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CRS Updates Estate and Gift Tax Revenue Measurements

FEB. 14, 2006

RL32768

DATED FEB. 14, 2006
DOCUMENT ATTRIBUTES
Citations: RL32768

 

CRS Report for Congress

 

Received through the CRS Web

 

Order Code RL32768

 

 

Updated February 14, 2006

 

 

Nonna A. Noto

 

Specialist in Public Finance

 

Government and Finance Division

 

 

Estate and Gift Tax Revenues:

 

Several Measurements

 

 

Summary

The question of whether to permanently repeal the federal estate tax or to retain but alter it remains a topic of congressional interest. This report presents a variety of data measuring the payment of estate and gift taxes to help inform the debate. The most recent IRS data are for estate tax returns filed in 2004. They show that the 3,494 gross estates of $5 million or higher accounted for just 0.14% of decedents and 11.6% of taxable returns, but 61.3% of estate taxes paid. The 30,276 taxable estate tax returns filed in 2004 represented 1.24% of deaths in 2003.

This is a period of changing estate tax laws. The Taxpayer Relief Act of 1997 (TRA, P.L. 105-34) provided for a gradual increase in the exempt amount under the estate tax from $600,000 for 1997 to $1 million in 2006. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16) superseded those changes and raised the exempt amount to $1 million for 2002 and 2003, $1.5 million for 2004 and 2005, $2 million for 2006 through 2008, and $3.5 million for 2009. EGTRRA repealed the estate tax entirely for 2010, but the law sunsets on December 31, 2010. Unless new legislation governing the estate tax is enacted, the estate tax will be reinstated in 2011 with an exempt amount of $1 million.

From 1998 through 2004 taxable estates as a percentage of deaths remained relatively constant in the three highest gross estate classes over $5 million. Taxable estates in the $1 million to $2.5 million and the $2.5 million to $5 million classes fluctuated with asset values. The rising exempt amount eliminated a large number of smaller estates, from $600,000 up to $1 million in gross size, from being taxable.

In FY2005 estate and gift tax revenues of $24.8 billion represented 1.1% of total federal revenue and 2.7% of individual income tax revenue. CBO has estimated estate and gift tax revenues from FY2006 through FY2016 under current law. Annual revenues are projected to be $28 billion in FY2006, reach $29 billion in FY2009, and then drop to $22 billion in FY2010 and $20 billion in FY2012. If the estate tax returns in 2011 with an exclusion of $1 million, CBO projects that revenues will rise steadily from $45 billion in 2012 to $67 billion in FY2016.

The Treasury Department has estimated revenue losses through FY2016 from enacting in 2006 permanent repeal of the estate and generation-skipping transfer taxes and modifying gift taxes starting in 2010. For the years prior to repeal Treasury shows revenue losses of $1.1 billion to $2.7 billion per year, resulting from older people paying fewer gift taxes and fewer income taxes on capital gains. After repeal Treasury projects annual revenue losses growing from $53 billion in FY2012 to $70 billion in FY2016. Treasury's five-year revenue loss estimate for FY2007-2011 is $31.4 billion. The 10-year revenue loss estimate for FY2007-FY2016 is $339.0 billion. Relative to the total costs of the revenue proposals in the Bush Administration's FY2007 budget, permanent estate tax repeal represents 11% over the five-year period FY2007-FY2011 and 19% over the 10-year period FY2007-FY2016. This report will be updated as new data become available.

                            Contents

 

 

 Distribution of Estate Tax Payments in 2004 by Size of Gross Estate

 

 Increases in the Applicable Exclusion Amount 3

 

 Relationship between the Filing Threshold and the Number of Taxable

 

 Returns

 

 Less Than Half of Estate Tax Returns Were Taxable

 

 Estate and Gift Tax Revenues: Past and Future

 

 Recent Experience

 

 Gift Taxes versus Estate Taxes

 

 CBO Revenue Projections

 

 Treasury Revenue Loss Estimate from Permanent Repeal

 

 For Additional Information

 

 

 List of Tables

 

 

 Table 1. Estate Tax Returns Filed in 2004, by Size of Gross Estate

 

 Table 2. Taxable Estate Tax Returns Filed in 2004, Cumulative

 

          Percentages by Size of Gross Estate

 

 Table 3. Applicable Exclusion Amount and Maximum Tax Rate for the

 

          Estate Tax, 1988-2011

 

 Table 4. Number of Estate Tax Returns Filed, Taxable, as a Percentage

 

          of Deaths, and Tax Paid, 1998-2004

 

 Table 5. Number of Taxable Returns by Size of Gross Estate, 1998-2004

 

 Table 6. Taxable Estates as a Percentage of Deaths by Size of Gross

 

          Estate, 1998-2004

 

 Table 7. Percentage of Returns Taxable by Size of Gross Estate

 

 Table 8. Estate and Gift Tax Revenues, Relative to Total Revenues and

 

          Individual Income Taxes, FY1998-FY2004

 

 Table 9. Estate Taxes and Gift Taxes, Net Collections, FYs 1998-2004

 

 Table 10. CBO Projections of Estate and Gift Tax Revenues Through

 

           FY2016 under Current Law

 

 Table 11. Treasury's Estimated Revenue Changes Through FY2016 from

 

           Acting in 2006 to Permanently Repeal the Estate and

 

           Generation-Skipping Transfer Taxes and Modify the Gift Tax

 

           Effective in 2010

 

Estate and Gift Tax Revenues:

 

Several Measurements

 

 

The question of whether to permanently repeal the federal estate tax or to retain but alter it remains before the 109th Congress. This report presents a variety of data available about revenues collected from federal estate and gift taxes to provide background material for the debate. The text discusses the numbers presented in 11 tables.

The first section of the report presents the most recent distributional data available from the Internal Revenue Service (IRS), for estate tax returns filed in 2004. It shows the amount of estate tax paid by each of five categories of size of gross estate, both separately (Table 1) and cumulatively (Table 2).

The second section of the report describes the substantial increases in the applicable exclusion amount (or exempt amount) under the estate tax scheduled from 1997 through 2009, the repeal of the estate tax scheduled for 2010, and the reinstatement of the estate tax with a lower exclusion amount in 2011 if no changes are made to current law. It also presents the scheduled decrease in the maximum marginal estate tax rate (Table 3).

The third section of the report examines the relationship between the increase in the applicable exclusion amount (or filing threshold) and the number of estate tax returns that were filed and taxable, as well as the total amount of tax paid, from 1998 through 2004 (Table 4). It traces the differing patterns of the number of taxable returns by size of gross estate, in both absolute numbers (Table 5) and measured as a percentage of deaths (Table 6).

