THE FEDERAL ESTATE AND GIFT TAX:

Description, Profile of Taxpayers, and Economic Consequences

by

David Joulfaian*

U.S. Department of the Treasury

OTA Paper 80 December 1998

OTA Papers is an occasional series of reports on the research, models, and datasets developed to 

inform and improve Treasury’s tax policy analysis. The papers are works in progress and subject 

to revision. Views and opinions expressed are those of the authors and do not necessarily 

represent official Treasury positions or policy. OTA Papers are distributed in order to document 

OTA analytic methods and data and invite discussion and suggestions for revision and 

improvement. Comments are welcome and should be directed to the authors. 

Office of Tax Analysis

U.S. Department of the Treasury

Washington, DC 20220

david.joulfaian@do.treas.gov

___________ 

* Financial Economist, Office of Tax Analysis. The paper greatly benefitted from comments by 

Gerald Auten, Leonard Burman, Lowell Dworin, Laura Kalambokidis, Beth Kaufman, and Jerry 

Tempalski. 
Summary 

The estate tax was enacted in 1916. The gift tax was enacted in 1924, repealed in 1926, 

and reenacted in 1932. In 1976, the gift tax was integrated with the estate tax, sharing a common 

tax rate schedule with a current maximum tax rate of 55 percent. Estate and gift taxes are 

complemented with a generation skipping transfer tax, first enacted in 1976, at a current flat rate 

of 55 percent. 

The estate and gift tax provides for an unlimited marital deduction and an effective 

exemption of $625,000 in 1998, by virtue of the unified credit, which is scheduled to increase to 

$1,000,000 by the year 2006. The estate tax provides for a credit for state death taxes at a 

maximum rate of 16 percent of the federal taxable estate, which effectively reduces the Federal 

marginal tax rate for the wealthiest estates to a maximum of 39 percent. 

Estate and gift taxes have considerable implications for economic behavior as well as for 

income and wealth distribution. There is overwhelming evidence that estate taxes stimulate 

charitable bequests, and recent evidence indicates that they influence lifetime giving as well. 

Recent evidence also suggests that estate taxes, by reducing the benefits of the step up in basis, 

also influence capital gains realizations. Because they apply primarily to the very wealthy, who 

tend to realize little of their income, estate and gift taxes bolster the progressivity of the total tax 

system. 
Table of Contents 

1. Introduction

2. Objectives of the Tax

3. Description of the Tax

3.1 The Tax Base

3.1.1 Valuation

3.1.2 Life Insurance

3.1.3 Family Owned Business

3.1.4 Pension Assets

3.2 Exemptions and Exclusions

3.3 Deductions

3.3.1 Marital Deduction

3.3.2 Charitable Bequests

3.3.4 Other Deductions

3.4 Rate Structure

3.5 Tax Credits

3.5.1 The Unified Credit

3.5.2 The State Death Tax Credit

3.5.3. Tax Credit for Gift Tax

3.5.4 The Credit for Prior Federal Tax Paid

3.6 Tax Due Dates

3.7 Tax Deferral

4. Profile of Estate Taxpayers and Beneficiaries

4.1 A Profile of Estate Tax Decedents

4.2 The Heirs

4.2.1 A Profile of the Children

4.2.2 Charitable Giving

4.3 A Profile of Gift Donors

5. The Fiscal Contribution of Federal Estate and Gift Taxes

5.1 Trends in Estate Tax Revenues

5.2 Trends in Gift Tax Revenues

6. Economic Effects of the Estate and Gift Tax

6.1 Behavioral Effects

6.1.1 Charitable Giving

6.1.2. Capital Gains Realizations

6.1.3 Labor Supply and Saving of the Heirs

6.1.4. Inter-vivos Gifts
Table of Contents (continued) 

6.1.5. Interstate Competition 

6.2 Distributional Effects 

7. Concluding Comment 

References 
List of Tables 

Table 1 Historical Features of the Estate Tax

Table 2 Historical Features of the Gift Tax

Table 3 Historical Features of the Generation Skipping Transfer Tax

Table 4 Estate Tax and State Death Tax Credit Rate Schedules

Table 5 An Illustration of the Taxation of Transfers under Estate, Gift, and Generation Skipping

Taxes 

Table 6 Federal Marginal Tax Rates After Unified and State Death Tax Credits 

Table 7 Number of Adult Deaths and Taxable Estates of Decedents in 1992 

Table 8 Estate Tax Profile Of Decedents In 1992 

Table 9 Life Insurance Ownership by Size of Estate, Marital Status, and Type 

Table 10 Estates Electing Special Use Valuation and Tax Deferrals, 1992 

Table 11A Number of Heirs by Type of Relation and Size of Estate 

Table 11B Amount of Inheritance by Type of Relation and Size of Estate 

Table 11C Average Inheritance by Type of Relation and Size of Estate 

Table 12A Number of Children, Total Income, and Inheritance Received 

Table 12B Average Income and Inheritance Received by the Children 

Table 13 Charitable Bequests by Size of Estate, 1992 

Table 14 Charitable Gifts in Life and at Death 

Table 15 Cumulative Post-1977 Taxable Gifts Reported for 1992 Decedents 

Table 16 Estate and Gift Tax Receipts Compared to Total Federal Government Receipts, 

1917-1997 

Table 17 Estate And Gift Tax Receipts by Source, 1917-1997 

Table 18 Nominal and Real Exemption Amounts Under the Estate Tax, 1916-2006 

Table 19 Life Expectancy Of Surviving Spouses: 1989 Estate Tax Decedents 

Table 20 Summary of the Findings on the Effect of Estate Taxes on Charitable Bequests 

Table 21 Estimated Tax Price Elasticities for Charitable Bequests by Type of Donee, 1986 

Table 22A Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: All Estates 

Table 22B Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: Estates of Married 

Individuals 

Table 22C Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: Estates of Individuals 

Not Married 

Table 23A Inheritance and Labor Force Transitions of Singles 

Table 23B Inheritance and Labor Force Transitions of Joint filers 

Table 24 Income and Wealth of Estate Tax Decedents 

Table 25 Income and Estate Tax Liabilities of Estate Tax Decedents 

List of Figures 

Figure 1 Estate Tax Receipts: Fiscal Years 1917-1997

Figure 2 Exemption Amounts Under the Estate Tax, 1916-2006

Figure 3 Gift Tax Receipts: Fiscal Years 1925-1997
1. INTRODUCTION 

As early as 1797, the Federal government experimented with a number of transfer taxes 

before settling on the estate tax system in 1916.1 This tax system, which has evolved into the 

Unified Transfer Tax, currently consists of three components: the estate tax, the gift tax, and the 

generations skipping transfer tax. This tax represents the only wealth tax levied by the Federal 

government. 

The estate tax, enacted in 1916, was chosen over an inheritance tax because it is relatively 

simpler to administer.2 At the time of its enactment, it applied to the wealth of decedents with 

estates in excess of $50,000, with a maximum tax rate of 10 percent. Over the years, the tax 

underwent numerous changes, especially in 1976 and 1981, and currently applies to taxable 

estates in excess of $625,000 in 1998 with a maximum tax rate of 55 percent.3 

The gift tax was first enacted in 1924, repealed in 1926, and re-enacted in 1932 in an 

attempt to reduce estate and income tax avoidance. In 1976, the gift tax was integrated with the 

estate tax under the Unified Transfer Tax, sharing a common tax rate schedule with a current 

maximum tax rate of 55 percent. As with the estate tax, cumulative gifts with a value below 

$625,000 are effectively exempt from taxation.4 Both estate and gift taxes are complemented 

with a generation skipping transfer tax (GSTT), first enacted in 1976 and drastically revamped in 

1986, with a flat rate of 55 percent for cumulative transfers in excess of $1,000,000. 

1

 For a historic overview, see Joint Committee on Taxation (1998), Johnson and Eller (1998), 

Eller (1997), Pechman (1987), Zaritsky (1980), Fiekowsky (1959), and Paul (1954). 

2

 See Office of Tax Analysis (1963, 17). An estate tax is levied on the wealth held in a 

decedent’s estate, while the inheritance tax depends on the relationship of the heir to the decedent 

and the size of the transfer. Because the current tax accords different treatments to some 

transfers depending on the relationship of the beneficiary, it can be viewed as a hybrid tax 

retaining some of the features of an inheritance tax. 

3

 This increases in steps to $1,000,000 in 2006. 

4

 This also increases in steps to $1,000,000 in 2006. 

1 
2

This paper is organized as follows. The next section lays out the objectives of the current 

Unified Transfer tax. Section 3 describes estate and gift taxes and their evolution. Section 4 

provides a profile of decedents with estates subject to the estate tax and their beneficiaries. 

Section 5 discusses trends in revenues. Section 6 discusses the economic effects of the estate and 

gift tax. A concluding comment is provided in section 7. 

2. OBJECTIVES OF THE TAX 

The enactment of the estate and gift taxes, and their evolving structures over the years, 

serve several legislative objectives. First and foremost, the estate tax was enacted for its revenue 

yield. As revenues declined following the outbreak of World War I, the tax was enacted to help 

finance the looming deficit in fiscal year 1917 and the “war-readiness” campaign.5 In fiscal year 

1918, its first full year of enactment, the estate tax yielded $45.5 million, which accounted for 1.3 

percent of the receipts of the Federal government.6 The gift tax was re-enacted (Revenue Act of 

1932) as government revenues shrank during the Great Depression. In fiscal year 1997, estate 

and gift taxes yielded about $20 billion and accounted for about 1.3 percent of Federal 

government receipts. 

A second objective, which is very much related to the first, is that these taxes act as a 

backstop to the income tax and offset the erosion of its base. The gift tax was enacted in 1924 

and re-enacted in 1932 to curb estate and income tax avoidance.7 Much of the capital income that 

escapes the income tax is subject to the estate tax. Under the personal income tax, accrued 

capital gains are taxed only when realized, and interest income from state and local bonds and the 

inside build-up on life insurance policies are tax-exempt. In contrast, most assets owned by 

decedents are included in their gross estates. As such, these taxes bolster the progressivity of the 

5

 See Paul (1954, p. 105) and OTA (1963, p. 15-16). The projected deficit for fiscal year 

1917 was $177 million. 

6

 In fiscal year 1917, receipts were $6.1 million, or 0.8 percent of total receipts. Estate and gift 

tax revenues peaked at 9.7 percent of total receipts, at $379 million, in fiscal year 1936. 

7

 See OTA(1963, p. 26). 
3

tax system.8 

A reduction in wealth concentration is a third objective. By taxing the wealth holdings of 

the wealthiest estates, estate and gift taxes are expected to reduce the size of bequests, which 

reduces the wealth accumulated over several generations. This is also accomplished by subjecting 

to estate taxation capital income that has escaped the personal income tax. When the estate tax 

was enacted, large concentrations of wealth were viewed as a danger to a democracy, and large 

inheritances were considered inconsistent with democratic ideals of equal opportunity.9 

Ensuring that the wealth of each generation is taxed is another objective. When the GSTT 

was enacted in 1976 and expanded in 1986, Congress was concerned that estate and gift taxes 

were avoided by the wealthy through generation skipping arrangements, such as gifts to 

grandchildren. Because of the emphasis on taxing each generation, an additional tax, the GSTT, 

is also levied on these transfers. The rationale for the GSTT is that a tax should be levied on 

wealth transfers to children, coupled with another tax when they, in turn, transfer wealth to their 

children. The GSTT applies as if transfers to grandchildren were transferred initially to the 

children, who in turn transfer them to their children. As such, the GSTT weakens the incentives 

to make tax-motivated transfers to grandchildren. 

The states viewed estate taxation as their preserve,10 and, thus, to minimize objection by 

the states to the enactment of death taxes by the Federal government, the estate tax provides a tax 

credit for state death taxes, thereby keeping the state tax base intact (Revenue Acts of 1924, 

1926). The credit was first set at 25 percent of the federal estate tax in effect in 1924 and later 

changed to 80 percent of the statutory tax rates that were in effect in 1926, equivalent to a 

maximum credit rate of 16 percent which is part of the tax code today. For the largest estates, the 

credit reduces Federal tax liability by about 29 percent. Effectively, the Federal estate tax 

minimizes the interstate competition for the wealthy, as the state death tax credit essentially 

offsets taxes levied by states on the wealthiest of estates. 

8

 See Graetz (1983). 

9

 See Fisher (1916, p. 711), Carnegie (1933, p. 10), and Paul (1954, p. 63). 

10 See Bullock (1907), and Mellon (1924, p. 111). 
4

3. DESCRIPTION OF THE TAX 

Since their inception, estate and gift taxes have undergone a number of changes affecting 

the assets taxed, allowable deductions, exemptions, tax rate schedule, and credits. 

3.1. The Tax Base 

The current estate tax base has not changed much since the Act of 1954. The base 

includes the value of real estate, cash, stocks, bonds, businesses, pensions, and proceeds from life 

insurance policies owned by the decedent. Together, these assets form the gross estate. 

Cumulative taxable lifetime gifts are added back to the taxable estate in computing the estate tax, 

with a credit provided for previously paid gift taxes.11 

Although the gift tax was not enacted until 1924, from its enactment in 1916 the estate tax 

treated gifts made within two years of the date of death as transfers made in contemplation of 

death, and required such gifts to be included in the taxable estate. The Tax Reform Act of 1976 

(TRA76), which integrated the gift and estate taxes, required the inclusion in the taxable estate of 

all gifts made within three years of the date of death. Beginning in 1982, and following the 

Economic Recovery Tax Act (ERTA) of 1981, generally only transfers of ownership of life 

insurance policies and the gift tax on transfers made within three years of the date of death are 

included in the estate.12 

The gift tax applies to lifetime transfers of assets just as transfers at death are taxed under 

the estate tax. Cumulative lifetime taxable gifts are added to the current year’s taxable gifts in 

computing the gift tax, with a credit provided for previously paid gift taxes.13 One major 

distinction between the estate tax and the gift tax is that the latter applies on a tax exclusive basis. 

In other words, the gift tax is based on the amount received by the donee and not the total 

11 This treatment is especially relevant in the presence of progressive tax rates. 

12 Internal Revenue Code, Section 2035. Other assets that must be added back to the estate 

include transfers of future interests and revocable trusts. 

13 Again, this treatment is relevant to the extent that progressive tax rates apply. 
5

amount, including tax, transferred by the donor.14 

When transfers, either testamentary (at death) or inter-vivos (between living persons), skip 

a generation, as in the case of a grandchild, the underlying assets become subject to the GSTT, in 

addition to the estate and gift tax. Beginning with the Tax Reform Act of 1986 (TRA86), the 

GSTT applies regardless of whether the transfer is made directly to a grandchild, or through a 

trust as provided for in TRA76. 

3.1.1. Valuation 

In determining the value of the gross estate, assets are generally valued at their market 

value (or appraised value in the absence of a publicly tradeable market) on the date of death. 

Because market values can fall between the date of death and the date the estate tax is due, the 

tax code provides an alternative valuation date.15 The alternative valuation date, first introduced 

in 1935, was one year from the date of death. Under current law, estates may elect to value their 

assets at six months after the date of death if the election would reduce both the value of the gross 

estate and the estate tax due. 

The tax code also provides an alternative valuation method for real property used on farms 

or in businesses.16 Under this special use valuation method, the value of an asset is based on its 

value as used in an ongoing business17 when that is less than its market value. The excess of the 

14 For an illustration, assume a parent wishing to make a total transfer of $100 faces a gift or 

estate tax rate of 50 percent. Under the estate tax, the estate pays a tax of $50, and the heirs 

receive $50. Under the gift tax, the tax is $33.33 and the beneficiaries receive $66.67, for a 

savings of $16.33. The tax advantages of making gifts, however, are in part offset by the income 

tax treatment of capital gains. Assets are accorded a step-up in basis in the case of bequests, and 

a partial basis carry-over in the case of gifts; the basis of the donee in the case of a gift is the 

donor’s basis increased by the gift tax multiplied by the share of appreciation in the property 

transferred -- Section 1015(d)(6). 

