Estate and Gift Tax Revenues: Several Measurements

Publication Date: April 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

The question of whether to permanently repeal the federal estate tax or to reform 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 2003. They show that the 3,486 gross estates of $5 million or higher accounted for just 11.4% of taxable returns, but 59.8% of estate taxes paid.

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 The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16) superseded those changes and raised the exempt amount to $1 million for 2002 and 2003, $1.5 million for 2004 and 2005, $2 million for 2006 through 2008, and $3.5 million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 EGTRRA repealed the estate tax entirely for 2010, but the estate tax provisions of EGTRRA sunset on December 31, 2010.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.

Both the number of taxable returns and total estate tax paid continued to rise from 1998 to 2000, as increases in asset values outpaced the $25,000 yearly increases in the applicable exclusion amount from $600,000 to $675,000. But the number of taxable returns dropped by 41% and estate tax payments fell by 15% between 2000 and 2003 as the exempt amount increased to $1 million and some asset values fell. Taxable estate tax returns filed in 2003 represented just 1.25% of deaths in 2002.

From 1998 through 2003 the rising exempt amount eliminated a large number of smaller estates ($600,000 up to $1 million in gross size) from being taxable. In contrast, the number of larger taxable estates (the three classes over $5 million in gross size) remained relatively constant over the same period.

Revenues from federal estate and gift taxes peaked at $29.0 billion in FY2000. Between FY2000 and FY2003 revenues fell by 24% to $22.0 billion. However, in FY2004 revenues rose by 12% to $24.8 billion. Estate and gift tax revenues were 1.3% of total federal revenue and 3.1% of individual income tax revenue in FY2004.

CBO has projected estate and gift tax revenues through FY2015 under current law, with annual revenues of $52 billion in FY2014. The Treasury Department and the Joint Committee on Taxation (JCT) have estimated revenue losses through FY2015 from permanent repeal of the estate and generation-skipping transfer taxes and modifying gift taxes starting in 2010. For FY2006-FY2010 Treasury shows revenue losses of $557 million to $2.2 billion per year, and JCT $1.1-to-$2.6 billion, primarily from reduced gift taxes. For FY2012-FY2015 Treasury shows losses of $51- to-$62 billion per year, and JCT $54-to-$71 billion, from forgone estate and gift tax revenues. This report will be updated as new data become available.