bureau of Economic Research, Inc.
  14. William G. Gale & Joel B. Slemrod, 2001. "Rethinking the Estate and Gift Tax: Overview," NBER Working Papers 8205, National Bureau of Economic Research, Inc.
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