15 Section 2032. 

16 Section 2032A. 

17 Assets may be valued based on capitalized income or the values of properties employed in 

similar enterprises. 
6

market value over the special use value is excluded from the gross estate. This exclusion was 

first introduced in 1976, and limited to a maximum of $500,000. The maximum exclusion was 

increased to $750,000 in 1983, and is indexed for inflation beginning in 1999 (see Table 1). The 

heir to such property is required to actively manage it. Failure to materially participate in its 

operations or disposal of the property within 10 years of its inheritance will subject the heirs to 

recapture taxes.18 

In principle, assets are supposed to be valued at their fair market value. In certain 

circumstances, however, the reported value may be less than the market value. For example, if a 

decedent, or donor, owned a large block of publicly traded stock, the market value reported for 

estate or gift tax purposes would likely be discounted. The discounted value may reflect the 

reduction in the expected trading price of such stock if a large block were to be sold. This 

“blockage” rule is one of many valuation methods employed by estate planners. 

Minority discounts are another valuation method commonly used to value inter-vivos gifts, 

especially transfers of closely held businesses. This valuation discount is also extended to estates 

when a minority position is maintained at death. The value of the interest transferred may be less 

than the pro-rata share of the value of the corporation or entity transferred due to the lack of 

control or marketability by the new owner.19 

3.1.2. Life Insurance 

Some life insurance proceeds are included in the gross estate, depending on the form of 

ownership of the policy.20 Life insurance proceeds first became taxable under the Act of 1918. 

Under the Act, proceeds from policies owned by the decedent, plus proceeds in excess of $40,000 

from life insurance policies owned by others, were included in the gross estate. In the Act of 

18 Prior to ERTA in 1981, the waiting period was 15 years. 

19 This valuation method may seem reasonable in the case of active businesses, but the 

potential for abuse is significant in the case of passive businesses. A growing practice in recent 

years is for investors to bundle their stocks, bonds, or personal residences, into partnerships and 

make fractional transfers to their heirs. 

20 Section 2042. 
7

1942, all proceeds from policies where the decedent paid the premiums or had an incidence of 

ownership were also made taxable. The Act of 1954 dropped the “premium paid” test, and since 

then only proceeds from policies owned by the insured are taxable to the estate. 

3.1.3. Family Owned Business 

The Taxpayer Relief Act of 1997 (TRA97), as amended in the Internal Revenue Service 

Restructuring and Reform Act of 1998, introduced a new provision benefitting family-owned 

businesses. Beginning in 1998, estates may deduct up to $675,000 of the interest in a family 

business in computing the taxable estate.21 For those who claim the maximum deduction, 

however, the maximum exemption available by virtue of the unified credit is limited to $625,000, 

for a combined value of $1.3 million. To qualify for this treatment, the value of the business must 

exceed 50 percent of the adjusted gross estate. Furthermore, the heirs are required to materially 

participate in running the business. 

3.1.4. Pension Assets 

Prior to 1982, assets held in qualified pension plans, individual retirement accounts 

(IRAs), and similar plans were generally excluded from the gross estate; this exclusion was limited 

to $100,000 by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). Beginning with 

the Deficit Reduction Act of 1984, these assets are fully included in the gross estate.22 To avoid 

double taxation, however, an income tax deduction for estate tax paid on such assets is provided 

for distributions from qualified plans to the heirs. 

3.2. Exemptions and Exclusions 

When first enacted, the estate tax provided for an exemption of $50,000, or about 

$752,000 in 1998 dollars, in computing the taxable estate. Over the years, as Table 1 illustrates, 

the exemption fluctuated within a narrow band through 1976 when it was $60,000. TRA76 

21 Section 2057. 

22 Section 2039. 
8

repealed this exemption and replaced it with the Unified Credit of $30,000 in 1977, which is 

equivalent to an exemption of $120,667, or $326,000 in 1998 dollars (see Section 3.5.1 below). 

Beginning in 1998, permanent conservation easements may benefit from a 40 percent 

exclusion of the value of land, up to a maximum of $100,000, depending on the location of the 

property (TRA97).23 The exclusion rises to $200,000 in 1999, $300,000 in 2000, $400,000 in 

2001, and $500,000 in 2002 and thereafter. 

The gift tax provides for an annual exclusion of $10,000, or $20,000 in split gifts by 

husband and wife, per donee.24 Prior to ERTA in 1981, the exclusion was limited to $3,000 (see 

Table 2). When first enacted, the gift tax provided a specific, or lifetime, exemption of $40,000, 

above and beyond the annual exclusion. The exemption fluctuated very little over the years 

through 1976 when it was $30,000, as shown in Table 2. TRA76 also repealed this exemption 

and replaced it with the Unified Credit as it integrated the estate and gift tax. 

The GSTT allows an exemption of $1,000,000 for cumulative generation skipping 

transfers per donor, as provided for by TRA86 and shown in Table 3.25 The exemption was 

$250,000 when the GSTT was first enacted in 1976 (TRA76). TRA86 also provided for an 

additional temporary $2 million exemption per grandchild for the period October 23, 1986, 

through 1989. The GSTT exemption, as provided for in TRA97, is indexed for inflation effective 

for transfers in 1999. 

3.3. Deductions 

A number of transfers and expenses are deductible in computing the taxable estate. These 

include spousal bequests (marital deduction), bequests to charity, debts of the decedent, and 

expenses incurred by the estate. 

23 Section 2031(c). 

24 Section 2503(b). 

25 Section 2631(a). 
9

3.3.1. Marital Deduction 

All transfers of property to a U.S. citizen spouse are deductible in computing the taxable 

estate and gifts.26 Prior to ERTA in 1981, the deduction for spousal bequests was limited to the 

greater of $250,000 or one-half the Adjusted Gross Estate. The latter is defined as the gross 

estate less funeral expenses, estate administrative expenses, and debts. Prior to TRA76, estates 

could deduct only 50 percent of the gross estate (see Table 1), and prior to the Act of 1948 only 

community property was excluded from the estate. Limiting the deduction to one-half of the 

estate was motivated by a desire to equalize the tax treatment of transfers to spouses in common 

law states with those in community property law states.27 The motivation for the unlimited 

marital deduction in the 1981 act was that husband and wife ought to be treated as one unit, and 

that estate taxes would be paid eventually at the death of the surviving spouse. The act continued 

to provide the step up in basis on assets transferred to the spouse at death, however, and treat the 

two as distinct economic units. 

As under the estate tax, all transfers of property to a U.S. citizen spouse are also 

deductible from the gift tax base. Prior to 1982, the deduction for spousal gifts was limited to 50 

percent of the lifetime gifts in excess of $200,000. However, the first $100,000 of spousal gifts 

was fully deductible and the next $100,000 was fully taxable. Prior to 1977, the deduction was 

limited to only 50 percent of the gift (see Table 2). 

3.3.2. Charitable Bequests 

Amounts donated to qualifying charitable organizations and federal, state and local 

governments are deductible in computing the taxable estate and gifts.28 The deduction was first 

introduced by the 1918 Act for the estate tax. Lifetime charitable contributions are also 

deductible in computing the taxable income of the donor. The 1969 Tax Reform Act tightened 

the rules governing bequests to foundations, especially those engaged in dealings with the heirs. 

26 Section 2056. 

27 See Pechman (1987, p. 241) and Shoup (1966). 

28 Section 2055. 
10

3.3.3. Other Deductions 

The gross estate is reduced by the amount of outstanding debts held at death and by estate 

expenses.29 These debts include mortgages and outstanding medical expenses, among others. 

Expenses such as funeral expenses and expenses involving the settlement of the decedent's estate, 

such as attorney and executor commissions, are also deductible under the estate tax.30 

Alternatively, rather than being deducted against the taxable estate, some of these expenses may 

be deducted against the estate’s (fiduciary) income tax. Attorney fees, for instance, may offset the 

taxable income derived from assets in the period from the date of death to the settlement of the 

estate.31 

Prior to ERTA in 1981, bequests to orphan children could also be deducted. This 

deduction was limited to $5,000 for each year the orphan child was under age 21. Another 

deduction, introduced by TRA86, was for the sale of employer securities to employee stock 

ownership plans (ESOPs). This deduction was repealed for decedents dying after July 12, 1989 

(Omnibus Budget Reconciliation Act of 1989). 

3.4. Rate Structure 

The tax rate schedule ranges from 18 percent on the first $10,000 of taxable estate and 

gifts to 55 percent for the excess over $3,000,000 of taxable estate and gifts. The current rate 

schedule is shown in the left panel of Table 4. This rate schedule applies to the gross estate less 

allowable deductions plus lifetime taxable gifts. When the estate tax was first enacted, the tax 

rates ranged from 1 percent to 10 percent. As shown in Table 1, these rates have changed 

considerably over the intervening years. 

From 1987 through 1997, the benefit of the graduated tax rate schedule, along with the 

unified credit described below, was phased out by a 5% surtax for taxable estates between 

29 Section 2053(a). 

30 Section 2053. 

31 For the tax minimizing estate, the choice of whether to claim the expenses against the 

income tax or the estate tax depends on the respective tax rates. 
11

$10,000,000 and $21,040,000, creating a marginal tax rate of 60 percent (OBRA87). Beginning 

in 1998, as provided for in TRA97, the graduated rates are phased out completely at taxable 

estates of $17,184,000. 

Gift tax rates, beginning in 1977, share a common rate schedule with the estate tax. Like 

the estate tax rates, gift tax rates have fluctuated considerably over the years (see Table 2). Prior 

to 1977, the gift tax rates were set at 75 percent of the estate tax rates. The GSTT rate is equal 

to the maximum statutory estate and gift tax rate, currently 55 percent (see Table 3). Table 5 

provides an example of how the GSTT works through the estate and gift tax. 

3.5. Tax Credits 

Several tax credits are available under the estate and gift tax. These credits include the 

unified credit, the state death tax credit, the estate tax credit for gift taxes paid, and the credit for 

previously paid death taxes. 

3.5.1. The Unified Credit 

The largest of the available credits is the unified credit.32 The Act of 1976 provided for a 

tax credit of $30,000 in 1977, which is equivalent to an exemption of $120,667. As Table 1 

illustrates, the value of this credit increased over time, especially with the enactment of ERTA in 

1981. From 1987 through 1997, the value of the unified credit was fixed at $192,800, equivalent 

to an exemption of $600,000, for combined estate and gift taxes. Thus, the first $600,000 of a 

taxable estate was taxed at a zero rate. Consequently, the marginal tax rate for estates in excess 

of $600,000 began at 37 percent. Taxable estates over $21,040,000 faced a flat tax rate of 55 

percent. The unified credit, along with the progressive rate structure, was phased out between 

$10,000,000 and $21,040,000, which created an effective marginal tax rate of 60 percent (see 

bottom of Table 6). The unified credit is set at $202,050 in 1998, and increases in steps to 

32 Section 2010. 
12

$345,800 in 2006, as provided for in TRA97.33 These credit levels are equivalent to exemptions 

of $625,000 and $1,000,000 respectively, as shown in Tables 1 and 2. Due to a technical error in 

drafting TRA97, the unified credit is no longer phased out.34 

A tax credit operates differently from an exemption as it provides the same reduction in 

tax liability regardless of the size of an estate. More specifically, the benefit of an exemption to 

the wealthiest estates reflects the top statutory tax rate, whereas the benefit of a credit reflects the 

lower tail of the tax rate schedule as well. In 1998, for example, an exemption of $10,000 is 

worth $5,500 in the case of a taxable estate of $5 million, but is worth $3,700 to a taxable estate 

of $700,000. On the other hand, a tax credit of $3,700 is worth the same to both. 

3.5.2. The State Death Tax Credit 

The second largest credit is for state death taxes. Currently, and as provided for in the 

1954 Act, the maximum credit is set by a rate schedule for a given "adjusted taxable estate," 

defined as the Federal taxable estate less $60,000.35 The credit rate schedule ranges from zero to 

16 percent, as shown in the right panel of Table 4. The credit acts to reduce the maximum federal 

statutory tax rate to 39 percent, down from 55 percent, for the wealthiest estates (see bottom of 

Table 6). 

This credit was first enacted by the Revenue Act of 1924 in response to the criticism that 

the federal government had encroached upon state domain of death taxes. It was limited to 25 

percent of the federal estate tax liability. In 1926, the maximum credit rate was further raised 

while the estate tax rate was lowered. The maximum credit rate was set at 80 percent of the 20 

percent maximum federal marginal tax rate applicable in 1926, or effectively 16 percent, which 

has remained part of the estate tax code since. Prior to the 1954 Act, it was necessary for estates 

33 A husband and wife can effectively transfer up to $1.25 million free of tax in 1998. 

34 If the phase-out of the credit were reinstated, along with the progressive tax rate schedule, 

the upper limit would be set at $21,225,000 in 1998, $21,410,000 in 1999, $21,595,000 in 2000 

and 2001, $21,780,000 in 2002 and 2003, $22,930,000 in 2004, $23,710,000 in 2005, and 

$24,100,000 in 2006 and thereafter. 

35 Section 2011. 
13

to calculate the federal tax liability under the 1926 law to compute the maximum credit available 

for state death taxes. 

A similar credit is not allowed for state gift taxes. But because state taxes are not 

considered as part of the gift tax base, they are effectively treated as a deduction or an exclusion 

in computing federal gift and estate taxes. Under the GSTT, a credit of up to 5 percent of the 

federal tax is available for state GST taxes. 

3.5.3. Estate Tax Credit for Gift Tax 

Because estate and gift taxes apply to cumulative transfers, cumulative lifetime gifts are 

added back to the taxable estate in computing the estate tax. Because lifetime gifts have already 

been taxed, the estate tax provides a tax credit for previously paid gift taxes to avoid double 

taxation.36 In general, this treatment is relevant when progressive effective tax rates apply. 

3.5.4. The Credit for Prior Federal Tax Paid 

To minimize excessive taxation of recently inherited wealth, the estate tax also provides a 

credit for previously paid estate taxes.37 In computing the estate tax, a credit is set equal to the 

estate tax previously paid on inherited wealth. This credit is phased out over ten years, in two 

year intervals, from the date of death. This credit, introduced in 1954, has its roots in the Act of 

1918 which allowed a deduction for taxes paid on property inherited within five years from the 

transferor’s date of death. 

3.6. Due Dates 

The estate tax, reported on Form 706, is due within 9 months from the date of death. 

When first enacted, the estate tax was due one year after the date of death; estates with payments 

within the year were granted a discount of five percent. The gift tax on transfers in a given 

calendar year, reported on Form 709, is due on April 15 of the following calendar year. Prior to 

36 Section 2012. 

37 Section 2013. 
14

1981, the gift tax was also due on April 15 of the following year, except for gifts made in the first 

three quarters of the calendar year on which the tax was due on the 15th of the second month of 

the fourth quarter of the year. The GSTT is due on the date the applicable estate or gift tax is 

due. 

3.7. Tax Deferral 

Estates with closely held businesses and farms may defer a fraction of the estate tax 

attributable to the business, and pay the tax under the installment method.38 This provision was 

first introduced by the Small Business Tax Revision Act of 1958. The tax is deferred for up to 14 

years from the otherwise due date (9 months from the date of death), with no principal payable 

during the first 5 years. Through 1997, interest payments were deductible against the estate tax. 

Calculating these interest payments was a cumbersome task that required the recalculation of the 

estate tax liability and the filing of tax returns in each year of the deferral period. No similar 

provision is available for the gift tax. 

The fraction of taxes deferred is equal to the ratio of the value of the qualifying interest in 

a closely held business to the adjusted gross estate, provided that this ratio is in excess of 35 

percent. Qualifying interest includes the value of proprietorships, and corporate stock or 

partnership interests if at least 20 percent of the voting stock or partnership assets is included in 

the estate, or if the corporation or partnership has no more than 15 shareholders or partners. A 

less generous deferral is also available to certain estates, such as those with severe liquidity 

constraints, at the discretion of the Commissioner of the Internal Revenue Service.39 

Through 1997, and for qualifying estates, the tax was paid in installments at an interest 

rate equal to the applicable federal short term interest rate (AFR) plus 3 percentage points. The 

tax on the first $1 million of the taxable estate (including the amount sheltered by the unified 

credit), however, is deferred at a preferential interest rate of 4 percent. Due to the deductibility of 

interest expenses, the effective interest rate charged, for those in the 55 percent tax bracket, was 

38 Section 6166. 

39 Section 6161. 
15

1.8 percent on the tax liability on the first million of taxable estate, 4*(1-0.55), and 4.05 percent 

for the tax liability on the taxable estate in excess of $1 million, assuming a 9 percent interest rate 

(or a 6 percent AFR). 

