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The Economics of the Estate Tax
Text courtesy of the US Congress - 1998 JEC

Executive Summary

      This analysis examines the arguments for and against the federal estate tax and concludes that the estate tax generates costs to taxpayers, the economy and the environment that far exceed any potential benefits that it might arguably produce.

      This paper documents the extensive costs associated with the federal estate tax. Specifically, the report finds:

  • The existence of the estate tax this century has reduced the stock of capital in the economy by approximately $497 billion, or 3.2 percent.
  • The distortionary incentives in the estate tax result in the inefficient allocation of resources, discouraging saving and investment and lowering the after-tax return on investments.
  • The estate tax is extremely punitive, with marginal tax rates ranging from 37 percent to nearly 80 percent in some instances.
  • The estate tax is a leading cause of dissolution for thousands of family-run businesses. Estate tax planning further diverts resources available for investment and employment.
  • The estate tax obstructs environmental conservation. The need to pay large estate tax bills often forces families to develop environmentally sensitive land.
  • The estate tax violates the basic principles of a good tax system: it is complicated, unfair and inefficient.
      In addition, a review of the arguments in favor of the estate tax suggests that the tax produces no benefits that would justify the large social and economic costs.
  • The estate tax is a "virtue tax" in the sense that it penalizes work, saving and thrift in favor of large-scale consumption.
  • Empirical and theoretical research indicates that the estate tax is ineffective at reducing inequality, and may actually increase inequality of consumption.
  • The enormous compliance costs associated with the estate tax are of the same general magnitude as the tax's revenue yield, or about $23 billion in 1998.
  • The deduction for charitable bequests stimulates little or no additional giving.
  • The estate tax raises very little, if any, net revenue for the federal government. The distortionary effects of the estate tax result in losses under the income tax that are roughly the same size as estate tax revenue.


Download Complete Report in PDF format



Useful Tax Links

ALTERNATIVE MINIMUM TAX: Alternative Minimum Tax - text of the U.S. Government code establishing the AMT.

CAPITAL GAINS: Tax Topic 409, Capital Gains and Losses - IRS

CHILDREN TAXPAYERS: Publication 929, Tax Rules for Children and Dependents; Tax for Children Under Age 14 Who Have Investment Income of More Than $1,400

INDIVIDUAL TAX RETURN: 3.22.3 Individual Income Tax Returns

ESTATE TAXES: Estate/Wealth/Gift Statistics -IRS and Publication 559, Survivors, Executors, and Administrators; Income Tax Return of an Estate-- Form 1041 and Publication 559, Survivors, Executors, and Administrators; Other Tax Information

FAIR TAX: IRS Tax Interactive - what is a fair tax

GIFT TAX: U.S. Estate and Gift Tax Law

PAYROLL TAXES: [4.4.2] 5.6 Payroll Taxes

SOCIAL SECURITY: Social Security History Home Page - This is the history web site of the social security administration with information on the history of Social Security and the Social Security Administration.


  • Internet: Browse and retrieve most Federal forms and publications from the IRS here.. These tax materials are available 24 hours a day, seven days a week.
  • Office: You may pick up forms or publications and even meet with IRS assistors for answers to your tax questions at your nearest IRS office - Where to File - IRS Offices. You can also call 1-800-829-1040 for recorded explanations that may answer your questions.
  • Phone: IRS forms line -- 1-800-TAX-FORM (1-800-829-3676) -- is open from 7:00 a.m. to 11:00 p.m., Monday through Saturday. You should know what forms you want by number, and the name or number of the publication. Taxpayers should allow up to 15 working days for telephone orders to be processed.
  • Telefax: available 24 hours a day, seven days a week 703-368-9694 -- offers 144 forms with instructions by return fax. You can request that the system fax a list of available items or you can find the order numbers in the various tax instruction booklets.

TAX HISTORY: Tax History Project at Tax Analysts - providing scholars, policy makers, and the media with information on the history of American taxation and Tax World - explanations of tax policy, history, courses, glossaries downloadable forms and a great menu of links to other important sites.

W-2 FORM: Form W-2 Information

W-4 FORM: Part 3 Revenue, Returns, and Accounts Processing Chap. 29 ISRP System Sec. 92 SC Processing of Form W-4 Employees' Withholding Allowance Certificate

Start your search on ESTATE TAX.

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