Rethinking the Estate and Gift Tax: Overview

This paper surveys, integrates, and extends research on estate and gift taxes. The paper begins with information on features of U.S. transfer taxes, characteristics of recent estate tax returns, the evolution of transfer taxes, the role of such taxes in other countries, and theory and evidence concerning why people give intergenerational transfers. The next sections examine the incidence, equity, and efficiency of transfer taxes. Subsequent sections cover administrative issues and the effects on saving, labor supply, entrepreneurship, inter vivos gifts, charitable contributions, and capital gains realizations. The paper closes with a discussion of policy options and a short conclusion. 1The idea of making death a taxable event infuriates many people. Winston Churchill called estate taxes an attempt to tax dead people rather than the living.1 Steve Forbes campaigned in favor of “no taxation without respiration."2 Equally striking remarks come from tax experts. Lawyer Edward McCaffery (1999) has equated estate taxation with grave robbery, while economist Bruce Bartlett (1997) points out that a key plank in the Communist Manifesto was the abolition of inheritance rights