Beginning in 1998, the interest rate charged on the tax on the first $1 million of taxable 

estate (in excess of the amount sheltered by the unified credit) is set at 2 percent (TRA97). The 

interest rate charged on the tax liability on the taxable estate in excess of $1 million is set at 45 

percent of the AFR. Interest charges are no longer deductible, which offsets the benefit of the 

lower interest rates. These changes significantly improve the administration of the tax because 

future re-calculation of the tax liability and the filing of tax returns are eliminated.40 

4. A PROFILE OF ESTATE TAXPAYERS AND BENEFICIARIES 

4.1. A Profile of Estate Tax Decedents 

Approximately 2.2 million adults die in a given year in the United States. Of these 

individuals, only about 1.3 percent leave behind taxable estates. Of the 2.2 million decedents in 

1992, for instance, only 27,243, or about 1.3 percent, left behind taxable estates, as shown in 

Table 7.41 Table 8 provides tabulations on the profile of estate tax decedents in 1992, by size of 

the gross estate. It shows 60,082 estate tax returns were filed for decedents with gross estates in 

excess of $600,000, the filing threshold in 1992. These estates reported total assets of $104.5 

billion and net worth of $99.9 billion. More than half of the decedents (31,724) have estates 

valued between $600,000 and $1,000,000, and 263 decedents have gross estates over $20 million. 

About half, or 27,751, of the decedents filing estate tax returns provided for spousal 

transfers totaling $32.1 billion. These transfers account for about one-third of net worth. The 

average spousal transfer ranges from 21.5 percent for estates under $1 million to 39.7 percent for 

those over $20 million. Total estate expenses, such as those for funeral expenses and attorney 

40 The benefit of the installment method, with the applicable low interest rates, reduces the 

effective tax rate by about one half, and much more for the smaller estates. 

41 See Internal Revenue Service, Statistics of Income Bulletin, Fall 1997, Washington, DC 

1997, page 217, for historic trends. 
16 

fees, are about $2.7 billion. These expenses account for 2.7 percent of net worth, and range from 

2.8 percent for the least wealthy to 2.1 percent for the wealthiest. 

Less than half the estates (27,243) were taxable and reported federal estate tax liability of 

$10.5 billion. Total estate taxes were $13.2 billion before the credit for state death taxes. An 

additional $89.4 million in GSTT were also incurred by these estates. Taxes, before the credit for 

state taxes, represent about 13.7 percent of terminal wealth (net worth less estate expenses), and 

range from 3.5 percent for the least wealthy to a high of 18 percent. The tax liability as percent of 

net worth, less estate expenses, charitable and spousal bequests, essentially the effective tax rate 

on bequests to non-spouse heirs, is about 23.3 percent and ranges from a low of 4.7 percent to 

54.3 percent for the wealthiest estates. 

Bequests to non-spouse heirs (net worth less estate expenses, spousal and charitable 

bequests), were $57.1 billion in 1992. This accounts for 58.8 percent of the reported terminal 

wealth, with 74.4 percent for the least wealthy and 33.1 percent for the wealthiest. After-tax 

bequests stood at $43.8 billion, or 45 percent of terminal wealth. After accounting for charitable 

and spousal bequests, and estate taxes, the heirs of the least wealthy received 71 percent of 

terminal wealth, while those of the wealthiest group received only 15.1 percent. 

About 33,000 estates reported life insurance policy proceeds, net of policy loans, of $3.4 

billion, as shown in Table 9. When compared to the figures in Table 8, these proceeds are 

reported by a third of the estates regardless of the estate size. They represent 3 percent of the 

gross estate, with slightly over 3 percent for the least wealthy and 0.5 percent for the wealthiest 

estates. Some 3,400 estates, or 6 percent of all estates, report an additional $1.3 billion in life 

insurance proceeds which are excluded from the estate. In contrast to the included proceeds, only 

3 percent of the least wealthy report such proceeds compared to over 20 percent of the wealthiest 

group. 

In 1992, only 305 estates took advantage of the special use valuation method, as shown in 

Table 10. The fair market value of the property was $300.8 million with reported value for estate 

tax purposes of $128.5 million, for an effective exclusion of 57 percent. In addition, Table 10 

also shows that only 716 estates elected to defer taxes under the installment method; about $519 
17

million in taxes were deferred.39 

4.2. The Heirs 

The most recent information available on bequests to heirs is from the 1982 Collation 

data, conducted by the Statistics of Income Division of the Internal Revenue Service, which links 

the income tax returns of heirs to the estate tax returns of decedents in 1982.40 Summary 

statistics from this data are reported in Tables 11A-C. For each heir, the amount of inheritance 

and the relationship to the decedent is reported on the estate tax return (Form 706, page 3). The 

collation data classifies heirs along 11 categories of relationships. These are: (1) spouse, (2) son, 

(3) daughter, (4) grandchild, (5) sibling, (6) niece or nephew, (7) aunt or uncle, (8) parent, (9) 

other, (10) estate or trust, and (11) not ascertainable. Category 9 includes sons- and 

daughters-in-law, great grandchildren, and cousins, as well as unrelated individuals. Category 10 

includes bequests not immediately distributed to heirs. Spousal trusts are classified under spousal 

bequests. 

Tables 11A and 11B provide a breakdown of bequests and number of heirs by relationship 

to the decedent, and size of the estate. The total number of beneficiaries is estimated to be 

237,064, with $34.2 billion in total bequests.42 The results show that, after payment of estate 

taxes and charitable bequests,43 about one-half of the distributable estate (net worth less estate 

expenses, estate taxes, and charitable bequests), or $16.7 billion, is bequeathed to surviving 

spouses, 24 percent to children, 11.5 percent to trusts, 3.8 percent to siblings, 4.1 percent to 

nieces and nephews, 3.2 percent to grandchildren, with the remaining 4.6 percent distributed to 

39 See Eller (1997, p. 15). 

40 A detailed description of the data is provided in Joulfaian (1994). 

42 Bequests are about $35.7 billion when constructed from estate tax information instead of 

beneficiary information in the collation study. The difference is in part due to differences in asset 

valuation. 

43 Estate taxes, charitable bequests, and other expenses are $5.9 billion ($5.1 billion federal), 

$2.7 billion, and $1.5 billion, respectively. Combined, they account for about 22 percent of 

terminal wealth. 
18

parents, aunts and uncles, among others.44 

Table 11C shows that, on average, a child received an inheritance equal to 22 percent of 

that received by the surviving spouse, or about $122,000 ($113,910 for sons and $130,242 for 

daughters). There were 33,010 sons and 34,020 daughters with total inheritances of $3.8 billion 

and $4.43 billion, respectively. Grandchildren, 32,478 of them with $1.1 billion in inheritances, 

received much smaller inheritances, or about 25 percent of the average inheritance received by a 

child. 

Siblings, comprising 14,012 heirs, received $1.3 billion, with an average inheritance of 

$91,649 or about 75 percent of that of the average child. Nieces and nephews, with 29,576 

beneficiaries, inherited $1.4 billion or an average of $46,982. Bequests to older generations 

seldom occur.45 Only 42 aunts and uncles were reported with an average inheritance of $62,138. 

Parents, with 885 beneficiaries, inherited much more. The average inheritance was $127,581, 

slightly higher than that of the average child. 

Other heirs include 41,500 individuals with $1.3 billion in inheritances or an average of 

$31,290. These include great grandchildren, in-laws, and friends, among others. Bequests to 

trusts (other than spousal trusts) and estates--16,499 of them--are about $3.5 billion for an 

average transfer of $239,242. 

4.2.1. A Profile of the Children 

The most recent data available on child heirs is also from the 1982 Collation study. Using 

the matched beneficiary income tax records and decedents estate tax returns, Tables 12A and 12B 

provide statistics on the distribution of inheritance received by size of the pre-inheritance income 

of the children and the parent’s gross estate; the wealth of the children is not observed. 

Tables 12A and 12B provide summary statistics on the adjusted gross income (AGI) in 

44 As a share of terminal wealth (net worth less estate expenses), spousal bequests account for 

38.1 percent of wealth, children 18.7 percent, trusts 9.0 percent, siblings 3.0 percent, nieces and 

nephews 3.2 percent, grandchildren 2.5 percent, and parents, aunts, among others, account for 

3.6 percent. Charitable bequests and estate taxes account for the remainder. 

45 From a tax planning point of view, it is generally unwise to make such transfers. 
19

1981 of the children along with the inheritance received. The results in Table 12A show that 

54,237 children received inheritances from estate tax decedents in 1982. Their total AGI in 1981 

is about $2.6 billion and the inheritance received is $8.3 billion, or about three times their income. 

The top panel shows that wealthy parents are more likely to have high income children. Less than 

one percent of the children of the least wealthy, or 220 out of 28,483 individuals, have incomes in 

excess of $200,000. In contrast, 34.9 percent of the children of the wealthiest parents, or 84 out 

of 241 observations, have incomes in excess of $200,000. The reverse pattern is observed for 

children with positive AGI under $10,000. About 12 percent (3,409 out of 28,483) of the 

children of the least wealthy compared to 5 percent of those of the wealthiest fall in this income 

group. 

The top two panels of Table 12B report mean values for AGI and inheritance received. 

The average AGI is $47,433, and ranges from a positive mean AGI of $5,376 to a high of 

$352,427. In addition, the average income of children increases with the wealth of the parent. 

The average income of children of the least wealthy group of parents is $34,960, compared to 

$271,254 for the average income of children of the wealthiest group. This large difference is 

perhaps due to greater human capital and other intangible transfers to children of the wealthiest 

group, and little should be attributed to inter-vivos gifts.46 

In contrast to AGI, the mean inheritance received seems to be invariant to the size of 

income of the heirs. The average inheritance ranges from about $115,000 in the lowest positive 

AGI class to $265,000 in the top AGI class, and from $131,000 for the heirs of the least wealthy 

to about $630,000 for the heirs of the wealthiest. On average, the inheritance received is about 

three-fold the average income. This multiple ranges from a high of 21 in the lowest positive AGI 

class to a low of 0.75 times the average income in the top bracket, partially reflecting income 

mobility.47 

46 Post-1977 cumulative taxable gifts were $294 million compared to terminal wealth of $45.9 

billion in 1982, or only about 0.5 percent. Even by 1992, such gifts are only 4.4 percent of 

reported wealth, as shown below. 

47 Note these statistics do not account for age differences, nor do they control for 

between/within group (siblings) variations. 
20

4.2.2. Charitable Giving 

Table 13 provides statistics on the pattern of charitable bequests for decedents in 1992. 

About 19 percent (11,230) of the returns reported charitable bequests; about 55 percent (145) of 

the wealthiest compared to 16.5 percent (5,221) of the least wealthy giving. Total charitable 

bequests were $8 billion, or about 8 percent of wealth, with the wealthiest giving about 26 

percent of their wealth and the least wealthy 3.5 percent. On an after tax basis, these bequests 

represent only about 5 percent of after-tax wealth, however, with the wealthiest giving about 17 

percent of their wealth.48 

The wealthiest estates not only bequeath more to charity, but they also seem to give more 

during life. Again using data for decedents in 1982, Table 14 provides statistics on the pattern of 

giving in 1981, the year prior to death, and bequests at death in 1982. Of the 59,692 decedents 

with estate tax returns, 41,614, or 69.7 percent, reported charitable contributions in the year prior 

to death, while 10527, or 17.6 percent, reported charitable bequests. The relative frequency of 

giving during life rises with the size of the estate. About 62 percent of the least wealthy 

contribute during life, while only 15.2 percent contribute at death. Similarly, 88.6 percent of the 

wealthiest contribute during life, while only 55 percent provide for charitable bequests. 

While the relative frequency of giving during life exceeds that at death, the reverse is true 

for the size of gifts made. For decedents subject to the estate tax, charitable contributions 

reported in 1981 were $204 million, compared to bequests of $3.4 billion in 1982, as shown in the 

middle panel of Table 13. In the aggregate, these lifetime contributions are equivalent to 6 

percent of charitable bequests. This ratio ranges from about 10 percent for the least wealthy to 

about 3 percent for the wealthiest. 

The bottom panel of Table 14 shows that lifetime contributions are about 5 percent of 

income, and range from less than 4 percent for the least wealthy to 16 percent for the wealthiest 

group. However, contributions represent less than one-half of one percent of net worth. The 

least wealthy contribute one-third of one percent compared to 0.8 percent for the top group. 

Charitable bequests are also about 8 percent of wealth, with mean values of $56,946 and 

48 For those in the top tax bracket, a bequest of $1 million to charity costs only $450,000. 
21 

$738,855, respectively. The reported pattern of charitable bequests in 1982, relative to net worth, 

is similar to that using 1992 data. In contrast, charitable bequests represent about 88 percent of 

income, and range from 28 percent for the least wealthy to well over 500 percent for the 

wealthiest group. 

4.3. A Profile of Gift Donors 

Table 15 provides figures on cumulative taxable gifts reported for decedents in 1992, by 

size of gross estate. These figures represent cumulative taxable gifts, after the annual exclusion, 

for the 1977 through 1992 period. Of the 1992 estates, 6,722 estates, or about 11 percent of all 

estates (see Table 8), reported $1.9 billion in taxable gifts, or an average of $288,000. For estates 

under $1 million, 1,867 taxpayers, or 5.9 percent of the estates, reported gifts of $220 million, or 

an average of $118,000. In contrast, 174 taxpayers, or 66.2 percent, with gross estates in excess 

of $20 million reported taxable gifts of $269 million, or an average of $1.5 million. These gifts 

are equivalent to about 2 percent of terminal wealth as reported in Table 8, and range from about 

one percent for the least wealthy percent to 2 percent for the wealthiest. When compared to nonspousal, non-charitable, after tax bequests, which represents transfers comparable to gifts, the 

share of wealth transferred during life becomes 4.4 percent, or about 13 percent for the 

wealthiest. 

5. THE FISCAL CONTRIBUTION OF FEDERAL ESTATE AND GIFT TAXES 

Table 16 provides a historical trend of estate and gift tax revenues, and their contribution 

to total government receipts, for the fiscal years 1917 through 1997. In fiscal year 1917, the year 

of enactment, estate tax receipts were $6.1 million, or 0.8 percent of total receipts. In fiscal year 

1997, estate and gift tax receipts stood at about $20 billion, or 1.3 percent of total receipts. 

Estate and gift tax revenues peaked at 9.7 percent of total receipts, at $379 million, in fiscal year 

1936. 

The contribution of estate and gift tax revenues to federal receipts grew rapidly in the first 

decade of enactment. As its scope narrowed, with attempts to repeal these taxes altogether in the 

1920s, tax revenues from this source diminished considerably. This trend was reversed in the 
22

1930s, following the great depression, when estate and gift taxes contributed nearly 10 percent of 

total receipts. In the aftermath of WWII and the broadening of the income tax base, the relative 

contribution of estate and gift taxes diminished greatly. 

Not only has the contribution of estate and gift taxes varied over time, but the contribution 

of each of these two sources of revenue varied as well. Table 17, which provides a breakdown of 

revenues by source, shows that on average, gift tax receipts account for about 9.4 percent of the 

combined estate and gift tax revenues. Often, however, the share of gift tax receipts diverged 

from its mean, especially in anticipation of changes in the tax laws. 