The fourth section reveals that less than half of all estate tax returns filed from 1998 through 2004 were taxable (Table 7). The percentage of taxable returns was higher, the larger the gross estate size class. There was a large drop in the percentage of returns that were taxable within each size class between 1998 and 2004.

The fifth section of the report presents data on actual estate and gift tax revenues collected from FY1999 through 2005, comparing them to total federal revenues and to revenues from individual income taxes (Table 8). Gift taxes as a percent of combined estate and gift tax revenues fell sharply after EGTRRA was enacted (Table 9). The fifth section also presents the January 2006 Congressional Budget Office (CBO) projection of revenues from estate and gift taxes from FY2006 through FY2016, under current law (Table 10). Finally, it presents estimates published by the Treasury Department in February 2006 of revenue losses from FY2006 through FY2016 if the sunset provision of EGTRRA were removed in 2006, thereby permanently repealing the estate tax and generation-skipping transfer taxes and modifying the gift tax effective in 2010 (Table 11).

 

Distribution of Estate Tax Payments in 2004

 

by Size of Gross Estate

 

 

The estate tax is considered the most progressive part of the U.S. tax system -- that is, the tax that falls most heavily on the wealthiest members of society. The distribution of estate tax payments is highly concentrated in the largest gross estate size categories. Estate tax returns filed in 2004 paid a total of $21.5 billion in estate taxes, as shown in the first row, third column of Table 1. The 30,276 taxable returns (column 2) represented 1.24 percent of deaths in the prior year, 2003 (column 4).

The largest gross estate size categories contributed a much bigger percentage of taxes (column 6) than the percentage of taxable returns they represented (column 5). The 520 gross taxable estates of $20 million or more accounted for just 0.02% of decedents and 1.7% of taxable returns, but 26.1% of estate taxes paid. The 808 gross estates from $10 million up to $20 million accounted for just 0 .03% of decedents and 2.7% of taxable returns, but 15.0% of taxes paid. The 2,166 gross estates from $5 million up to $10 million accounted for 0.09% of decedents and 7.2% of taxable returns, but 20.2% of taxes paid. The 5,630 gross estates from $2.5 million up to $5 million accounted for 0.23% of decedents and 18.6% of taxable returns, and a nearly proportional 21.6% of taxes paid. In contrast, the 21,152 gross estates from $1.0 million up to $2.5 million accounted for 0.86% of decedents and 69.9% of taxable returns, but only 17.1% of estate taxes paid.1

           Table 1. Estate Tax Returns Filed in 2004,

 

                    by Size of Gross Estate

 

 

                                        (3)

 

 Size of gross     (1)          (2)    Taxes paid

 

 estate          Tax returns Taxable  (in $

 

 (in $ millions) filed       returns  thousands)

 

 

 All Returns     62,718      30,276    $21,510,036

 

 1.0 < 2.5       45,974      21,152      3,672,087

 

 2.5 < 5.0       10,887       5,630      4,651,112

 

 5.0 < 10.0       3,806       2,166      4,350,019

 

 10.0 < 20.0      1,315         808      3,224,425

 

 20.0 or more       736         520      5,612,394

 

 

                               [Table Continued]

 

 

                              (5)

 

                 (4) taxable Percent

 

 Size of gross   returns as  of       (6)

 

 estate          a percent   taxable  Percent of

 

 (in $ millions) of deaths   returns  taxes paid

 

 

 All Returns         1.24%    100.0%    100.0%

 

 1.0 < 2.5            0.86     69.9       17.1

 

 2.5 < 5.0            0.23     18.6       21.6

 

 5.0 < 10.0           0.09      7.2       20.2

 

 10.0 < 20.0          0.03      2.7       15.0

 

 20.0 or more         0.02      1.7       26.1

 

 

 Sources: Columns 1-3: Internal Revenue Service, Statistics of

 

 Income, Estate Tax Returns Filed in 2004 with Total Gross Estate

 

 Greater than $1 million. Unpublished data available at

 

 [http://www.irs.gov/pub/irs-soi/04es01tc.xls

 

 returns filed in one year are calculated as a percent of all deaths

 

 in the prior year. There were 2,448,288 deaths in the United States

 

 in 2003; see Table 4 for source. Columns 4-6: Percentage

 

 calculations by CRS.

 

 

These calculations are shown on a cumulative basis in Table 2. Again, the 520 gross taxable estates of $20 million or more accounted for just 0.02% of decedents and 1.7% of taxable returns, but 26.1% of estate taxes paid. The 1,328 gross estates of $10 million or more accounted for 0.05% of decedents and 4.4% of taxable returns, but 41.1% of estate taxes. The 3,494 gross estates of $5 million or more accounted for 0.14% of decedents and 11.6% of taxable returns, but 61.3% of estate tax revenues. The 9,124 gross estates of $2.5 million or more accounted for 0.37% of decedents and 30.1% of taxable returns, but 82.9% of estate tax payments.

 Table 2. Taxable Estate Tax Returns Filed in 2004, Cumulative

 

              Percentages by Size of Gross Estate

 

 

                          Taxable

 

                 Number   returns

 

 Size of gross   of       as a        Cumulative      Cumulative

 

 estate          taxable  percentage  percentage of   percentage of

 

 (in $ millions) returns  of deaths   taxable returns Taxes paid

 

 

 20 or more         520     0.02%          1.7%          26.1%

 

 10 or more       1,328     0.05           4.4           41.1

 

 5 or more        3,494     0.14          11.6           61.3

 

 2.5 or more      9,124     0.37          30.1           82.9

 

 1 or more       30,276     1.24         100.0          100.0

 

 

 Sources: See Table 1.

 

Increases in the Applicable Exclusion Amount

 

 

The period from 1997 through 2011 marks a time of changes in the estate tax laws brought about by the Taxpayer Relief Act of 1997 (TRA, P.L. 105-34) and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16). In particular, these two laws provided for increases in the applicable exclusion amount under the estate tax, as shown in the first column of Table 3. EGTRRA also provided for a gradual decrease in the maximum marginal estate tax rate, as shown in the second column of Table 3.2

The applicable exclusion amount has two important implications. First, a federal estate tax return must be filed if a U.S. decedent's gross assets3 equal or exceed the applicable exclusion amount for the year of the decedent's death. That is why the applicable exclusion amount is sometimes called the "tax filing threshold." Second, each estate tax return receives a unified transfer tax credit equal to the tax that would be due on the applicable exclusion amount.4 Thus, the transfer of an amount of assets up to the applicable exclusion amount is free from federal tax for every estate. EGTRRA referred to the applicable exclusion amount as the "unified credit effective exemption amount." It is sometimes called the "exempt amount" for short.

