The Distributional Burden of Taxing Estates and Unrealized Capital Gains at the Time of Death

James M. Poterba, Scott Weisbenner

NBER Working Paper No. 7811
Issued in July 2000
NBER Program(s):Economics of Aging, Public Economics

The 1998 Survey of Consumer Finances provides information on household wealth ownership that can be used to estimate the effect of changing the Unified Estate and Gift Tax Credit on estate tax revenues. The survey also includes data on the prices at which assets were purchased, along with information on their market values. This makes it possible to compare the revenue yield and the distributional consequences of taxing estates with those of taxing unrealized capital gains on assets held by individuals who die. This paper uses data from the Survey of Consumer Finances to estimate the revenue effects of changes in both estate tax provisions and capital gains tax rules. It finds that among those with small estates ($1 million or less), taxing capital gains at death would collect more revenue than the current estate tax from roughly half of the decedents. For those with larger estates, replacing the estate tax with a tax on unrealized gains at death would result in a substantial reduction in total tax payments. The revenue estimates and distributional analyses assume no change in the current capital gains realization behavior of taxpayers, even if the tax law changes. This is an important limitation, and the paper notes several directions for further research that might help to relax this assumption.

download in pdf format
   (167 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7811

Published: Gale, William G., James R. Hines, and Joel Slemrod (eds.) Rethinking Estate and Gift Taxation. Brookings Institution, 2001.

Users who downloaded this paper also downloaded* these:
Gale and Slemrod w8205 Rethinking the Estate and Gift Tax: Overview
Poterba w6337 The Estate Tax and After-Tax Investment Returns
Poterba and Weisbenner w9456 Inter-Asset Differences in Effective Estate Tax Burdens
Auerbach, Burman, and Siegel w6399 Capital Gains Taxation and Tax Avoidance: New Evidence from Panel Data
Kopczuk w15741 Economics of estate taxation: a brief review of theory and evidence
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us