5.1. Trends in Estate Tax Revenues 

Revenues from the estate tax reflect the tax structure in effect, the performance of the 

economy, and who dies in a given year and how their estates are settled.49 Table 17 and Figure 1 

show, in nominal and real terms, the trend of estate tax revenues from its inception to fiscal year 

1997. The reduction of revenues in the late 1920s reflects lower estate tax rates, and the increase 

in the exemption (Table 18, Figure 2), as well as a provision in the Act of 1926 that required all 

estate tax revenues attributable to provisions instituted by the 1924 Act be refunded to the 

taxpayers; about $250 million was refunded.50 

Despite the absence of any major tax increase, estate tax revenues grew rapidly in the post 

World War II period through the mid-1970s, as shown in Table 17 and Figure 1. The emerging 

pattern is even more dramatic when revenues are adjusted for inflation. Strong economic growth 

in this period is certainly a major contributor to the revenue yield. Another major contributor, 

however, is the inflationary expansion in wealth. As inflation eroded the value of the exemption, 

as shown in Table 18 and Figure 2, more estates became subject to the estate tax. When 

compared to its value in 1955, for example, the exemption remained unchanged at $60,000 but 

49 To a lesser extent, they may also reflect changes in income tax laws. Define terminal wealth 

as the difference between cumulative lifetime after-tax income and consumption. If income tax 

rates are reduced, then wealth will increase, as long as the marginal propensity to save is positive, 

thereby expanding the estate tax base. 

50 See Warren and Surrey (1952, p. 24). 
23 

lost half of its value in real terms. 

Reductions in revenues in the late 1970s reflect lower tax rates and an expanded 

exemption (unified credit) brought about by the TRA76. The maximum tax rate was reduced 

from 77 percent to 70 percent, and the exemption was effectively tripled in nominal terms and 

doubled in real terms (Table 18, Figure 2), between 1976 and 1981. 

Reductions in revenues in the early 1980s reflect the tax rate reductions, the increase in 

the unified credit and, most importantly, the unlimited marital deduction brought about by ERTA 

in 1981. The maximum tax rate was gradually reduced from 70 to 55 percent. Similarly, the 

unified credit was gradually increased from $47,000 to $192,800, with equivalent exemptions of 

$175,625 and $600,000, respectively. The unlimited marital deduction took effect in 1982, up 

from one-half the estate. 

Increases in revenues in the late 1980s and early 1990s in part reflect the deferral of estate 

taxes in the early 1980s due to the enactment of the unlimited marital deduction in 1981. The 

timing of this, of course, reflects the surviving spouse’s life expectancy (see Table 19). Through 

the early 1980s, returns for women, usually the surviving spouse, represented about one-third of 

the returns filed for estates in excess of $600,000; this fraction increased to about 44 percent 

beginning in the late 1980s. In part, the increase in revenues is also explained by the strong 

economic growth. 

5.2. Trends in Gift Tax Revenues 

As with the estate tax, revenues from the gift tax reflect the tax structure in effect, and the 

performance of the economy. In addition, gift tax revenues depend on the expectation of tax law 

changes. Table 17 and Figure 3 provide figures on the gift tax yield since its inception. 

In fiscal year 1925, its first year in effect, gift tax receipts were $8 million. In fiscal year 

1996, gift tax receipts were $2.2 billion. Gift tax revenues grew rapidly in the late 1980s and the 

1990s, and constitute about 13 percent of the share of estate and gift tax receipts. 

In fiscal year 1977, which reflects calendar year 1976 transfers, gift tax receipts soared to 

$2 billion, about five times the receipts in the previous year, an all time high in real terms. Gift 

taxes accounted for 24 percent of the combined yield of estate and gift tax revenues, well above 
24

its historic trend. This surge in receipts reflects the speed up in gifts made in anticipation of the 

higher gift tax rates in 1977 brought about by TRA76. This surge may have resulted in lower gift 

tax receipts in the late 1970s when perhaps these transfers would have taken place absent the 

changes made by TRA76. 

This is not the first time that top wealth holders accelerated inter-vivos transfers. In 1935, 

estate tax rates were increased mid-year, while corresponding gift tax increases were delayed to 

the end of the calendar year. The maximum estate tax rate, for instance, was increased from 60 to 

70 percent on August 31, 1935. The same legislation, however, increased the maximum gift tax 

rate from 45 to 52.5 percent (75 percent of the applicable estate tax rate), effective January 1, 

1936, four months later. In both fiscal years 1935 and 1936, gift tax receipts stood well above the 

trend. A similar pattern is also observed in fiscal year 1942, as gift tax rate increases lagged 

behind estate tax rate increases. 

The strong growth in gift tax receipts in the late 1980s may reflect the deferral of gifts in 

the early 1980s as tax rates were scheduled to decline gradually from 70 percent down to 50 

percent. Increases in revenues in fiscal year 1990 (calendar year 1989 gifts) may also reflect the 

expiration of the $2 million GSTT exemption per grandchild at the end of calendar year 1989; 

transfers accelerated to take advantage of the exemption are fully taxable under the gift tax. 

6. ECONOMIC EFFECTS OF THE ESTATE AND GIFT TAX 

Estate and gift taxes may influence the behavior of parents and children, and have 

implications for the distribution of income and wealth. 

6.1. Behavioral Effects 

Estate and gift taxes have incentive effects for both parents and heirs. Higher estate taxes, 

for instance, may reduce the work effort and savings of parents motivated to leave large bequests 

to their children.51 This is because a large fraction of their bequest-motivated savings may be 

taxed away, with relatively little left for their children. This substitution effect is the result of the 

51 See Poterba (1997) and Shoven and Wise (1996) for a discussion of the savings incentives 

of the estate tax. 
25

tax raising the price of bequests. An offsetting effect is the income effect, whereby parents may 

increase their work effort and savings to make up for the higher taxes. It is not clear which effect 

dominates, and there is no empirical evidence. 

6.1.1. Charitable Giving 

The estate tax lowers the price of charitable bequests relative to bequests to heirs, while 

raising the price of transfers to heirs relative to consumption. More specifically, for every 

additional bequest of $1 to charity, a nonprofit organization receives $1. In contrast, and in the 

case of the wealthy, for every additional bequests of $1 to children, these heirs receive $0.45 ($1 

less the marginal tax rate of 0.55). That is, the price of charitable bequests is simply 0.45. 

Alternatively stated, for additional $1 received by an heir, the parent would have to save $2.22, or 

1/(1-0.55). 

Table 20 provides a summary of the findings of studies on the effects of the estate tax 

reported in the literature. Most researchers find that the estate tax encourages charitable bequests 

(Joulfaian, 1998; Auten and Joulfaian, 1996; Joulfaian, 1991; Clotfelter, 1985; Feldstein, 1977; 

Boskin, 1976).52 There is also evidence that the tax price effects vary by type of charity 

(Joulfaian, 1991; Boskin, 1976). Table 21 reports findings on the tax price effects by type of 

donee. The evidence suggests that giving to religious organizations and education/medical 

research institutions is most responsive to the tax price. 

Table 22A provides a tabulation of charitable bequests, tax prices, and wealth. We 

observe bequests to rise as the tax price decreases. But bequests also rise with wealth. 

Consequently, it is difficult to separate the effects of the tax price from those of wealth. The tax 

price is also likely to depend on wealth which makes it difficult to separately identify the effects of 

the price from those of wealth.53 Fortunately, the treatment of spousal transfers presents 

opportunities (and challenges) in modeling charitable bequests. Because of the unlimited marital 

deduction, married individuals leave behind smaller taxable estates and, consequently, face 

52 See Barthold and Plotnick (1984) for a contrarian view. 

53 See Feenberg (1987) and Poterba (1987). 
26

relatively lower tax rates. In light of the latter, the tax price of charitable bequests for such estates 

is usually higher than for their “not-married” counterparts, as shown in tables 22B and 22C. The 

latter are mostly widowed, but also include never-married singles and divorced individuals. 

In Table 22B, estates of married individuals with after-tax wealth between $10 million and 

$20 million face a tax price of charitable bequests of 0.70 compared to 0.45 for the other estates 

with comparable wealth reported in Table 22C.54 While both report the same wealth levels, the 

latter, who face a lower tax price, contribute over 10 times the amount reported by the estates of 

married individuals. The same pattern is observed for every other wealth class where the latter 

group faces a lower tax price and report greater levels of charitable bequests. Tables 22B and 

21C strongly suggest that taxes are an important consideration in making charitable bequests. 

However, one may overstate the effects of taxes, as spousal transfers are eventually taxed at the 

death of the surviving spouse unless, of course, they are consumed in the intervening years. 

Estate taxes may also affect lifetime charitable contributions, as they raise the cost of 

bequests and inter-vivos gifts. A parent may consume $1, give it to charity, or transfer it to the 

children. In the case of a charitable contribution of $1, a charity receives $1. Because it reduces 

taxable income as an itemized deduction, it costs the donor only $1 less the marginal income tax 

rate, or 1-0.396 for those facing the maximum Federal marginal tax rate. In contrast, a transfer of 

$1 to the children costs the parent 1+t in case of a gift, or 1/(1-t) in case of bequests, where t is 

the estate/gift tax rate. An individual compares the price of charitable giving to the price of 

transfers to his children in deciding on the size of contributions to make. Auten and Joulfaian 

(1996), using the 1982 Collation data, find that estate taxes are an important consideration in 

determining lifetime contributions.55 This study estimates a positive price elasticity of 0.6 for 

giving with respect to the tax price of bequests. This suggests that in the absence of estate taxes, 

lifetime contributions may decline by as much as 12 percent. 

54 Wealth is defined as net worth less estate expenses and taxes, computed in the absence of 

charitable bequests. Charitable bequests are reduced by the tax benefits from the deduction in 

computing the share of wealth transferred. 

55 Also see Steuerle (1987) on the pattern of giving of the wealthy. 
27

6.1.2. Capital Gains Realizations 

Economists have long argued that in the presence of capital gains taxes, the step up in 

basis (whereby accrued capital gains escape income taxation at death) creates a lock-in effect 

because individuals have incentives to hold assets until death and bequeath them to their heirs. In 

effect, the taxation of capital gains may influence the choice between consumption and bequests. 

If gains are realized to finance consumption, then the investor would have to forego 20 percent of 

these gains in taxes, the current maximum tax rate. Alternatively, the individual may hold on to 

the assets and bequeath them to the heirs, thereby avoiding the capital gains tax. These capital 

gains taxes can also be treated as a transaction cost encountered in asset trading and portfolio 

adjustments (Kiefer, 1990). Thus, even when wealth is planned to be held until death, capital 

gains taxes may discourage the trading of assets. 

While it is true that gains accrued during life avoid capital gains taxes at death, they do not 

escape taxation, as they are taxed under the estate tax. Individuals holding assets until death, and 

not consuming accrued gains, may save a maximum of 20 percent tax on the capital gains from 

assets stepped up and transferred to the heirs. However, these assets become taxable under the 

estate tax at the maximum rate of 55 percent. In the case of portfolio adjustments, the difference 

between the tax rates on gains from assets traded and those not traded, but both held until death, 

is not 20 percent, but more likely to be 9 percent when the estate tax is accounted for; i.e., 

0.20*(1-0.55)+0.55 compared to 0.55, ignoring differences in rates of return and discounting. 

The estate tax reduces the incentives to hold onto assets and partially offsets the benefits from the 

step-up in basis, thereby reducing the lock-in effect. 

Given the high marginal tax rates, the wealthy are particularly responsive to the estate tax. 

Minimizing estate taxes, while maximizing transfers to the heirs, is one of the primary objectives 

of estate planning. Valuation discounts is one of the means to this end. Such discounts, however, 

while minimizing the value of the taxable estate, are usually claimed at the expense of the step up 

in basis. By reporting lower values for estate tax purposes, individuals reduce their estate tax 

liabilities. In the process, however, they also lower the basis of the assets inherited by the heirs, 

thereby increasing future capital gains taxes. With the maximum estate tax rate at 55 percent, 

being significantly larger than the maximum future capital gains tax rate of 20 percent faced by the 
28 

heirs, the fact that valuation discounts are used should not be surprising. 

Evidence reported in Auten and Joulfaian (1997), using the 1982 Collation data and 

examining the effects of ERTA law changes, suggests that estate taxes may have significant 

effects on the pattern of capital gains realizations, especially for taxpayers between the age of 65 

and 85. They estimate an elasticity coefficient of realizations with respect to the tax rate of about 

0.4, evaluated at an estate tax rate of 50 percent. In the absence of the estate tax, this finding 

suggests that realizations might decline by 25 percent. 

6.1.3. Labor Supply and Saving of the Heirs 

Estate taxes, as they potentially reduce the size of inheritances, may also affect the heirs' 

work effort and saving. Evidence from the 1982 Collation study suggests that large inheritances 

speed up retirement. Tables 23A and 23B provide statistics on the labor force transitions for a 

sample of single and joint filers between 1982 and 1985 and the potential effect of inheritances. 

These tables classify individuals based on their employment status in the respective years and the 

size of inheritance received from decedents in 1982. 

Table 23A shows that singles who dropped out of the labor force by 1985 had received 

greater inheritances than those who remained employed. Of those employed in 1982, about 9 

percent dropped out; they inherited an average of $167,060 compared to $83,846 for the others. 

The pre-inheritance earnings of the individuals who remained employed also represented a larger 

multiple of their inheritances. A similar pattern is observed when we examine individuals in each 

of the three inheritance size categories. Even when comparing individuals across categories, a 

similar pattern emerges. Individuals in the highest category are about four times more likely to 

drop out of the labor force than those in the lowest inheritance group; 18.2 percent vs. 4.6 

percent. 

Table 23B replicates the above results for joint filers. In contrast to the singles, we may 

observe up to two individuals employed per tax return. The results are virtually consistent with 

those observed for single individuals; in each inheritance category, the labor force participation 

drops with the size of inheritance, in absolute value or relative to earnings. Comparing filers in 

the largest inheritance group to those in the lowest, and focusing on the case where both spouses 
29

are employed for instance, the likelihood of both husband and wife dropping out of the labor force 

is over three-fold greater, and the likelihood that one will drop out is over 1.5 times as large. 

The evidence gleaned from these tables is corroborated by further examination of the 

Collation study data in Holtz-Eakin, Joulfaian, and Rosen (1993, 1994a, 1994b). Even for those 

who remain in the labor force, one may also observe a reduction in labor supply or earnings. 

These labor supply reductions, however, are generally small as shown in Holtz-Eakin, Joulfaian, 

and Rosen (1993) and Joulfaian and Wilhelm (1994), the latter using Panel Study of Income 

Dynamics (PSID) data.56 

Some economists argue that the estate tax leads to a reduction in savings and capital 

formation (Wagner, 1993). It is reasonable to assume that the estate tax may have effects on 

saving similar to those of the taxation of capital income. In general, however, there is little 

consensus on the effects of taxes on savings. In the PSID data, consumption is observed to rise in 

the aftermath of inheritance, suggesting a reduction in savings. But, again, these effects are small 

as demonstrated in Joulfaian and Wilhelm (1994).57 

6.1.4. Inter-vivos Gifts 

Estate taxes are argued to cause substantial inter-vivos transfers in an attempt to reduce 

the tax burden or avoid taxation all together.58 High estate tax rates, combined with high marginal 

income tax rates, especially in the absence of gift taxes, may create incentives for parents to make 

lifetime transfers of assets to their children, who are generally in lower income tax brackets 

(Shoup, 1966 p. 67). Consequently, as argued by Bernheim (1987) losses in income tax revenues 

to the government may exceed the revenue collected from taxing transfers. 

While there is little evidence that estate and gift taxes lead to an increase in gifts from 

parents with high income tax rates to children with low income tax rates, there is evidence that the 

56 One shortcoming of the PSID data is that we do not observe many individuals leaving the 

labor force after the receipt of an inheritance. Perhaps this can be attributed to the fact that few 

individuals receive large inheritances in the sample. 

57 Unfortunately, consumption information in the PSID is very limited. 

58 See Bernheim (1987) and Cooper (1979). 
30 

wealthy are very responsive to differences between estate and gift tax rates, or expectations of tax 

rate changes (Poterba, 1998). One may easily point to the record surge in gift tax revenues in the 

aftermath of the enactment of TRA76 to highlight the sensitivity of the wealthy to tax rate 

changes. As described earlier, and shown in Table 17 and Figure 2, gift tax receipts increased 

five-fold in fiscal year 1977 over receipts in 1976. In the absence of estate and gift taxes, 

however, transfers, both lifetime and testamentary, would probably increase given the reduction in 

the price of bequests (gifts). 

