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The Redistributive Potential of Transfer Taxation

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  • James R. Hines Jr.

Abstract

The United States imposes substantial federal taxes on estates, gifts, and generation-skipping transfers exceeding high exemption levels (currently US$5.25 million). These transfer taxes are very distortionary compared to other federal taxes, and raise little revenue; their appeal lies in their distributional properties. Gratuitous transfers benefit both those who make the transfers and those who receive them; transfer taxes therefore impose burdens on both donors and recipients, in addition to distorting economic behavior. This article considers a potential reform of replacing federal transfer taxes with greater income taxes on the highest-income earners. Such a reform holds the prospect of raising additional federal tax revenue with improved efficiency and greater measured tax progressivity.

Suggested Citation

  • James R. Hines Jr., 2013. "The Redistributive Potential of Transfer Taxation," Public Finance Review, , vol. 41(6), pages 885-903, November.
    • Handle: RePEc:sae:pubfin:v:41:y:2013:i:6:p:885-903
    DOI: 10.1177/1091142113499964
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    References listed on IDEAS

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    Keywords

    estate tax; gift tax; tax reform;
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