The applicable exclusion amount is not indexed for inflation. Nor is it set with an explicit target of taxing only a certain percentage of the population, for example, the wealthiest one or two percent. Instead, Congress has intermittently changed the dollar amount.

From 1987 through1997 the applicable exclusion amount remained at $600,000, under provisions of the Economic Recovery Tax of 1981 (ERTA, P.L. 97-34). The Taxpayer Relief Act of 1997 (TRA, P.L. 105-34) phased in a relatively gradual increase in the applicable exclusion amount from $600,000 in 1997 to $1,000,000 in 2006. The applicable exclusion amount rose to $625,000 in 1998, $650,000 in 1999, and $675,000 for 2000 and 2001.5 In addition, the Taxpayer Relief Act provided for the applicable exclusion amount to increase to $700,000 for 2002 and 2003, $850,000 for 2004, $950,000 for 2005, and $1 million for 2006 and beyond.

However, before the provisions of TRA were fully phased in, they were superseded for tax years 2002-2010 by the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L 107-16). EGTRRA raised the applicable exclusion amount to $1 million beginning immediately in 2002 and 2003. It increased the exclusion in large increments, to $1.5 million for 2004 and 2005, $2 million for 2006-2008, and $3.5 million in 2009. It repealed the estate tax and generation-skipping transfer tax entirely for the estates of decedents dying in 2010. But the provisions of EGTRRA will sunset on December 31, 2010. Unless new legislation governing the estate tax is enacted beforehand, in 2011 the law will revert to that in effect prior to June 7, 2001. The estate tax will be reinstated with an applicable exclusion amount of $1 million, the amount that TRA had provided for 2006 and beyond, and the family-owned business deduction will be reinstated.

   Table 3. Applicable Exclusion Amount and Maximum Tax Rate

 

                 for the Estate Tax, 1988-2011

 

 

 Calendar year                                              Maximum tax rate

 

 (In the case of estates                                   for taxable estate

 

 of decedents dying          Applicable exclusion             vaules over

 

 during)                            amount                   (in millions)

 

 

 1988-1997                       $600,000a                 55% over $3.0 plus

 

                                                           5% surtax from over

 

                                                            $10.0 to $21.040d

 

 

 1998                            $625,000b                 55% over $3.0 plus

 

                                                           5% surtax from over

 

                                                            $10.0 to $17.184e

 

 

 1999                            $650,000b                        "

 

 2000                            $675,000b                        "

 

 2001                            $675,000b                        "

 

 2002                          $1,000,000c                   50% over $2.5c

 

 2003                          $1,000,000c                   49% over $2.0c

 

 2004                          $1,500,000c                   48% over $2.0c

 

 2005                          $1,500,000c                   47% over $2.0c

 

 2006                          $2,000,000c                   46% over $2.0c

 

 2007-2008                     $2,000,000c                   45% over $1.5c

 

 2009                          $3,500,000c                        "

 

 2010                               Estate tax repealed for 2010 onlyc

 

 2011 and thereafter           $1,000,000b                55% over $3.0 plus

 

                                                          5% surtax from over

 

                                                           $10.0 to $17.184e

 

 

                          FOOTNOTES TO TABLE

 

 

      a Provision of the Economic Recovery Tax Act of 1981

 

 (ERTA, P.L. 97-34). The applicable exclusion amount was $600,000 in

 

 1987 also.

 

 

      b Provisions of the Taxpayer Relief Act of 1997 (TRA,

 

 P.L. 105-34).

 

 

      c Provisions of the Economic Growth and Tax Relief

 

 Reconciliation Act of 2001 (EGTRRA, P.L. 107-16).

 

 

      d The Revenue Act of 1987 (P.L. 100-203) provided for a

 

 5% surtax to offset the benefits of both the graduated tax rates on

 

 taxable estate values below $3 million and the unified credit (or

 

 applicable exclusion amount), such that the effective rate of tax on

 

 the entire estate was 55%.

 

 

      e As the result of a clerical error in the final text

 

 of TRA of 1997, later adopted by Congress, the surtax was intended to

 

 offset the benefits of only the graduated tax rates, and not the

 

 unified credit.

 

END OF FOOTNOTES TO TABLE

 

 

Relationship between the Filing Threshold

 

and the Number of Taxable Returns

 

 

The tax law that applies to an estate is the law in effect in the year of the person's death.6 However, the estate tax return is not due until nine months after the person's death, and an extension of six months is not uncommon. As a consequence, estate tax returns filed in a given year are most likely to reflect the tax law in effect in the preceding year. It has been estimated that of the estate tax returns filed for decedents dying in a given calendar year roughly 5% are filed in the same calendar year, 75% to 80% in the next year, and the remaining 15% to 20% in later years.7

It follows that estate tax returns filed in any given calendar year will include a few returns of people who died in that year, mostly the returns of people who died in the previous year, and some returns from deaths in prior years that are filing under an extension.8 The applicable exclusion amount -- or tax filing threshold -- may well differ among the years represented. For each filing year from 1998 to 2004, the second column of Table 4 shows the applicable exclusion amount for both the prior year (top number) and current year (bottom number).

For example, estate tax returns filed in 2001 will generally reflect a filing threshold of $675,000, the threshold in effect for both 2000 and 2001. In contrast, estate tax returns filed in 2002 will include mainly the returns of decedents that fall under 2001 law when the threshold was $675,000, as well as some under 2002 law when the effective filing threshold was $1 million. Estate tax returns filed in 2003 will generally reflect a filing threshold of $1 million, the law in effect for both 2002 and 2003. Estate tax returns filed in 2004 will generally reflect the $1 million threshold in effect for 2002 and 2003 but also some under the $1.5 million threshold in effect for 2004.

An increase in the applicable exclusion amount would be expected to reduce the number of estate tax returns filed, the number of returns that were taxable, and the amount of estate tax paid -- relative to what they would otherwise be. Whether these numbers decline absolutely depends in large part on whether the increase in the exclusion amount outpaces the growth in the value of assets held by decedents.