6.1.5. Interstate Competition 

The estate tax credit for state death taxes discourages interstate competition for the 

wealthy. Around the time of its enactment, in November 1924, Florida amended its constitution 

to forbid the enactment of an inheritance tax in addition to the income tax. This was an obvious 

attempt to attract the wealthy and encourage their migration to the state (Aronson and Hilley, 

1986, p. 117). Nevada followed suit and enacted its own constitutional amendment in July 1925. 

The federal tax credit, enacted in 1924 and modified in 1926, equalizes or at least reduces the gap 

in the death taxes levied by states. It reduces the incentives for wealthy taxpayers to consider 

relocating to another state to avoid estate and inheritance taxes. 

6.2. Distributional Effects 

One of the rationales for estate and gift taxes is redistribution of income and wealth. 

Estate and gift taxes are levied on wealth, and typically apply only to the most wealthy. The 

revenue obtained from the estate and gifts taxes reduces the concentration of wealth in the hands 

of few people. And, when redistributed, it may make the overall distribution of income more 

progressive as well. 

Wealthy individuals generally report relatively little of the income they earn, as 

demonstrated in Steuerle (1985) using 1976 estate Collation data. This is because much of their 

income is in the form of accrued but unrealized capital gains, or derived from other tax preferred 

investments. Consequently, the estate tax, as a back-stop to the income tax, bolsters the 

progressivity of the tax system. This is further verified by examining the relative size of capital 
31

income reported by the wealthy. Table 24, once again using data from the 1982 Collation study, 

provides figures on the ratio of capital income, as measured by AGI less wages in 1981, to the 

gross estate. This is a crude measure of the return to capital reported for income tax purposes. 

What is noteworthy are the reported figures in the last column which show the ratio falling with 

the size of the estate; the realized rate of income for those with estates under $500,000 is about 

twice as large as that of the wealthiest group.59 

An alternative to studying income flows is to compare the income tax liabilities of the 

wealthy to their estate tax liabilities. This is more meaningful, as it embodies all the features of 

the tax Code, and not just the reported income. Using the 1982 Collation data, Table 25 tabulates 

the reported 1981 income tax liability and the reported 1982 estate tax liability of decedents with 

taxable estates. Overall, the income tax liability is about one sixth that of the estate tax. For the 

least wealthy group, the income tax is about a third of the estate tax liability. For the wealthiest 

group, this ratio is about 13 percent. Conversely, the estate tax liability for the wealthiest group 

is well over seven times their pre-death income tax liability.60 The estate tax significantly 

contributes to the overall tax burden on the wealthy. 

It is theoretically possible that the estate and gift tax might cause greater inequality. If the 

estate tax, for instance, were to reduce savings, it would lead to lower levels of capital and lower 

the real rate of return to labor. By lowering labor income, this reduction may exacerbate existing 

inequalities between those who receive income from capital and those who receive income from 

labor.61 However, this argument in principle also applies to other forms of taxation of capital. 

In addition, if the tax were designed such that it stimulated inter-vivos gifts and bequests 

to a wider number of recipients, including charity, then it can be thought of as a tool that can be 

59 Note that in the case of married individuals, the wealth measure reflects assets attributable to 

the decedent while the income measure is for both husband and wife. Hence, the reported rate of 

return is potentially overstated for these individuals. 

60 These figures are remarkable considering that the estate tax liability is understated in the 

case of married individuals; the spouse’s share of jointly held property is excluded from the estate 

and a deduction is accorded for spousal bequests, in contrast to the income tax which is based on 

the combined reported income of husband and wife. 

61 See Stiglitz (1978). 
32 

used to discourage the concentration of wealth. The findings in the current literature, as reported 

earlier, suggest that estate and gift taxes have significant stimulative effects on charitable giving. 

The distributional implications of estate and gift taxes are perhaps most significant when 

considering a switch from the current income tax to a consumption tax. Many argue that the tax 

burden on the wealthy will decline under this alternative tax regime. Any reduction in the tax 

burden on the very wealthy, however, is likely to broaden the tax base for the estate tax, thereby 

recouping some of the tax savings and mitigating some of the redistribution effects of the 

alternative regime, provided that the estate tax is not repealed as some proposals envision. 

7. CONCLUDING COMMENT 

The current transfer tax system has been criticized on several grounds. Despite, or 

because of, the high tax rates, critics argue that the estate tax raises very little revenue once its 

effect on the entire tax system is accounted for (Bernheim, 1987). The high rates are argued to 

create incentives for parents in high income tax brackets to gift assets to their children who are in 

lower income tax brackets. The resulting loss in income tax revenues is suggested to offset the 

revenue collected from the estate tax. A more plausible scenario, however, is that in the absence 

of estate and gift taxes, the government risks losing more than this specific source of revenues. 

The step-up in basis on assets with capital gains, for instance, becomes far more attractive as the 

underlying assets are no longer subject to the estate tax. Thus, if these taxes are repealed, the 

government will also lose some of the existing income tax as well. 

Furthermore, the current tax, especially in the case of the very wealthy, weakens the 

incentives to make tax motivated transfers to grandchildren and great grandchildren who are likely 

to be in low income tax brackets as in Bernheim (1987). The GSTT applies in addition to the 

applicable gift or estate tax, as discussed in Section 3 and shown in Table 5, and more than offsets 

differentials in income tax rates, if any, between the donor and the beneficiary. In the absence of 

the current transfer tax, especially the gift tax, differences in marginal income tax rates alone may 

create incentives for making intergenerational transfers. Indeed the protection of the tax base, for 

both income and death taxes, was the primary motivation for the re-enactment of the gift tax in 
33

1932 and its drastic revamping in 1976.62 “By checking avoidance of death and income taxes [the 

gift tax] may indirectly increase the revenues by a far greater amount than its own revenue yield” 

(Harriss, 1940, p. 1). 

Some have criticized the estate tax on the grounds that it violates the ability to pay 

principle. Assuming that the heirs bear the burden of the estate tax, then large families may face a 

greater burden of the tax than smaller families. Consider an estate worth $2 million with four 

beneficiaries compared to an estate worth $500,000 with one heir. In the absence of the estate 

tax, and assuming equal division of estates, each heir of both estates would receive $500,000. In 

1998, the larger estate would face a tax liability of $578,750, and each of the heirs would receive 

$355,312.5, i.e., ($2,000,000-$578,750)/4. In contrast, because of the $625,000 exemption, the 

heir of the smaller estate would receive the entire estate of $500,000. The critics would argue 

that while the heirs of the two estates have the same ability to pay ($500,000 each), they pay 

different amounts of taxes; each would receive the same amount in after-tax transfers under the 

inheritance tax. This criticism of the estate tax, however, rests on the assumption that the 

incidence of the estate tax rests with the heirs. In essence, it assumes that the estate tax neither 

acts as a backstop to the income tax nor bolsters its progressivity, and that it has little behavioral 

effects on the parents’ labor supply and their consumption and savings decisions. A more 

plausible argument is that the incidence of the estate tax primarily rests with the latter and not the 

heirs.63 

Critics also point out that the estate tax can be avoided with careful planning (Cooper, 

1979), and argue for its replacement with another form of wealth tax and expanding the role of 

transfer taxation (Aaron and Munnell, 1992). Alternative tax systems, however, such as the 

inheritance tax or the accession tax, where all inheritances received by a beneficiary are 

considered as part of his taxable income, are likely to be quite complex and would involve a larger 

number of taxpayers. Others have recommended that the reach of wealth taxation can be 

62 The expansion of the reach of the gift tax (TRA76) and the enactment of the GSTT 

(TRA76 and TRA86), along with the kiddie tax provision of TRA86, go a long way in reducing 

transfers motivated by the taxation of income at progressive rates. 

63 See Holtz-Eakin (1996) for a discussion on the incidence of these taxes. 
34 

expanded by replacing the current transfer tax altogether with a progressive consumption tax 

(McCaffery, 1994). Short of having very high tax rates, a consumption tax may not replicate the 

incidence of the current transfer tax system. 

Notwithstanding the criticisms, estate and gift taxes serve a number of objectives. These 

taxes, perhaps imperfectly, act as a backstop to the income tax. They generate about $20 billion 

annually mostly paid by the very wealthy. The current tax thus enhances the progressivity of the 

entire tax system (Graetz, 1983). It discourages interstate competition for the wealthy. Its effects 

on wealth concentration, however, appear to be modest. 
35 

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Table 1 

Historical Features of the Estate Tax 

Year Tax Rate 

Range 

Exemption or 

Equivalent 

Amount 

Unified 

Credit 

Maximum 

Marital 

Deduction 

Special Use Exclusion 

for Closely Held 

Business 

1916 1 - 10% $50,000 N.A. N.A. N.A. 

1917 1 - 15 50,000 N.A. N.A. N.A. 

1917 2 - 25 50,000 N.A. N.A. N.A. 

1919 1 - 25 50,000 N.A. N.A. N.A. 

1924 1 - 40 50,000 N.A. N.A. N.A. 

1926 1 - 20 100,000 N.A. N.A. N.A. 

1932 1 - 45 50,000 N.A. N.A. N.A. 

1934 1 - 60 50,000 N.A. N.A. N.A. 

1935 2 - 70 40,000 N.A. N.A. N.A. 

1941 3 - 77 40,000 N.A. N.A. N.A. 

1942 3 - 77 60,000 N.A. N.A. N.A. 

1949 3 - 77 60,000 N.A. 50 % of Adj. Gross Estate N.A. 

1955 3 - 77 60,000 N.A. 50 % of Adj. Gross Estate N.A. 

1977 18 - 70 120,667 $30,000 50% or $250,000 $500,000 

1978 18 - 70 134,000 34,000 50% or $250,000 500,000 

1979 18 - 70 147,333 38,000 50% or $250,000 500,000 

1980 18 - 70 161,563 42,000 50% or $250,000 500,000 

1981 18 - 70 175,625 47,000 50% or $250,000 600,000 

1982 18 - 65 225,000 62,800 100 % 700,000 

1983 18 - 60 275,000 79,300 100 % 750,000 

1984 18 - 55 325,000 96,300 100 % 750,000 

1985 18 - 55 400,000 121,800 100 % 750,000 

1986 18 - 55 500,000 155,800 100 % 750,000 

1987 18 - 55 600,000 192,800 100 % 750,000 

1996 18 - 55 600,000 192,800 100 % 750,000 

1998 18 - 55 625,000 202,050 100 % 750,000 

1999 18 - 55 650,000 211,300 100 % indexed 

2000 18 - 55 675,000 220,550 100 % indexed 

2001 18 - 55 675,000 220,550 100 % indexed 

2002 18 - 55 700,000 229,800 100 % indexed 

2003 18 - 55 700,000 229,800 100 % indexed 

2004 18 - 55 850,000 287,300 100 % indexed 

2005 18 - 55 950,000 326,300 100 % indexed 

2006 18 - 55 1,000,000 345,800 100 % indexed 

Note: Year reflects period when feature took effect. 
Table 2 

Historical Features of The Gift Tax 

Year Tax Rate 

Range 

Annual 

Exclusion per 

donee 

Exemption or 

Equivalent 

Amount 

Unified Credit 

Maximum Marital 

Deduction 

1924 1 - 40% $500 $50,000 N.A. N.A. 

1926 N.A. N.A. N.A. N.A. N.A. 

1932 0.75 - 33.5 5,000 50,000 N.A. N.A. 

1934 0.75 - 45 5,000 50,000 N.A. N.A. 

1936 1.5 - 52.5 5,000 40,000 N.A. N.A. 

1942 2.25 - 57.75 4,000 40,000 N.A. N.A. 

1943 2.25 - 57.75 3,000 30,000 N.A. N.A. 

1949 2.25 - 57.75 3,000 30,000 N.A. 50 % of Gift 

1955 2.25 - 57.75 3,000 30,000 N.A. 50 % of Gift 

1977 18 - 70 3,000 120,667 $30,000 50 % of Gift 

1978 18 - 70 3,000 134,000 34,000 50 % of Gift 

1979 18 - 70 3,000 147,333 38,000 50 % of Gift 

1980 18 - 70 3,000 161,563 42,000 50 % of Gift 

1981 18 - 70 3,000 175,625 47,000 50 % of Gift 

1982 18 - 65 10,000 225,000 62,800 100 % 

1983 18 - 60 10,000 275,000 79,300 100 % 

1984 18 - 55 10,000 325,000 96,300 100 % 

1985 18 - 55 10,000 400,000 121,800 100 % 

1986 18 - 55 10,000 500,000 155,800 100 % 

1987 18 - 55 10,000 600,000 192,800 100 % 

1996 18 - 55 10,000 600,000 192,800 100 % 

1998 18 - 55 indexed 625,000 202,050 100 % 

1999 18 - 55 indexed 650,000 211,300 100 % 

2000 18 - 55 indexed 675,000 220,550 100 % 

2001 18 - 55 indexed 675,000 220,550 100 % 

2002 18 - 55 indexed 700,000 229,800 100 % 

2003 18 - 55 indexed 700,000 229,800 100 % 

2004 18 - 55 indexed 850,000 287,300 100 % 

2005 18 - 55 indexed 950,000 326,300 100 % 

2006 18 - 55 indexed 1,000,000 345,800 100 % 

Note: Year reflects period when feature took effect. See text for pre-1982 and post 1976 allowable marital 

deduction, Section 3.3.1. 
Table 3 

Historical Features of The Generation Skipping Transfer Tax 

Year Tax Rate (%) Exemption per donor Exemption per donee 

1916 N.A. N.A. N.A. 

1977 70 $250,000 N.A. 

1982 65 1,000,000 N.A. 

1983 60 1,000,000 N.A. 

1984 55 1,000,000 N.A. 

1985 55 1,000,000 N.A. 

1986 55 1,000,000 N.A. 

1987 55 1,000,000 $2,000,000 

1990 55 1,000,000 N.A. 

1999 55 indexed N.A. 

