Does the Estate Tax Raise Revenue?
In: Tax Policy and the Economy, Volume 1
Proponents of transfer taxation argue that levies on gifts and estates serve the dual purposes of breaking up large concentrations of private wealth, while raising significant revenues. A number of commentators have recently questioned the first of these purported advantages, on the grounds that a variety of available estate planning techniques allow wealthy individuals to pass on vast resources essentially tax free. Most techniques entail the use of intra vivos transfers, and are particularly effective when these transfers are made as early in life as possible. In this paper, I argue that the use of these same estate planning techniques also largely neutralize the second objective of transfer taxation by depressing income tax revenues. This effect is reinforced by the tendency for estate taxation to encourage charitable bequests. Although it is difficult to quantify the indirect revenue effects with a high degree of precision, I find that, prior to the Tax Reform Act of 1986, these effects could easily have offset all revenues collected through the estate tax. The recent Tax Reform Act only partially vitiates this conclusions.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
10931.||Handle:|| RePEc:nbr:nberch:10931||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226436319, December.
- James M. Poterba & Lawrence H. Summers, 1984. "The Economic Effects of Dividend Taxation," Working papers 343, Massachusetts Institute of Technology (MIT), Department of Economics.
- Stiglitz, Joseph E., 1983. "Some aspects of the taxation of capital gains," Journal of Public Economics, Elsevier, vol. 21(2), pages 257-294, July.
- Boskin, Michael J., 1976. "Estate taxation and charitable bequests," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 27-56.
- Kotlikoff, Laurence J & Summers, Lawrence H, 1981.
"The Role of Intergenerational Transfers in Aggregate Capital Accumulation,"
Journal of Political Economy,
University of Chicago Press, vol. 89(4), pages 706-732, August.
- Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
- Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486, December.
- Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1, December.