As shown in Table 4, even as the filing threshold was increasing in annual increments of $25,000 -- from $600,000 in 1997, to $625,000 in 1998, $650,000 in 1999, and $675,000 in 2000 -- the number of estate tax returns filed and the number of taxable returns continued to rise. The increasing pattern holds whether measured as absolute number of returns or as tax returns as a percentage of deaths in the prior year (reflecting the nine-month grace period for filing returns). This suggests that asset values were generally rising more rapidly than the filing threshold over the 1997-2000 period. The number of estate tax returns filed rose from 97,856 or 4.23% of deaths in 1998 to 108,322 or 4.53% of deaths in 2000. The number of taxable estates rose from 47,475 or 2.05% of deaths in 1998 to 51,999 or 2.17% of deaths in 2000.

The numbers barely dipped in 2001 when the $675,000 filing threshold was fully phased in. This suggests that the filing threshold had caught up with the growth in asset values. But the number of returns filed dropped by 9% between 2001 and 2002 when the filing threshold increased by a much larger step, from $675,000 to $1 million. The number dropped by a noteworthy 33% in 2003 when the million dollar threshold was fully phased in. This suggests that at the $1 million level the tax filing threshold had moved ahead of the value of assets held by decedents in 2002. Between 2003 and 2004 the number of returns filed dropped by just 5% as the higher $1.5 million filing threshold began to take effect.

Between 2001 and 2003, both the total number of returns filed and the number of taxable returns fell by approximately 40%. The total number of returns filed fell from 108,112 to 66,042, or from 4.50% of deaths to 2.70% of deaths. The number of taxable returns fell from 51,842 to 30,626, or from 2.16% to 1.25% of deaths. Some of this decrease was caused by a decline in asset values, in addition to the large increases in the tax filing threshold from $675,000 in 2000 and 2001 to $1 million in 2002 and 2003.

The last column of Table 4 shows that the total estate tax paid generally moved in the same direction as the number of taxable returns, with both rising from 1998 to 2000 and falling from 2000 to 2003. In percentage terms the total estate tax paid rose more than the number of taxable returns from 1998 to 2000 (a 20% increase in taxes compared with a 10% increase in the number of taxable returns), but dropped less than the number of taxable returns from 2000 to 2003 (a 15% decrease in taxes compared with a 41% decrease in taxable returns). Net estate tax paid increased slightly from $20.7 billion in 2003 to $21.5 billion in 2004, reflecting the legislated decline in state death tax credits.9

   Table 4. Number of Estate Tax Returns Filed, Taxable, as a

 

         Percentage of Deaths, and Tax Paid, 1998-2004

 

 

              Filing

 

           threshold in                                Total returns

 

            prior and        Total                     as percent of

 

 Year       current year     returns      Taxable      deaths in

 

 filed         ($)           filed        returns      prior yeara

 

 

 1998          $600,000       97,856      47,475           4.23%

 

               $625,000

 

 1999           625,000      103,979      49,863           4.45

 

                650,000

 

 2000           650,000      108,322      51,999           4.53

 

                675,000

 

 2001           675,000      108,112      51,842           4.50

 

                675,000

 

 2002           675,000       98,359      44,408           4.07

 

              1,000,000

 

 2003         1,000,000       66,042      30,626           2.70

 

              1,000,000

 

 2004         1,000,000       62,718      30,276           2.56

 

              1,500,000

 

 

                           [Table Continued]

 

 

           Taxable

 

           returns as

 

           percent of     Net estate

 

 Year      deaths in      tax paid (in

 

 filed     prior yeara  $ billions)

 

 

 1998             2.05%        $20.3

 

 1999             2.13          22.9

 

 2000             2.17          24.4

 

 2001             2.16          23.5

 

 2002             1.84          21.4

 

 2003             1.25          20.7

 

 2004             1.24          21.5

 

 

 Sources: Data on total returns filed, taxable returns, and net

 

 estate tax paid from Internal Revenue Service, Table 1. Estate

 

 Tax Returns Filed in [year]: Gross Estate by Type of Property,

 

 Deductions, Taxable Estate, Estate Tax and Tax Credits, by Size of

 

 Gross Estate. Unpublished data from the Statistics of Income (SOI)

 

 for the years 1998 to 2004. Available on the IRS website

 

 [http://www.irs.gov/taxstats

 

 revised data released in December 2005, which include returns in the

 

 $675,000 to $1 million gross size class filed in 2003 for decedents

 

 who died several years earlier. The data reported for 2004 do not

 

 include any returns with gross assets below $1 million.

 

 

      Deaths in 1997-2001 from U.S. Department of Commerce, Economics

 

 and Statistics Administration, U.S. Census Bureau, Statistical

 

 Abstract of the United States, annual editions from 2000 to 2003.

 

 Deaths in 2002 from National Vital Statistics Reports, Deaths:

 

 Final Data for 2002, vol. 53, no. 5, October 12, 2004, p. 1.

 

 Deaths in 2003 from Department of Health and Human Services, Centers

 

 for Disease Control and Prevention, National Center for Health

 

 Statistics, Deaths: Final Data for 2003, posted Jan.

 

 20, 2006, available at [http://www.cdc.gov/nchs/data/hestat/

 

 finaldeaths03_tables.pdf].

 

 

                          FOOTNOTES TO TABLE

 

 

      a The total number of deaths in the United States rose

 

 slightly from year to year from 1997 through 2003, as follows:

 

 

 1997 2,314,245

 

 1998 2,337,256

 

 1999 2,391,399

 

 2000 2,403,351

 

 2001 2,416,425

 

 2002 2,443,387

 

 2003 2,448,288

 

END OF FOOTNOTES TO TABLE

 

 

The number of taxable estates in each size category of gross estate above $5 million remained relatively constant across the years 1998-2004, as shown in Table 5. This stability is even more apparent in Table 6 which shows the number of taxable estates by size category from Table 5 as a percentage of total deaths in the previous year.10

  Table 5. Number of Taxable Returns by Size of Gross Estate,

 

                           1998-2004

 

 

 Size of gross                        Year returns filed in

 

     estate

 

 (in millions)     1998     1999    2000      2001     2002     2003     2004

 

 

 $0.600 < $1.0     20,106   19,136  18,634    18,198   13,026     NA       N A

 

 

 $1.0 < $2.5       19,838   22,233  23,827    24,591   22,993   21,635   21,152

 

 

 $2.5 < $5.0        4,633   5,212    5,917     5,551    5,049    5,505    5,630

 

 

 $5.0 < $10.0       1,836   2,045    2,258     2,165    2,101    2,157    2,116

 

 

 $10.0 < $20.0        688     770      814       868      755      824      808

 

 

 $20.0 or more        374     467      549       469      484      504      520

 

 

 Total             47,475  49,863   51,999    51,842   44,408   30,626   30,276

 

 

 Sources: IRS data cited for Table 4.