Note: Year reflects period when feature took effect. 
Table 4 

Estate Tax and State Death Tax Credit Rate Schedules 

ESTATE TAX - Rate Schedule STATE DEATH TAX CREDIT - Rate Schedule 

If the amount of Taxable Estate 

($1,000s) 

then for the tentative tax If the Adjusted Taxable 

Estate* ($1,000s) 

then for the maximum tax credit 

is over but not over enter the amount over is over but not over enter the amount over 

0 10 $0 + 18.0% $0 0 40 $0 + 0.0% $0 

10 20 1,800 + 20.0% 10 40 90 0 + 0.8% 40 

20 40 3,800 + 22.0% 20 90 140 400 + 1.6% 90 

40 60 8,200 + 24.0% 40 140 240 1,200 + 2.4% 140 

60 80 13,000 + 26.0% 60 240 440 3,600 + 3.2% 240 

80 100 18,200 + 28.0% 80 440 640 10,000 + 4.0% 440 

100 150 23,800 + 30.0% 100 640 840 18,000 + 4.8% 640 

150 250 38,800 + 32.0% 150 840 1,040 27,600 + 5.6% 840 

250 500 70,800 + 34.0% 250 1,040 1,540 38,800 + 6.4% 1,040 

500 750 155,800 + 37.0% 500 1,540 2,040 70,800 + 7.2% 1,540 

750 1,000 248,300 + 39.0% 750 2,040 2,540 106,800 + 8.0% 2,040 

1,000 1,250 345,800 + 41.0% 1,000 2,540 3,040 146,800 + 8.8% 2,540 

1,250 1,500 448,300 + 43.0% 1,250 3,040 3,540 190,800 + 9.6% 3,040 

1,500 2,000 555,800 + 45.0% 1,500 3,540 4,040 238,800 + 10.4% 3,540 

2,000 2,500 780,800 + 49.0% 2,000 4,040 5,040 290,800 + 11.2% 4,040 

2,500 3,000 1,025,800 + 53.0% 2,500 5,040 6,040 402,800 + 12.0% 5,040 

3,000 1,290,800 + 55.0% 3,000 6,040 7,040 522,800 + 12.8% 6,040 

7,040 8,040 650,800 + 13.6% 7,040 

8,040 9,040 786,800 + 14.4% 8,040 

9,040 10,040 930,800 + 15.2% 9,040 

10,040 1,082,800 + 16.0% 10,040 

*

 The adjusted taxable estate is equal to the taxable estate less $60,000. 
Table 5 

An Illustration of the Taxation of Transfers Under Estate, Gift, and GST Taxes 

Estate Tax Gift Tax 

Wealth transferred ($millions) 100.00 100.00 

After-tax transfer ($millions) 45.00 64.52 

Tax liability ($millions) 55.00 35.48 

Statutory tax rate (percent) 55.00 55.00 

Effective tax rate (percent) 55.00 36.00 

Additional Generation Skipping Transfer Tax (direct skip) 

Statutory tax rate (percent) 55.00 55.00 

Tax liability ($millions) 15.61 22.54 

Effective tax rate (percent) 35.00 35.00 

Cumulative Net Effect 

After-tax transfer ($millions) 29.39 41.98 

Tax liability ($millions) 70.61 58.02 

Effective tax rate (percent) 71.00 58.00 

Note: Estimates assume one donee, exclusions of $10,000 under the gift tax and 

$1,000,000 under the GSTT. The estate tax is computed on a tax inclusive 

basis, while the gift tax and GSTT on direct skip are computed on a tax 

exclusive basis. Note that under the estate tax, assets get a step up in basis, 

while under the gift tax they receive a partial basis carry over. 
Table 6 

Federal Marginal Tax Rates After Unified And State Death Tax Credits, 1997 

Taxable Estate ($000's) Tax Rate after 

Unified Credit (%) 

State Death Tax 

over but not over Credit Rate (%) Net tax rate (%)

0 600 0.0 0.0 0.0 

600 700 37.0 4.0 33.0 

700 750 37.0 4.8 32.2 

750 900 39.0 4.8 34.2 

900 1000 39.0 5.6 33.4 

1000 1100 41.0 5.6 35.4 

1100 1250 41.0 6.4 34.6 

1250 1500 43.0 6.4 36.6 

1500 1600 45.0 6.4 38.6 

1600 2000 45.0 7.2 37.8 

2000 2100 49.0 7.2 41.8 

2100 2500 49.0 8.0 41.0 

2500 2600 53.0 8.0 45.0 

2600 3000 53.0 8.8 44.2 

3000 3100 55.0 8.8 46.2 

3100 3600 55.0 9.6 45.4 

3600 4100 55.0 10.4 44.6 

4100 5100 55.0 11.2 43.8 

5100 6100 55.0 12.0 43.0 

6100 7100 55.0 12.8 42.2 

7100 8100 55.0 13.6 41.4 

8100 9100 55.0 14.4 40.6 

9100 10000 55.0 15.2 39.8 

10000 10100 60.0 15.2 44.8 

10100 21040* 60.0 16.0 44.0 

21040* and over 55.0 16.0 39.0 

* Beginning in 1998, the rates are phased out completely at taxable estates of $17,184,000. 
Table 7 

Number of Adult Deaths and Taxable Estates of Decedents in 1992 

Gross Estate Number of Deaths 

Estate Tax 

Taxable Estates Estate Tax ($mil.) 

Under $600,000 2,051,535 0 0.0 

$600,000 $1,000,000 31,724 11,659 527.8 

$1,000,000 $2,500,000 21,489 11,244 2,664.6 

$2,500,000 $5,000,000 4,469 2,667 2,245.3 

$5,000,000 $10,000,000 1,608 1,083 1,902.4 

$10,000,000 $20,000,000 529 382 1,298.3 

$20,000,000 Over 263 208 1,869.4 

Total 2,111,617 27,243 10,507.8 

Source: Martha Britton Eller. “Federal Taxation of Wealth Transfers, 1992-1995,” SOI 

Bulletin, Internal Revenue Service, Statistics of Income, Winter 1996-97, 

Washington, DC 1997, and 

Internal Revenue Service, Statistics of Income Bulletin, Fall 1997, Washington, 

DC 1997, page 217. 
Table 8 

Estate Tax Profile of Decedents in 1992 (Amounts in $1,000s) 

Size of Gross Estate Gross Estate Net Worth 

Debts Expenses 

Spousal bequests 

Over Under Number Amount Number Amount Number Amount 

600,000 1,000,000 31,724 24,329,330 31,724 23,611,487 717,843 655,945 13,145 5,067,924 

1,000,000 2,500,000 21,489 31,600,054 21,489 30,244,772 1,355,282 864,071 10,975 9,332,842 

2,500,000 5,000,000 4,469 15,276,723 4,469 14,485,726 790,997 420,532 2,326 5,306,255 

5,000,000 10,000,000 1,608 10,925,991 1,608 10,255,073 670,918 287,495 867 3,991,499 

10,000,000 20,000,000 529 7,155,584 529 6,779,976 375,608 196,560 288 2,608,460 

20,000,000 263 15,166,045 263 14,529,082 636,963 307,858 150 5,768,765 

Total 60,082 104,453,727 60,082 99,906,116 4,547,611 2,732,461 27,751 32,075,747 

Size of Gross Estate Charitable Deduction Allowable Unified Credit State Death Tax Credit Federal Estate Tax 

Over Under Number Amount Number Amount Number Amount Number Amount 

600,000 1,000,000 5,221 802,609 31,081 5,979,971 14,733 267,840 11,659 527,801 

1,000,000 2,500,000 4,004 1,301,836 21,084 4,059,436 12,243 585,034 11,244 2,664,578 

2,500,000 5,000,000 1,134 739,576 4,436 854,033 2,962 440,846 2,667 2,245,325 

5,000,000 10,000,000 518 721,525 1,591 306,395 1,124 415,800 1,083 1,902,446 

10,000,000 20,000,000 207 664,949 528 101,651 400 352,648 382 1,298,254 

20,000,000 145 3,751,611 263 50,643 215 642,331 208 1,869,364 

Total 11,229 7,982,106 58,983 11,352,129 31,677 2,704,499 27,243 10,507,768 

Size of Gross Estate GSTT All Taxes as Percent of Bequests to (non-spousal) Heirs After -Tax Bequests 

Over Under Number Amount Net worth * Net worth ** Amount** % of NW* Amount** % of NW* 

600,000 1,000,000 24 650 3.5% 4.7% 17,085,009 74.4% 16,288,718 71.0% 

1,000,000 2,500,000 38 2,691 11.1% 17.3% 18,746,023 63.8% 15,493,720 52.7% 

2,500,000 5,000,000 114 15,848 19.2% 33.7% 8,019,363 57.0% 5,317,344 37.8% 

5,000,000 10,000,000 46 11,424 23.4% 44.3% 5,254,554 52.7% 2,924,884 29.3% 

10,000,000 20,000,000 40 16,924 25.3% 50.4% 3,310,007 50.3% 1,642,181 24.9% 

20,000,000 27 41,904 18.0% 54.3% 4,700,848 33.1% 2,147,249 15.1% 

Total 289 89,441 13.7% 23.3% 57,115,804 58.8% 43,814,096 45.1% 

* Net worth less estate expenses 

** Net worth less estate expenses, spousal, and charitable bequests 

Source: Martha Britton Eller. “Federal Taxation of Wealth Transfers, 1992-1995,” SOI Bulletin, Internal Revenue Service, Statistics of Income, Winter 1996-97, 

Washington, DC 1997, and author’s calculations using the estate tax file for decedents in 1992 with returns filed in 1992 through 1994. 
Table 9 

Life Insurance Ownership by Size of Estate, Marital Status, and Type 

(Amounts in $millions) 

Size of Gross Estate 

Married Not Married All 

Proceeds Included in 

Estate 

Proceeds Excluded 

from Estate 

Proceeds Included in 

Estate 

Proceeds Excluded 

from Estate 

Proceeds Included in 

Estate 

Proceeds Excluded 

from Estate 

Over Under Number Amount Number Amount Number Amount Number Amount Number Amount Number Amount 

600,000 1,000,000 9,571 793 712 96 7,467 301 266 45 17,037 1,093 978 140 

1,000,000 2,500,000 7,596 1,181 1,085 304 4,328 281 358 100 11,924 1,462 1,443 404 

2,500,000 5,000,000 1,599 413 391 220 776 84 134 50 2,374 497 525 270 

5,000,000 10,000,000 590 218 227 181 235 28 58 37 825 246 285 217 

10,000,000 20,000,000 208 81 91 118 84 10 22 19 292 92 113 137 

20,000,000 97 58 49 126 45 12 8 21 142 70 57 147 

Total 19,660 2,744 2,555 1,045 12,935 716 846 271 32,595 3,460 3,401 1,315 

Note: Life insurance proceeds are net of policy loans.

Source: Computed from the estate tax file for decedents in 1992 with returns filed in 1992 through 1994
Table 10 

Estates Electing Special Use Valuation, 1992 

(Amounts in $millions) 

Size of Gross Estate 

Number 

Value 

Over Under Fair Market Adjusted Reduction in 

600,000 1,000,000 175 135 45 90 

1,000,000 and over 130 166 84 82 

Total 305 301 128 172 

Estates Electing Tax Deferral, 1992 

(Amounts in $millions) 

Size of Gross estate 

Number 

Tax 

Deferred 

Estate 

Tax 

Percent of 

Over Under Tax Deferred

600,000 1,000,000 119 9 13 67.15% 

1,000,000 5,000,000 462 166 261 63.78% 

5,000,000 and over 135 344 571 60.30% 

Total 716 519 844 61.48% 

Source: Martha Britton Eller. “Federal Taxation of Wealth Transfers, 1992-1995,” SOI 

Bulletin, Internal Revenue Service, Statistics of Income, Winter 1996-97, 

Washington, DC 1997. 
Table 11A 

Number of Heirs by Type of Relation and Size of Estate 

Gross Estate 

Spouse Son Daughter Grandchild Sibling Niece / 

Nephew 

Aunt / Uncle Parent Other Trust / 

Estate 

$300,000 $500,000 15,941 18,234 17,798 12,666 7,862 18,671 0 546 16,815 4,695 

500,000 1,000,000 9,143 9,856 11,162 13,893 4,275 5,106 0 237 11,755 7,006 

1,000,000 2,500,000 3,758 3,693 3,778 4,139 1,387 4,342 32 87 8,582 3,155 

2,500,000 10,000,000 1,088 1,083 1,148 1,532 455 1,303 9 11 3,546 1,405 

10,000,000 130 144 135 248 33 154 1 3 801 239 

Total 30,061 33,010 34,020 32,478 14,012 29,576 42 885 41,500 16,499 

Gross Estate NA Total 

$300,000 $500,000 2,839 116,067 

500,000 1,000,000 1,187 73,620 

1,000,000 2,500,000 717 33,673 

2,500,000 10,000,000 176 11,756 

10,000,000 60 1,948 

Total 4,981 237,064 

Source: Computed from the 1982 Collation File. 
Table 11B 

Amount of Inheritance by Type of Relation and Size of Estate ($000) 

Gross Estate 

Spouse Son Daughter Grandchild Sibling Niece / 

Nephew 

Aunt / 

Uncle 

Parent Other Trust / Estate 

$300,000 $500,000 3,926,071 1,529,153 1,735,046 323,263 589,332 592,828 0 31,668 360,467 777,818 

500,000 1,000,000 4,120,104 995,438 1,461,548 354,223 468,199 353,115 0 77,069 418,150 1,293,393 

1,000,000 2,500,000 3,405,539 742,180 763,310 200,969 157,741 292,655 2,392 12,760 304,867 955,033 

2,500,000 10,000,000 2,745,338 394,187 384,516 155,674 63,560 141,172 176 4,192 153,543 685,974 

10,000,000 2,511,222 99,240 86,438 50,751 5,338 9,774 57 1,892 61,501 235,048 

Total 16,708,274 3,760,200 4,430,857 1,084,880 1,284,169 1,389,544 2,625 127,581 1,298,527 3,947,266 

Gross Estate NA Total 

$300,000 $500,000 92,173 9,957,835 

500,000 1,000,000 21,770 9,563,011 

1,000,000 2,500,000 29,815 6,867,253 

2,500,000 10,000,000 8,782 4,737,113 

10,000,000 1,838 3,063,100 

Total 154,379 34,188,313 

Source: Computed from the 1982 Collation File. 
Table 11C 

Average Inheritance by Type of Relation and Size of Estate 

Gross Estate 

Spouse Son Daughter Grandchild Sibling Niece / 

Nephew 

Aunt / Uncle Parent Other Trust / 

Estate 

$300,000 $500,000 $246,281 $83,861 $97,487 $25,523 $74,964 $31,751 $0 $58,006 $21,437 $165,667 

500,000 1,000,000 450,623 101,003 130,943 25,497 109,528 69,158 0 324,521 35,571 184,618 

1,000,000 2,500,000 906,096 200,951 202,022 48,551 113,688 67,395 74,738 146,331 35,523 302,734 

2,500,000 10,000,000 2,524,249 363,965 334,979 101,588 139,675 108,377 19,342 368,505 43,300 488,242 

10,000,000 19,299,988 690,073 641,803 204,910 161,279 63,436 57,000 552,699 76,757 985,342 

Total 555,817 113,910 130,242 33,404 91,649 46,982 62,138 144,090 31,290 239,242 

Gross Estate NA Total 

$300,000 $500,000 $32,468 $85,794 

500,000 1,000,000 18,334 129,897 

1,000,000 2,500,000 41,556 203,940 

2,500,000 10,000,000 49,803 402,939 

10,000,000 30,385 1,572,188 

Total 30,996 144,215 

Source: Computed from the 1982 Collation File. 
Table 12A 

Number of Children, Total Income, And Inheritance Received 

Number of Children by Parent's Gross Estate and Child's AGI 

Gross Estate 

No AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

Total 

$300,000 $500,000 1,100 3,409 4,729 6,708 5,938 3,739 1,100 1,540 220 28,483 

500,000 1,000,000 251 1,506 2,134 3,138 5,147 1,632 1,130 1,757 251 16,946 

1,000,000 2,500,000 191 614 731 816 1,263 933 605 1,025 431 6,609 

2,500,000 10,000,000 61 127 165 181 302 231 196 362 333 1,958 

10,000,000 8 13 14 11 23 19 26 44 84 241 

Total 1,610 5,670 7,772 10,855 12,673 6,554 3,056 4,728 1,320 54,237 

Children's 1981 AGI by Parent's Gross Estate and Child's AGI ($000) 

Gross Estate 

NO AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

TOTAL 

$300,000 $500,000 $-50,187 $19,260 $72,992 $164,152 $226,528 $227,916 $93,492 $193,720 $47,888 $995,760 

500,000 1,000,000 -7,203 7,126 30,310 78,292 193,633 99,298 99,054 230,026 66,270 796,806 

1,000,000 2,500,000 -13,345 3,324 10,979 20,620 49,415 57,099 52,413 140,279 152,150 472,933 

2,500,000 10,000,000 -5,372 692 2,450 4,508 11,946 14,211 17,181 52,196 143,926 241,739 

10,000,000 -491 76 198 279 867 1,113 2,289 6,259 54,800 65,390 

Total -76,597 30,478 116,929 267,850 482,389 399,636 264,430 622,479 465,034 2,572,628 

Inheritance by Parent's Gross Estate And Child's AGI ($000) 

Gross Estate 

No AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

Total 

$300,000 $500,000 $122,837 $367,531 $421,454 $739,337 $1,189,707 $507,011 $103,254 $259,654 $13,012 $3,723,794 

500,000 1,000,000 66,547 144,845 188,604 450,243 659,454 378,175 136,201 263,232 47,692 2,334,993 

1,000,000 2,500,000 38,500 99,436 137,598 142,637 260,291 228,667 141,807 253,678 108,281 1,410,889 

2,500,000 10,000,000 15,331 32,849 49,469 49,512 100,288 84,843 76,288 137,504 125,844 671,929 

10,000,000 2,407 4,910 8,237 4,703 11,242 12,378 17,723 35,353 54,853 151,807 

Total 245,623 649,571 805,362 1,386,432 2,220,983 1,211,074 475,274 949,421 349,682 8,293,413 

Source: Computed from the 1982 Collation File. 
Table 12B 

Average Income and Inheritance Received by the Children 

Average Child AGI in 1981 by Parent's Gross Estate and Child's AGI 

Gross Estate 

No AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

Total 

$300,000 $500,000 0 $5,650 $15,436 $24,470 $38,146 $60,956 $85,015 $125,825 $217,729 $34,960 

500,000 1,000,000 0 4,731 14,203 24,948 37,623 60,849 87,677 130,890 263,966 47,019 

1,000,000 2,500,000 0 5,409 15,029 25,276 39,115 61,199 86,629 136,811 353,038 71,555 

2,500,000 10,000,000 0 5,438 14,856 24,847 39,608 61,539 87,848 144,305 431,660 123,452 

10,000,000 0 6,042 14,347 24,657 38,374 59,088 86,827 142,431 651,429 271,254 

Total 0 5,376 15,045 24,675 38,065 60,979 86,516 131,658 352,427 47,433 

Average Inheritance by Parent's Gross Estate and Child's AGI 

Gross Estate 

No AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

Total 

$300,000 $500,000 0 $107,809 $89,126 $110,213 $200,340 $135,600 $93,892 $168,651 $59,161 $130,740 

500,000 1,000,000 0 96,157 88,381 143,471 128,132 231,743 120,558 149,785 189,965 137,787 

1,000,000 2,500,000 0 161,817 188,354 174,848 206,037 245,089 234,384 247,406 251,247 213,468 

2,500,000 10,000,000 0 258,155 299,913 272,883 332,504 367,407 390,066 380,159 377,426 343,142 

10,000,000 0 391,045 596,416 416,221 497,441 657,237 672,188 804,497 652,065 629,733 

Total 0 114,568 103,623 127,723 175,258 184,794 155,499 200,809 265,007 152,909 

Average Inheritance as Percent of Average AGI by Parent's Gross Estate and Child's AGI (%) 

Gross Estate 

No AGI $1 -

$10,000 

$10,000-

$20,000 

$20,000-

$30,000 

$30,000-

$50,000 

$50,000-

$75,000 

$75,000-

$100,000 

$100,000-

$200,000 

$200,000-

******* 

Total 

$300,000 $500,000 0 1,908 577 450 525 222 110 134 27 374 

500,000 1,000,000 0 2,033 622 575 341 381 138 114 72 293 

1,000,000 2,500,000 0 2,992 1,253 692 527 400 271 181 71 298 

2,500,000 10,000,000 0 4,747 2,019 1,098 839 597 444 263 87 278 

10,000,000 0 6,472 4,157 1,688 1,296 1,112 774 565 100 232 

Total 0 2,131 689 518 460 303 180 153 75 322 

Source: Computed from the 1982 Collation File. 
Table 13 

Charitable Bequests by Size of Estate, 1992 

Gross Estate Charitable Bequests Percent 

Giving 

Bequests as 

Percent of 

Wealth* 

Bequests as 

Percent of 

Wealth** Over Under Number Amount ($1000s) 

600,000 1,000,000 5,221 802,609 16.46% 3.5% 3.1% 

1,000,000 2,500,000 4,004 1,301,836 18.63% 4.4% 3.5% 

2,500,000 5,000,000 1,134 739,576 25.37% 5.3% 3.6% 

5,000,000 10,000,000 518 721,525 32.21% 7.2% 4.7% 

10,000,000 20,000,000 207 664,949 39.13% 10.1% 6.4% 

20,000,000 145 3,751,611 55.13% 26.4% 17.2% 

Total 11,229 7,982,106 18.69% 8.2% 5.3% 

* Net worth less estate expenses. 

** Net worth less estate expenses and taxes, computed in the absence of charitable bequests. The 

ratio of charitable bequests to wealth is computed after reducing bequests by the tax savings from the 

deduction. 

Source: Martha Britton Eller. “Federal Taxation of Wealth Transfers, 1992-1995,” SOI 

Bulletin, Internal Revenue Service, Statistics of Income, Winter 1996-97, 

Washington, DC 1997, and author’s calculations from the SOI estate tax file for 

decedents in 1992. 
Table 14 

Charitable Gifts in Life and at Death 

(1981 Levels of Income and 1982 Levels of Wealth) 

Gross Estate 

Number of 

Decedents 

Number with 

Charitable 

Contributions 

Percent 

Contributing 

Number with 

Charitable 

Bequests 

Percent with 

Bequests Over Under 

$300,000 500,000 32,384 20,047 61.90% 4,935 15.24% 

500,000 1,000,000 18,405 14,084 76.52% 2,881 15.65% 

1,000,000 2,500,000 6,836 5,665 82.87% 1,897 27.75% 

2,500,000 10,000,000 1,859 1,633 87.84% 699 37.60% 

10,000,000 and over 209 185 88.52% 115 55.02% 

Total 59,693 41,614 69.71% 10,527 17.64% 

Gross Estate Total 

Charitable 

Contributions 

Mean 

Charitable 

Contribution 

Total 

Charitable 

Bequests 

Mean 

Charitable 

Bequests 

Contributions 

as percent of 

Bequests Over Under 

300,000 500,000 36,364 1,123 353,429 10,914 10.29% 

500,000 1,000,000 41,917 2,277 318,096 17,283 13.18% 

1,000,000 2,500,000 36,926 5,402 548,048 80,171 6.74% 

2,500,000 10,000,000 45,529 24,491 706,656 380,127 6.44% 

10,000,000 and over 43,028 205,876 1,473,076 7,048,211 2.92% 

Total 203,764 3,414 3,399,305 56,946 5.99% 

Gross Estate Mean 

AGI 

Contributions 

as percent 

of Income 

Bequests as 

percent 

of Income 

Mean 

Wealth 

Contributions 

as percent 

of Wealth Over Under 

300,000 500,000 38,762 2.90% 28.16% 348,293 0.32% 

500,000 1,000,000 61,597 3.70% 28.06% 630,914 0.36% 

1,000,000 2,500,000 104,801 5.15% 76.50% 1,330,166 0.41% 

2,500,000 10,000,000 261,025 9.38% 145.63% 3,646,204 0.67% 

10,000,000 and over 1,265,719 16.27% 556.85% 25,557,882 0.81% 

Total 64,583 5.29% 88.18% 738,855 0.46% 

Total contributions in 1981 levels, and bequests and wealth in 1982 levels, both in $1000s. 

Wealth is defined as net worth less estate expenses. 

Source: Computed from the 1982 Estate Collation File. 
Table 15 

Cumulative Adjusted Taxable Gifts Made during 1977-1992 for Decedents in 1992 

Size of Gross estate Number of 

Estates 

Percent of 

Estates 

Gifts 

($1000s) 

Average 

Gift 

Gifts/ 

Wealth* 

Gifts/ 

Over Under Wealth**

$600,000 1,000,000 1,867 5.89% 220,267 $117,979 0.96% 1.35% 

1,000,000 2,500,000 2,622 12.20% 508,095 193,781 1.73% 3.28% 

2,500,000 5,000,000 1,159 25.93% 335,067 289,100 2.38% 6.30% 

5,000,000 10,000,000 632 39.30% 348,989 552,198 3.50% 11.93% 

10,000,000 20,000,000 268 50.66% 251,785 939,496 3.82% 15.33% 

20,000,000 ******** 174 66.16% 269,238 1,547,345 1.89% 12.54% 

Total 6,722 11.19% 1,933,441 287,629 1.99% 4.41% 

* Net worth less estate expenses 

** Net worth less estate expenses, spousal and charitable bequests, and taxes. 

Source: Martha Britton Eller. “Federal Taxation of Wealth Transfers, 1992-1995,” SOI 

Bulletin, Internal Revenue Service, Statistics of Income, Winter 1996-97, 

Washington, DC 1997, and author’s calculations. 
Table 16 

Estate and Gift Tax Receipts Compared to Total Federal Government Receipts, 1917-1997 

Fiscal 

Year 

Receipts 

($millions) 

Percent of 

Total Receipts 

Fiscal 

Year 

Receipts 

($millions) 

Percent of 

Total Receipts 

1917 6 0.55% 1957 1,365 1.71% 

1918 48 1.30% 1958 1,393 1.75% 

1919 82 1.60% 1959 1,333 1.68% 

1920 104 1.56% 1960 1,606 1.74% 

1921 154 2.76% 1961 1,896 2.01% 

1922 139 3.46% 1962 2,016 2.02% 

1923 127 3.29% 1963 2,167 2.03% 

1924 103 2.66% 1964 2,394 2.13% 

1925 108 2.98% 1965 2,716 2.33% 

1926 109 2.87% 1966 3,066 2.34% 

1927 100 2.50% 1967 2,978 2.00% 

1928 60 1.54% 1968 3,051 1.99% 

1929 62 1.60% 1969 3,491 1.87% 

1930 65 1.60% 1970 3,644 1.89% 

1931 48 1.55% 1971 3,735 2.00% 

1932 47 2.46% 1972 5,436 2.62% 

1933 34 1.72% 1973 4,917 2.13% 

1934 113 3.77% 1974 5,035 1.91% 

1935 212 5.89% 1975 4,611 1.65% 

1936 379 9.71% 1976 5,216 1.75% 

1937 306 5.66% 1977 7,327 2.06% 

1938 417 6.13% 1978 5,285 1.32% 

1939 361 5.73% 1979 5,411 1.17% 

1940 353 5.43% 1980 6,389 1.24% 

1941 403 4.63% 1981 6,787 1.13% 

1942 420 2.88% 1982 7,991 1.29% 

1943 441 1.84% 1983 6,053 1.01% 

1944 507 1.16% 1984 6,010 0.90% 

1945 637 1.41% 1985 6,422 0.87% 

1946 668 1.70% 1986 6,958 0.90% 

1947 771 2.00% 1987 7,493 0.88% 

1948 890 2.14% 1988 7,594 0.84% 

1949 780 1.98% 1989 8,745 0.88% 

1950 698 1.77% 1990 11,500 1.11% 

1951 708 1.37% 1991 11,139 1.06% 

1952 818 1.24% 1992 11,143 1.02% 

1953 881 1.27% 1993 12,577 1.09% 

1954 934 1.34% 1994 15,225 1.21% 

1955 924 1.41% 1995 14,763 1.09% 

1956 1,161 1.56% 1996 17,189 1.18% 

1997 19,845 1.26% 

Source: Annual Report of the Secretary of the Treasury (various years) and the Budget of the United States Government, 

Historical Tables. 
Table 17 

Estate and Gift Tax Receipts by Source, 1917-1997 

Fiscal 

Year 

Nominal 

($ millions) 

Real 

($ millions) 

Estate 

Share 

Gift 

Share 

Fiscal 

Year 

Nominal 

($ millions) 

Real 

($ millions) 

Estate 

Share 

Gift 

Share 

1917 6 88 1.00 0.00 1957 1,365 7,874 0.91 0.09 

1918 48 582 1.00 0.00 1958 1,393 7,778 0.90 0.10 

1919 82 852 1.00 0.00 1959 1,333 7,237 0.91 0.09 

1920 104 940 1.00 0.00 1960 1,606 8,659 0.88 0.12 

1921 154 1,208 1.00 0.00 1961 1,896 10,050 0.91 0.09 

1922 139 1,222 1.00 0.00 1962 2,016 10,579 0.88 0.12 

1923 127 1,183 1.00 0.00 1963 2,167 11,258 0.90 0.10 

1924 103 945 1.00 0.00 1964 2,394 12,275 0.87 0.13 

1925 108 995 0.93 0.07 1965 2,716 13,746 0.89 0.11 

1926 109 977 0.97 0.03 1966 3,066 15,272 0.85 0.15 

1927 100 889 1.00 0.00 1967 2,978 14,421 0.90 0.10 

1928 60 542 1.00 0.00 1968 3,051 14,332 0.88 0.12 

1929 62 568 1.00 0.00 1969 3,491 15,740 0.89 0.11 

1930 65 595 1.00 0.00 1970 3,644 15,579 0.88 0.12 

1931 48 452 1.00 0.00 1971 3,735 15,104 0.88 0.12 

1932 47 489 1.00 0.00 1972 5,436 21,059 0.93 0.07 

1933 34 393 0.87 0.13 1973 4,917 18,456 0.87 0.13 

1934 113 1,366 0.92 0.08 1974 5,035 17,793 0.91 0.09 

1935 212 2,483 0.66 0.34 1975 4,611 14,675 0.92 0.08 

1936 379 4,339 0.58 0.42 1976 5,216 15,212 0.92 0.08 

1937 306 3,448 0.92 0.08 1977 7,327 20,204 0.76 0.24 

1938 417 4,542 0.92 0.08 1978 5,285 13,683 0.97 0.03 

1939 361 4,014 0.92 0.08 1979 5,411 13,021 0.97 0.03 

1940 353 3,985 0.92 0.08 1980 6,389 13,808 0.97 0.03 

1941 403 4,516 0.87 0.13 1981 6,787 12,923 0.97 0.03 

1942 420 4,483 0.78 0.22 1982 7,991 13,793 0.99 0.01 

1943 441 4,245 0.93 0.07 1983 6,053 9,842 0.98 0.02 

1944 507 4,598 0.93 0.07 1984 6,010 9,468 0.97 0.03 

1945 637 5,679 0.93 0.07 1985 6,422 9,698 0.96 0.04 

1946 668 5,823 0.93 0.07 1986 6,958 10,146 0.95 0.05 

1947 771 6,204 0.91 0.09 1987 7,493 10,727 0.93 0.07 

1948 890 6,262 0.91 0.09 1988 7,594 10,489 0.94 0.06 

1949 780 5,078 0.92 0.08 1989 8,745 11,598 0.91 0.09 

1950 698 4,602 0.93 0.07 1990 11,500 14,551 0.81 0.19 

1951 708 4,609 0.87 0.13 1991 11,139 13,372 0.89 0.11 

1952 818 4,936 0.90 0.10 1992 11,143 12,837 0.91 0.09 

1953 881 5,216 0.88 0.12 1993 12,577 14,065 0.89 0.11 

1954 934 5,489 0.92 0.08 1994 15,225 16,532 0.86 0.14 

1955 924 5,389 0.91 0.09 1995 14,763 15,630 0.88 0.12 

1956 1,161 6,797 0.90 0.10 1996 17,189 17,697 0.87 0.13 

1997 19,845 19,845 0.86 0.14 

Real values computed using CPI-U (1997=100), lagged one year. 