 

 

The fluctuation in the total number of taxable estate tax returns as a percentage of deaths (from 2.05 in 1998, to 2.17 in 2000, to 1.24 in 2004) is traceable to the three smallest size categories, under $5 million. The first row of Table 6 shows how the increase in the tax filing threshold reduced the number of taxable estates (measured as a percentage of deaths) in the $600,000 to $1 million size of gross estate class, at first gradually from 1998 to 2001, and then markedly in 2002 and completely in 2003 and 2004.11 The second row of Table 6 shows how the number of taxable estates in the $1 million to $2.5 million size class grew from 1998 to 2001, reflecting a growth in asset holdings, and more than offsetting the decline in the lowest size class. By the 2002 and 2003 filing years, however, the increase in the tax filing threshold to $1 million (and the decline in asset values) had started to reduce the number of taxable returns in the $1 million to $2.5 million size class. The downward trend in this size class continued in 2004 as the $1.5 million threshold began to take effect. The combined losses in the two smallest size classes (under $2.5 million) caused most of the drop in the total from 2001 to 2002, and all of the drop from 2002 to 2004. The number of taxable returns in the $2.5 million to $5 million class rose from 1998 to 2000, fell in 2001 and 2002, but rose back to its 2001 level in 2003 and 2004 (row 3), reflecting fluctuations in net asset values.

In contrast, there was a noteworthy stability in the number of taxable estate tax returns as a percentage of deaths in the three largest size classes. For all but one of the six years examined, estates in the $5 million to $10 million range represented .09% of deaths (row 4), and estates in the $10 million to $20 million range .03% of deaths (row 5). Estates of $20 million or more accounted for .02% of deaths in all seven years (last row).

 Table 6. Taxable Estates as a Percentage of Deaths by Size of

 

                    Gross Estate, 1998-2004

 

 

 Size of                            Year returns filed in

 

 gross estate

 

 (in millions)  1998      1999     2000      2001      2002     2003    2004

 

 

 $0.600 < $1.0   .87%     .82%     .78%     .76%       .54%       NA      NA

 

 $1.0 < $2.5     .86      .95     1.00     1.02        .95       .89     .86

 

 $2.5 < $5.0     .20      .22      .25      .23        .21       .23     .23

 

 $5.0 < $10.0    .08      .09      .09      .09        .09       .09     .09

 

 $10.0 < $20.0   .03      .03      .03      .04        .03       .03     .03

 

 $20.0 or more   .02      .02      .02      .02        .02       .02     .02

 

 

 Total          2.05     2.13     2.17     2.16       1.84      1.25    1.24

 

 

 Sources: CRS calculations of percentages based on the IRS data

 

 presented in Table 5, divided by the number of deaths in the

 

 prior year shown in the note to Table 4. Column may not sum to

 

 total due to rounding.

 

 

The tax filing threshold has increased to $1.5 million in 2004-2005 and $2 million for 2006-2008. The numbers presented in Tables 1 and 2 in the first section suggest that these increases can be expected to dramatically decrease the number of tax returns required to be filed and the number of returns that are taxable from 2005 to 2009, through their effect on the $1 million to $2.5 million size class. The decline in estate tax revenues should be less than proportional to the decline in the number of taxable returns. The scheduled further increase in the filing threshold to $3.5 million in 2009 is likely to moderately reduce the number of returns filed and taxable in the $2.5 million to $5 million class between 2009 to 2010, unless it is offset by a major increase in asset values.

 

Less Than Half of Estate Tax Returns Were Taxable

 

 

Many estates face the administrative burden of filing an estate tax return even though they owe no estate tax. Just under half of estate tax returns filed each year from 1998 through 2004 were taxable. Overall, the percentage of total returns filed that were taxable dipped slightly from 48.5% in 1998, to 48.0% in 1999-2001, to 45.1% in 2002, and then rose slightly to 46.4% in 2003 and 48.3% in 2004, as shown in the first row of Table 7. Compare this with the percentage of individual income tax returns filed that were taxable: 72.8% in 2001, 69.9% in 2002, and 68.2% in 2003.12

      Table 7. Percentage of Returns Taxable by Size of Gross

 

                              Estate

 

 

 Size of gross                        Year returns filed in

 

     estate

 

 (in millions)    1998     1999     2000     2001     2002     2003     2004

 

 

 Total            48.5%    48.0%    48.0%    48.0%    45.1%    46.4%    48.3%

 

 

 $0.600<$1.0      40.5     38.4     38.9     40.0     35.4      NA       NA

 

 

 $1.0<$2.5        54.5     54.5     52.7     52.0     49.6     43.5     46.0

 

 

 $2.5<$5.0        60.3     60.5     59.1     56.1     51.1     52.2     51.7

 

 

 $5.0<$10.0       68.9     67.1     66.7     61.0     61.1     57.8     56.9

 

 

 $10.0<$20.0      72.9     72.4     72.1     67.7     63.0     63.7     61.4

 

 

 $20.0 or more    83.9     80.9     78.9     74.7     72.1     70.0     70.1

 

 

 Source: Percentage calculations by CRS, based on IRS sources

 

 cited for Table 4.

 

 

The computation of final net estate tax liability permits deductions from the gross estate for certain expenses related to administering the estate (executors' commissions and attorneys' fees), funeral costs, debts and mortgages, charitable bequests, and, most importantly, bequests to a surviving spouse. It also permits credits against the tentative estate tax for the unified credit (equal to the tax on the exempt amount), gift taxes previously paid, and foreign death taxes. Prior to 2002 there was a full credit for state death taxes. The credit was phased out by 25% per year from 2002 to 2004 and converted to a deduction in 2005. It is common for the first spouse to die to leave a substantial portion of his or her estate as a bequest to the surviving spouse. As a result, the estate of the first spouse to die may not be subject to tax.

As shown in each column of Table 7, for any given year, the percentage of estate tax returns filed that were taxable increased with the size of gross estate. Estates with a gross value just above the tax filing threshold (the applicable exclusion amount) are required to file an estate tax return but are likely to owe little or no tax. For tax returns filed in 2004 when the prevailing threshold was $1 million for most and $1.5 million for some estates, the percentage of returns that were taxable was 46.0% in the $1 million to $2.5 million category, 51.7% in the $2.5 million to$5.0 million category, 56.9% in the $5 million to $10 million category, 61.4% in the $10 million to $20 million category, and 70.1% in the $20 million and over category.