Source: Annual Report of the Secretary of the Treasury (various years), the Annual Report of the Commissioner of the Internal 

Revenue Service (various years) and unpublished IRS statistics. 
Table 18 

Nominal and Real Exemption Amounts Under the Estate Tax, 1916-2006 

Year Nominal Real Year Nominal Real 

1916 $50,000 $900,792 1961 $60,000 $394,059 

1917 50,000 767,081 1962 60,000 390,144 

1918 50,000 650,241 1963 60,000 385,045 

1919 50,000 567,551 1964 60,000 380,076 

1920 50,000 490,932 1965 60,000 374,043 

1921 50,000 548,527 1966 60,000 363,653 

1922 50,000 584,443 1967 60,000 352,765 

1923 50,000 574,189 1968 60,000 338,574 

1924 50,000 574,189 1969 60,000 321,045 

1925 50,000 561,065 1970 60,000 303,669 

1926 100,000 1,109,450 1971 60,000 290,923 

1927 100,000 1,128,579 1972 60,000 281,875 

1928 100,000 1,148,378 1973 60,000 265,369 

1929 100,000 1,148,378 1974 60,000 238,993 

1930 100,000 1,175,884 1975 60,000 219,003 

1931 100,000 1,291,926 1976 60,000 207,071 

1932 50,000 716,689 1977 120,667 391,018 

1933 50,000 755,280 1978 134,000 403,588 

1934 50,000 732,734 1979 147,333 398,515 

1935 40,000 573,351 1980 161,563 385,031 

1936 40,000 565,101 1981 175,625 379,405 

1937 40,000 545,480 1982 225,000 457,864 

1938 40,000 557,086 1983 275,000 542,194 

1939 40,000 565,101 1984 325,000 614,255 

1940 40,000 561,065 1985 400,000 730,010 

1941 40,000 534,347 1986 500,000 895,861 

1942 60,000 722,844 1987 600,000 1,037,180 

1943 60,000 681,061 1988 600,000 995,973 

1944 60,000 669,452 1989 600,000 950,190 

1945 60,000 654,576 1990 600,000 901,481 

1946 60,000 604,224 1991 600,000 865,078 

1947 60,000 528,357 1992 600,000 839,798 

1948 60,000 488,895 1993 600,000 815,388 

1949 60,000 495,057 1994 600,000 795,031 

1950 60,000 488,895 1995 600,000 773,121 

1951 60,000 453,168 1996 600,000 750,947 

1952 60,000 444,617 1997 600,000 734,104 

1953 60,000 441,287 1998 625,000 748,963 

1954 60,000 438,006 1999 650,000 762,154 

1955 60,000 439,640 2000 675,000 773,673 

1956 60,000 433,175 2001 675,000 756,279 

1957 60,000 419,301 2002 700,000 766,656 

1958 60,000 407,694 2003 700,000 749,419 

1959 60,000 404,892 2004 850,000 889,550 

1960 60,000 398,053 2005 950,000 971,850 

2006 1,000,000 1,000,000 

Real values computed using CPI-U, 2006=100. An inflation rate of 2.1% is assumed for 1998, 2.2% 

for 1999, and 2.3% thereafter. 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

Table 19 

Life Expectancy of a Surviving Spouse 

Years Relative Frequency Cumulative Relative Frequency 

8.28% 8.28% 

7.71% 15.99% 

6.72% 22.71% 

5.77% 28.47% 

6.07% 34.54% 

4.37% 38.90% 

3.86% 42.76% 

4.12% 46.88% 

4.28% 51.16% 

4.24% 55.39% 

2.79% 58.19% 

3.00% 61.18% 

3.36% 64.54% 

2.77% 67.31% 

2.79% 70.10% 

2.37% 72.47% 

2.12% 74.59% 

1.81% 76.40% 

2.17% 78.57% 

2.00% 80.57% 

1.76% 82.33% 

1.51% 83.84% 

1.36% 85.20% 

1.66% 86.86% 

1.23% 88.09% 

0.73% 88.82% 

1.15% 89.97% 

0.95% 90.92% 

1.16% 92.08% 

0.95% 93.03% 

0.58% 93.61% 

0.61% 94.22% 

1.05% 95.27% 

0.52% 95.79% 

0.39% 96.17% 

0.47% 96.65% 

0.55% 97.19% 

0.25% 97.44% 

0.45% 97.89% 

0.29% 98.18% 

40+ 1.82% 100.00% 

Source: Computed from estate tax returns filed during 1989-1991 for decedents in 1989. 
Table 20 

Summary of the Findings on the Effect of Estate Taxes on Charitable Bequests 

Study Data Sources Estimated Price Elasticities 

(Specification) 

McNees (1973) Federal estate tax returns filed in 1957 and 1959 Not reported; finds taxes to be a 

significant factor 

Boskin (1976) Federal estate tax returns filed in 1957 and 1959 -0.94 to -1.8* (linear) 

Federal estate tax returns filed in 1969 -0.2 to -2.53* (linear) 

Feldstein (1977) Aggregate Federal estate tax data pooled for 

estate tax returns filed in 1948 through 1963. 

-4.0 to -0.1 (varies) 

Barthold and Plotnick (1984) Connecticut probate records, 1930s and 1940s No effect (logarithmic) 

Clotfelter (1985) Federal estate tax returns of decedents in 1976 

filed in 1977 

-2.79 to -1.67 (logarithmic) 

Joulfaian (1991) Federal estate tax returns of decedents in 1986 

filed during 1986-88 

-3.0 (logarithmic) 

Auten and Joulfaian (1996) Federal estate tax returns of decedents in 1982 

filed during 1982-83 

-2.5 (logarithmic) 

Joulfaian (1998) Federal estate tax returns of decedents in 1992 

filed during 1992-94 

-1.67* (budget share) 

-2.26 (logarithmic) 

* Evaluated at mean values. 
Table 21 

Estimated Tax Price Elasticities for Charitable Bequests by Type of Donee, 1986 

Charity Log-linear Model Linear Model 

Arts and Humanities -0.19 -0.49 

Religious -1.22 -1.22 

Education/Medical Research -1.57 -1.18 

Social Welfare -0.25 -0.61 

Foundations -0.33 -0.26 

Other -0.70 -0.80 

Source: David Joulfaian, “Charitable Bequests and Estate Taxes,” National Tax Journal, 

June, 1991 (p. 176 and 179). 
Table 22A 

Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: All Estates 

After-Tax Wealth Returns 

Returns 

with 

Bequests 

Percent of 

Returns with 

Bequests (%) 

Mean 

(First $) 

Price *100 

Mean 

(Last $) 

Price *100 

Mean 

Bequest 

($000s) 

Mean AfterTax Wealth 

($000s) 

Bequests as 

Percent of 

Wealth (%) 

$1 $500,000 651 99 15.2 95 95 11 409 2.7 

500,000 750,000 22,078 3,836 17.4 77 80 27 651 3.6 

750,000 1,000,000 14,931 2,846 19.1 76 78 44 854 3.9 

1,000,000 2,500,000 17,106 3,168 18.5 73 76 80 1,449 3.5 

2,500,000 5,000,000 3,012 719 23.9 70 72 310 3,353 4.6 

5,000,000 10,000,000 953 283 29.7 66 69 796 6,701 5.3 

10,000,000 20,000,000 283 84 29.7 66 68 2,563 13,409 8.3 

20,000,000 50,000,000 123 52 42.3 61 64 8,175 29,106 12.5 

50,000,000 ******** 29 16 55.2 54 56 64,496 161,157 18.0 

TOTAL 59,166 11,102 18.8 75 78 134 1,364 5.3 

Note: Wealth is defined as net worth less estate expenses and estate taxes computed in the absence of charitable bequests, plus 

excluded life insurance proceeds. The ratio of bequests to wealth is computed after reducing bequests by the tax savings from the 

deduction. First dollar tax price is computed by setting charitable bequests to zero, and subtracting $1000 from the taxable estate. The 

last dollar price is computed by adding $1000 to charitable bequests. 

Source: Calculated from SOI sample of estate tax returns filed in 1992 through 1994 for decedents in 1992. 

Limited to estates with positive wealth 
Table 22B 

Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: Estates of Married Individuals 

After-Tax Wealth Returns 

Returns 

with 

Bequests 

Percent of 

Returns with 

Bequests (%) 

Mean 

(First $) 

Price *100 

Mean 

(Last $) 

Price *100 

Mean 

Bequest 

($000s) 

Mean AfterTax Wealth 

($000s) 

Bequests as 

Percent of 

Wealth (%) 

$1 $500,000 279 1 0.4 95 95 0 411 0 

500,000 750,000 7,286 298 4.1 95 95 2 658 0.3 

750,000 1,000,000 7,248 645 8.9 93 94 2 858 0.2 

1,000,000 2,500,000 9,987 702 7.0 88 89 10 1,471 0.5 

2,500,000 5,000,000 2,136 306 14.3 80 82 82 3,375 1.4 

5,000,000 10,000,000 722 144 19.9 74 77 171 6,751 1.2 

10,000,000 20,000,000 233 45 19.3 70 72 557 13,389 1.9 

20,000,000 50,000,000 93 28 30.1 66 69 1,585 28,274 2.5 

50,000,000 ******** 20 10 50.0 58 61 23,174 181,455 5.7 

TOTAL 28,003 2,179 7.8 90 91 42 1,688 1.2 

Note: Wealth is defined as net worth less estate expenses and estate taxes computed in the absence of charitable bequests, plus 

excluded life insurance proceeds. The ratio of bequests to wealth is computed after reducing bequests by the tax savings from the 

deduction. First dollar tax price is computed by setting charitable bequests to zero, and subtracting $1000 from the taxable estate. The 

last dollar price is computed by adding $1000 to charitable bequests. 

Source: Calculated from SOI sample of estate tax returns filed in 1992 through 1994 for decedents in 1992. 

Limited to estates with positive wealth 
Table 22C 

Charitable Bequests, Tax Price, and After-Tax Wealth in 1992: Estates of Individuals not Married 

After-Tax Wealth Returns 

Returns 

with 

Bequests 

Percent of 

Returns with 

Bequests (%) 

Mean 

(First $) 

Price *100 

Mean 

(Last $) 

Price *100 

Mean 

Bequest 

($000s) 

Mean AfterTax Wealth 

($000s) 

Bequests as 

Percent of 

Wealth (%) 

$1 $500,000 372 98 26.3 95 95 19 407 4.7 

500,000 750,000 14,791 3,538 23.9 69 72 39 648 5.3 

750,000 1,000,000 7,683 2,201 28.7 60 64 83 851 7.5 

1,000,000 2,500,000 7,119 2,466 34.6 53 57 177 1,419 7.8 

2,500,000 5,000,000 876 412 47.1 45 49 867 3,299 12.8 

5,000,000 10,000,000 231 139 60.2 41 46 2,748 6,545 18.4 

10,000,000 20,000,000 50 39 78.0 45 51 11,912 13,504 38.2 

20,000,000 50,000,000 30 24 80.0 45 48 28,602 31,684 40.1 

50,000,000 ******** 9 6 66.7 45 45 156,323 116,049 60.6 

TOTAL 31,162 8,923 28.6 62 66 216 1,074 11.1 

Note: Wealth is defined as net worth less estate expenses and estate taxes computed in the absence of charitable bequests, plus 

excluded life insurance proceeds. The ratio of bequests to wealth is computed after reducing bequests by the tax savings from the 

deduction. First dollar tax price is computed by setting charitable bequests to zero, and subtracting $1000 from the taxable estate. The 

last dollar price is computed by adding $1000 to charitable bequests. 

Source: Calculated from SOI sample of estate tax returns filed in 1992 through 1994 for decedents in 1992. 

Limited to estates with positive wealth 
Table 23A 

Inheritance and Labor Force Transitions of Singles 

Inheritance under $25,000 Inheritance $25,000-$150,000 Inheritance over $150,000 All 

Status in 

1982 

Working Status in 1985 

0 1 0 1 0 1 0 1 

0 

Number 35 39 61 33 74 14 170 86 

Percent 0.4730 0.5270 0.6489 0.3511 0.8409 0.1591 0.6641 0.3359 

Inheritance 9,277 6,141 74,642 68,471 426,575 368,577 214,379 89,060 

Earn82/Inheritance 0 0 0 0 0 0 0 0 

Age 37.4 25.9 38.1 28.1 49.1 32.8 42.8 27.9 

1 

Number 30 626 45 405 49 221 124 1252 

Percent 0.0457 0.9543 0.1000 0.9000 0.1815 0.8185 0.0901 0.9099 

Inheritance 8,661 7,718 75,682 67,939 347,957 328,636 167,060 83,846 

Earn82/Inheritance 1.86 124.54* 0.16 0.29 0.03 0.06 0.52 62.37* 

Age 30.9 33.7 36.8 33.5 41.3 37.8 37.2 34.4 

All 

Number 730 544 358 1,632 

Inheritance 7,747 69,364 353,087 104,041 

Earn82/Inheritance 106.87 0.23 0.04 47.89 

Age 33.4 33.9 40.4 35.1 

* When 8 outliers are excluded, the reported figures become 4.88 and 1.98 respectively. The remaining figures are little affected. 

Note: Status equal 1 denotes that the individual is employed, and denotes not working when equal to zero. 

Source: Computed from the 1982 Collation File. 
Table 23B 

Inheritance and Labor Force Transitions of Joint Filers 

Inheritance under $25,000 Inheritance $25,000-$150,000 Inheritance over $150,000 All 

Status in 

1982 

Working Status in 1985 

0 1 2 0 1 2 0 1 2 0 1 2 

0 

Number 11 5 0 20 9 0 19 4 0 50 18 0 

Percent 0.6875 0.3125 0.0000 0.6897 0.3103 0.0000 0.8261 0.1739 0.0000 0.7353 0.2647 0.0000 

Inheritance 8,386 9,190 0 81,403 54,239 0 634,358 382,972 0 275,462 114,777 0 

Earn82/Inheritance 0 0 0 0 0 0 0 0 0 0 0 0 

Age 51.3 35.2 0 52.8 42.7 0 48.4 37 0 50.8 39.3 0 

1 

Number 10 314 139 21 367 88 23 265 58 54 946 285 

Percent 0.0216 0.6782 0.3002 0.0441 0.7710 0.1849 0.0665 0.7659 0.1676 0.0420 0.7362 0.2218 

Inheritance 10,382 7,661 7,860 88,005 71,902 72,796 391,362 363,745 310,105 202,838 132,332 89,420 

Earn82/Inheritance 5.20 11.53 8.13 0.21 0.64 0.57 0.06 0.14 0.12 1.07 4.11 4.16 

Age 51.6 41.3 39.0 52.5 42.2 38.5 49.9 45.6 41.6 51.2 42.9 39.4 

2 

Number 5 127 467 8 128 353 7 80 172 20 335 992 

Percent 0.0084 0.2120 0.7796 0.0164 0.2618 0.7219 0.0270 0.3089 0.6641 0.0149 0.2487 0.7365 

Inheritance 5,400 7,681 7,678 110,372 78,949 69,765 428,235 322,440 300,441 195,381 110,078 80,533 

Earn82/Inheritance 10.67 15.13 16.01 0.40 0.59 0.70 0.08 0.14 0.19 2.85 5.99 7.82 

Age 50.8 39.0 38.8 45.3 39.6 39.2 53.1 44.5 43.2 49.4 40.5 39.7 

All 

Number 1,078 994 628 2,700 

Inheritance 7,726 72,811 346,232 110,422 

Earn82/Inheritance 13.22 0.62 0.14 5.54 

Age 39.8 41.0 44.7 41.4 

Note: The status indicator refers to the number of employed taxpayers filing joint returns. Earn82 denotes labor earnings in 1982. 

Source: Computed from the 1982 Collation File. 
Table 24 

Income and Wealth of Estate Tax Decedents 

(1981 Levels of Income and 1982 Levels of Wealth) 

Gross Estate 

Mean 

Income 

Mean 

Wealth 

Income/ 

Wealth 

$300,000 500,000 $32,122 $379,107 8.47% 

500,000 1,000,000 54,268 682,203 7.95% 

1,000,000 2,500,000 86,554 1,471,358 5.88% 

2,500,000 10,000,000 222,479 4,118,342 5.40% 

10,000,000 and over 1,219,559 27,834,296 4.38% 

Total 55,270 810,229 6.82% 

Mean Income is defined as Adjusted Gross Income less wages, in 1981. 

Mean Wealth is defined as the gross estate, in 1982. 

Source: Computed from the 1982 Estate Collation File. 
Table 25 

Income and Estate Tax Liabilities of Estate Tax Decedents 

(1981 Levels of Income and 1982 Levels of Wealth) 

Gross Estate 

Income Tax 

($millions) 

Estate Tax 

($millions) 

Income Tax/ 

Estate Tax 

$300,000 500,000 284.5 823.2 34.57% 

500,000 1,000,000 314.2 1,508.0 20.84% 

1,000,000 2,500,000 243.9 1,698.0 14.37% 

2,500,000 10,000,000 196.2 1,704.6 11.51% 

10,000,000 and over 128.0 952.3 13.44% 

Total 1,166.9 6,686.0 17.45% 

Source: Computed from the 1982 Estate Collation File, limited to returns with taxable 

estates. 
0

5

10

15

20

25

Fiscal Year

Receipts 

17

18

19

20

21

22

23

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95

96

97

Nominal Real

Figure 1. x Receipts: Fiscal Years 1917-1997

(in $billions)

Real values are computed using CPI-U, 1997=100

Estate Ta
0

500

1000

1500

Real

Nominal

Year

Exemption

1916 1921 1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

Figure 2. x, 1916-2006

(in $1000s)

Real values computed using CPI-U 2006=100

Exemption Amounts under the Estate Ta
0

2

4

6

Fiscal Year

Receipts 

25

26

27

28

29

30

31

32

33

34

35

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97

Nominal Real

Figure 3. Gift Tax Receipts: Fiscal Years 1925-1997

(in $billions)

Real values are computed using CPI-U, 1997=100