As shown in each row of Table 7, with a few exceptions, the percentage of returns that were taxable declined within each size category each year from 1998 through 2004. Between 1998 and 2004 the largest percentage point drop occurred in the $20 million-and-over gross estate class, where the percentage of taxable returns fell 13.8 points, from 83.9% to 70.1%. The percentage taxable also fell by from 8.5 to 12.0 percentage points for the four size categories from $1 million to $20 million. The previously large $600,000 to $1 million class -- with the lowest rate of taxability (35.4% in 2002) -- was eliminated by the rise in the tax filing threshold to $1 million and then $1.5 million. Its removal from the calculations led the overall percentage of taxable returns to rise from 45.1% in 2002 to 48.3% in 2004.

 

Estate and Gift Tax Revenues: Past and Future

 

 

This section of the report shifts to data on revenues from both estate and gift taxes, and reported by fiscal year rather than calendar year. It looks back on actual data for FYs 1998-2005, and forward to projections through FY2016.

Because of the nine-month grace period for filing estate tax returns, the revenues for a particular fiscal year are most likely to reflect the tax laws in effect for the priornumbered calendar year. For example, revenues collected during FY2005, which ran from October 1, 2004, until September 30, 2005, are most likely to reflect the estate and gift tax laws in effect during calendar year 2004.

Recent Experience

Revenues from federal estate and gift taxes peaked at $29.0 billion in FY2000, as shown in column 1 of Table 8. Revenues then began falling, in part as a result of changes in the tax law, described previously, which substantially raised the applicable exclusion amount and modestly lowered the maximum tax rate, and in part because of a decline in asset values. Between FY2000 and FY2003 estate and gift tax revenues fell by $7 billion or 24%, from $29.0 billion to $22.0 billion. In FY2004, reflecting a recovery in asset values, revenues rose by 13%, back to $24.8 billion where they remained in FY2005.

Estate and gift taxes contribute a small share of total federal revenues. Measured relative to other federal revenue sources, estate and gift tax revenues peaked in FY1999 at 1.5% of total receipts (column 2 of Table 8) and 3.2% of individual income tax revenues (column 3). Relative to FY2003, in FY2004 estate and gift tax revenues rose both in absolute dollars and as a percent of total and individual income tax revenues. In FY2005, however, the same estate and gift tax revenues of $24.8 billion represented a low of 1.1% of total federal receipts of $2.154 trillion and 2.7% of individual income taxes of $927 billion.

    Table 8. Estate and Gift Tax Revenues, Relative to Total

 

      Revenues and Individual Income Taxes, FY1998-FY2004

 

 

                     Estate and gift tax revenues

 

 

                                                           As a percent of

 

                      In         As a percent of total   individual income

 

 Fiscal year       $ billions      federal revenue          tax revenue

 

 

    1998             $24.1                1.4%                 2.9%

 

    1999              27.8                1.5                  3.2

 

    2000              29.0                1.4                  2.9

 

    2001              28.4                1.4                  2.9

 

    2002              26.5                1.4                  3.1

 

    2003              22.0                1.2                  2.8

 

    2004              24.8                1.3                  3.1

 

    2005              24.8                1.1                  2.7

 

 

 Sources: Revenue data from U.S. Executive Office of the

 

 President, Office of Management and Budget, Historical Tables,

 

 Budget of the United States Government, Fiscal Year 2007

 

 (Washington: GPO, 2006), Table 2.1, p. 30 (total receipts and

 

 individual income taxes), Table 2.5, p. 45 (estate and gift taxes).

 

 Percentage calculations by CRS.

 

 

Gift Taxes versus Estate Taxes

The gift tax is levied on the taxable transfer of assets during the donor's lifetime. The gift tax is due by April 15th of the year after the gift is made. Under the Taxpayer Relief Act of 1997 (TRA), the applicable exclusion amount for lifetime taxable gifts plus bequests rose from $600,000 in 1997, to $675,000 million in 2001. The same graduated tax rate structure that applied to estates applied to gifts above the exclusion amount, on a cumulative lifetime basis. However, under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the exclusion amount for lifetime gifts is scheduled to remain at $1 million, even as the applicable exclusion amount rises to $3.5 million by 2009.13 Furthermore, the gift tax is scheduled to remain in effect when the estate tax is repealed in 2010. The maximum gift tax rate will be capped at 35% (equal to the maximum individual income tax rate) on taxable transfers over $500,000.

Through FY2001 gift taxes accounted for a significant percentage of estate and gift tax revenues. However, since the adoption of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001, with its announcement of estate tax repeal in 2010 , there has been a substantial decline in the revenue collected from gift taxes. The last column of Table 9 shows that gift taxes accounted for 14% to 17% of combined estate and gift tax revenues over the FY1998- FY2001 period. However, over the FY2002-FY2004 period, gift taxes accounted for only 6% to 9% of combined estate and gift tax revenues. Gift tax revenues fell by more than half, from the range of $3.3 to $4.7 billion per year in FY1998-FY2001, down to the range of $1.4 to $1.9 billion in FY2002-FY2004 (column 2 of Table 9). Forecasters predict that gift tax revenues will remain low in the years remaining prior to FY2011 and will be higher in FY2011, reflecting gifts made in 2010 before the return of the estate tax in 2011.

     Table 9. Estate Taxes and Gift Taxes, Net Collections,

 

                         FYs 1998-2004

 

                            ($ in billions)

 

 

                                           Estate &     Percent      Percent

 

 Fiscal year  Estate taxes  Gift taxes    gift taxes  estate taxes  gift taxes

 

 

    1998         $20.8         $3.3         $24.1          86%          14%

 

 

    1999          23.0          4.7          27.7          83           17

 

 

    2000          24.9          4.0          28.9          86           14

 

 

    2001          24.4          3.9          28.3          86           14

 

 

    2002          24.8          1.6          26.4          94            6

 

 

    2003          20.0          1.9          21.9          91            9

 

 

    2004          23.4          1.4          24.8          94            6

 

 

 Sources: Internal Revenue Service Data Book for the

 

 fiscal years 1998-2004, Table 1: Summary of Internal Revenue

 

 Collections and Refunds, by Type of Tax, p. 8. Available on the IRS

 

 website [http://www.irs.gov

 

 collections minus refunds. Percentage calculations by CRS.

 

 

CBO Revenue Projections

In January 2006 the Congressional Budget Office (CBO) released its projections of estate and gift tax revenues for FY2006-FY2016 under current law, as shown in Table 10. They assume growth in the value of assets over time, reflecting both real economic growth and inflation. Starting from actual revenues of $25 billion in FY2005, CBO projected that revenues would fluctuate in the $26-to-$29 billion range from FY2006 through FY2009, corresponding to 0.2% of gross domestic product (GDP). This is while the applicable exclusion amount is rising from $1.5 million for decedents dying in 2004-2005 to $2.0 million for decedents dying in 2006-2008. Reflecting the large increase in the applicable exclusion amount to $3.5 million for 2009 and the repeal of the estate tax for calendar year 2010, CBO projected that estate and gift tax revenues would fall to $22 billion in FY2010 and $20 billion in FY2011, corresponding to 0.1% of GDP for both years. Reflecting the reinstatement of the estate tax in 2011 with an applicable exclusion amount of $1 million, CBO projected that estate and gift tax revenues would rise markedly to $45 billion and 0.3% of GDP in FY2012. CBO projected that estate and gift tax revenues would remain at 0.3% of GDP for the subsequent four fiscal years, rising steadily to $49 billion in FY2013, $55 billion in FY2014, $61 billion in FY2015, and $67 billion in FY2016.

   Table 10. CBO Projections of Estate and Gift Tax Revenues

 

                Through FY2016 under Current Law

 

 

                  Estate and gift tax        Estate and gift taxes as

 

    Fiscal year   revenues ($ in billions)   a percentage of GDP

 

 

 Actual 2005               $25                       0.2%

 

        2006                28                       0.2

 

        2007                26                       0.2

 

        2008                28                       0.2

 

        2009                29                       0.2

 

        2010                22                       0.1

 

        2011                20                       0.1

 

        2012                45                       0.3

 

        2013                49                       0.3

 

        2014                55                       0.3

 

        2015                61                       0.3

 

        2016                67                       0.3

 

 Total  2007-2011          124                       0.2

 

 Total  2007-2016          402                       0.2

 

 

 Economic Outlook: Fiscal Years 2007 to 2016, Washington, January

 

 2006, Table 4-2, p. 84.

 

 

 Source: U.S. Congress, Congressional Budget Office, The

 

 Budget and Economic Outlook: Fiscal Years 2007 to 2016,

 

 Washington, January 2006, Table 4-2, p. 84.

 

 

Treasury Revenue Loss Estimate from Permanent Repeal

Among its revenue proposals for FY2007, the Bush Administration once again proposed to permanently extend the provisions of EGTRRA that are scheduled to sunset on December 31, 2010. EGTRRA's extension would make permanent the modifications to the gift tax and the repeal of the estate tax and the generation-skipping transfer tax now due to take effect for 2010 only.

In February 2006, the Treasury Department published its estimates of changes in federal receipts expected each year from FY2006 through FY2016 if legislation to repeal the sunset provision of EGTRRA with respect to the estate and gift taxes were enacted in 2006, to become effective in 2011. These estimates are presented in Table 11.

The relatively modest estimated revenue losses from FY2006 through FY2010 stem primarily from a projected decline in gift tax revenues. The estimates are based on the assumption that taxpayers would immediately begin to reduce taxable gifts during their lifetimes if they knew that the estate tax would be permanently repealed in 2010. In addition, the Treasury Department projected that the enactment in 2006 of permanent repeal of the estate tax (effective in 2010) would modestly affect revenues from the individual income tax, in two different ways. First, Treasury assumes that lifetime charitable donations and accompanying tax deductions would fall, thereby increasing income tax revenues. Second, it assumes that capital gains realizations by the elderly would fall, thereby decreasing income tax revenues. For all but one year in the forecast period FY2006-FY2011 Treasury projects that net reductions in income taxes would add to the decrease in revenues from gift taxes.14 These negative effects on gift and income tax revenues are expected to continue from FY2011 onward if the estate tax is permanently repealed.

For the years prior to full repeal of the estate tax, the Treasury Department estimated revenue losses ranging from $205 million in FY2006 to $2.7 billion in FY2010. FY2011 reflects a period of transition from estate taxes for decedents dying in 2009 to no estate taxes in 2010 and beyond. For FY2011 Treasury estimated a revenue loss of $23.8 billion. For the years reflecting full repeal of the estate tax, Treasury estimated a revenue loss of $53.1 billion for FY2012, rising annually to $70.3 billion in FY2016. The five-year revenue loss estimate for FY2007-2011 is $31.4 billion. The 10-year revenue loss estimate for FY2007-FY2016 is $339.0 billion.

     Table 11. Treasury's Estimated Revenue Changes Through

 

        FY2016 from Acting in 2006 to Permanently Repeal

 

       the Estate and Generation-Skipping Transfer Taxes

 

           and Modify the Gift Tax Effective in 2010

 

                         (millions of dollars)

 

 

 Fiscal year              Treasury Department

 

 

    2006                           $-205

 

    2007                          -1,102

 

    2008                          -1,728

 

    2009                          -2,181

 

    2010                          -2,676

 

    2011                         -23,758

 

    2012                         -53,122

 

    2013                         -56,853

 

    2014                         -61,562

 

    2015                         -65,757

 

    2016                         -70,283

 

 2007-2011                       -31,445

 

 2007-2016                      -339,022

 

 

 Sources: U.S. Department of the Treasury, General

 

 Explanations of the Administration's Fiscal Year 2007 Revenue

 

 Proposals (referred to as the Bluebook), Washington, February

 

 2006, p. 143. The Treasury Department's annual estimates for FY2006

 

 to FY2011, and the cumulative five- and 10-year estimates are also

 

 published in U.S. Executive Office of the President, Office of

 

 Management and Budget, Analytical Perspectives, Budget of the U.S.

 

 Government, Fiscal Year 2007, Table 17-3, p. 265.

 

 

 Note: These estimates include the projected effect on

 

 individual income tax revenue, in addition to estate and gift taxes.

 

 

To put these numbers in some perspective, the full set of revenue proposals presented in the Bush Administration's FY2007 budget were estimated by Treasury to cost $285.3 billion over the five-year period FY2007-FY2011 and $1.741 trillion over the 10-year period FY2007-FY2016.15 The revenue loss associated with the repeal of the estate tax and generation-skipping transfer tax and the modification of the gift taxes represents 11% of the total proposed revenue costs over the five-year period FY2007-FY2011. It represents 19% of total estimated revenue costs for the 10-year period FY2007-FY2016. This reflects the large effects of full estate tax repeal during the second half of the 10-year period, FY2012-FY2016.

 

For Additional Information

 

 

CRS Report 95-444. A History of Federal Estate, Gift, and Generation-Skipping Taxes, by John R. Luckey.

CRS Report RS20593. Asset Distribution of Taxable Estates: An Analysis, by Steven Maguire.

CRS Report RL31092. Calculating Estate Tax Liability During the Estate Tax Phasedown Period 2001-2009, by Nonna A. Noto.

CRS Report RS20609. Economic Issues Surrounding the Estate and Gift Tax: A Brief Summary, by Jane Gravelle.

CRS Report RL31061. Estate and Gift Tax Law: Changes Under the Economic Growth and Tax Relief Reconciliation Act of 2001, by Nonna A. Noto.

CRS Report RL30600. Estate and Gift Taxes: Economic Issues, by Jane G. Gravelle and Steven Maguire.

CRS Report RL32818. Estate Tax Legislation in the 109th Congress, by Nonna A. Noto.

CRS Report RL33070. Estate Taxes and Family Businesses: Economic Issues, by Jane Gravelle and Steven Maguire.

CRS Report 95-416. Federal Estate, Gift, and Generation-Skipping Taxes: A Description of Current Law, by John R. Luckey.

CRS Report RS20853. State Estate and Gift Tax Revenue, by Steven Maguire.

 

FOOTNOTES

 

 

1 Estate tax returns filed in 2004 are most likely to be for the estates of decedents dying in 2003 when the exclusion amount under the estate tax was $1 million. They are also likely to include returns of some decedents dying in early 2004 when the exclusion amount was $1.5 million.

2 Taxable estate values below the maximum cutoff are subject to a table of graduated marginal tax rates starting at 18% for the first $10,000. The lower range of marginal rates is incorporated in the unified credit. Consequently, taxpayers are only likely to pay attention to the marginal rate that applies above the applicable exclusion amount.

3 Including taxable gifts given during the donor's lifetime.

4 The unified credit is applied against both estate and gift tax obligations.

5 The Taxpayer Relief Act also created a new exclusion from the estate tax for qualified family-owned businesses that was in effect from 1998 through 2003. The exclusion was limited to a total of $1,300,000 in combination with the applicable exclusion amount. The family-owned business exclusion was converted to a deduction by the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206). Under EGTRRA, the family-owned business deduction was repealed in 2004 when the applicable exclusion amount for all estates was increased to $1,500,000. For more information, see CRS Report 95-444, A History of Federal Estate, Gift, and Generation-Skipping Taxes, by John R. Luckey.

6 Assets are typically valued at their fair market value as of the date of death. However, they may be valued as of the "alternate valuation date" -- six months after the date of death or the date of distribution of the property from the estate if earlier. The alternate valuation date might be elected by the executor if the assets have a lower value on that later date. For more information, see CRS Report 95-416, Federal Estate, Gift, and Generation-Skipping Taxes: A Description of Current Law, by John R. Luckey.

7 David Joulfaian, Estate Taxes and Charitable Bequests: Evidence from Two Tax Regimes, unpublished research paper, Dec. 2004, p. 10.

8 Complex returns may be granted an extension longer than six months.

9 Explained later on page 13.

10 This percentage is sometimes expressed relative to the number of adult deaths in the previous year. The number of adult deaths (age 20 and over plus deaths for which age is unavailable) was 97.6%-97.8% of all deaths for the years 1997 to 2002. Consequently, using total deaths instead of adult deaths as the denominator does not make much difference in the percentage.

11 Some estate tax returns are filed several years after the decedent's death. In its publicly released data for returns filed in a given year, the IRS excludes those late returns for which the gross value of the estate was less than the filing threshold in effect for the prior calendar year. In 2003, for example, 6,498 returns were filed with from $675,000 up to $1 million in gross assets, of which 2,365 were taxable. These returns are not included in the publicly released data for returns filed in 2003. This practice somewhat understates the total number of returns filed, the number of taxable returns filed, and the amount of tax paid by the $600,000 to $1 million gross estate size class for the 1998-2004 period examined in this report. But it gives a closer picture of what is occurring under the tax laws most pertinent to the filing years. Returns filed several years after the decedent's death are included as long as the gross assets in the estate exceed the filing threshold in effect for the year prior to filing. IRS excludes from its tabulations returns filed that were not required to be filed because gross assets were below the filing threshold in effect for the year of death.

12 Internal Revenue Service, Statistics of Income Bulletin, vol. 25, no. 2, fall 2005, Washington, D.C., Selected Historical and Other Data, Table 3, p. 286. Calculated by CRS as 100 minus the percentage of returns showing no total income tax.

13 Under the gift tax there is an annual exclusion per donor per donee. This exclusion amount is indexed for inflation and rounded down to the nearest $1,000. The exclusion was $11,000 in 2005 and is $12,000 in 2006. There is an unlimited exclusion for gifts to pay for tuition or medical expenses or for transfers to a political organization for the use of the organization. There is also an unlimited marital deduction for most interspousal gifts. For more information, see CRS Report 95-444, A History of Federal Estate, Gift, and Generation-Skipping Taxes, by John R. Luckey, and CRS Report 95-416, Federal Estate, Gift, and Generation-Skipping Taxes: A Description of Current Law, by John R. Luckey.

14 These conclusions are based on a comparison of two sets of revenue change estimates for FY2006-FY2011 published in the U.S. budget for FY2007. See U.S. Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2007 (Washington: GPO, 2006), Table 17-3, p. 265, and Table 17-4, p. 269. According to conversations with Treasury Department analysts, the estimates in Table 17-3, Effect of Proposals on Receipts -- for making permanent the repeal of estate and generation-skipping transfer taxes and modification of gift taxes -- include the projected effects on income taxes, in addition to the effect on estate and gift tax revenues. These are the same estimates presented (out to FY2016) in Table 11 of this report. In contrast, the estimates in Table 17-4, Receipts by Source -- for proposed legislation, under estate and gift taxes -- include only the effects on estate and gift tax receipts. The difference between the two series indicates the estimated effects of changes in income tax revenues.

15 U.S. Department of the Treasury, General Explanations of the Administration's Fiscal Year 2007 Revenue Proposals (referred to as the Bluebook), Washington, February 2006, p. 146.

 

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