NCPA - National Center for Policy Analysis

JEC Report: Economic Costs Of Estate Taxes Outweigh Benefits

December 17, 1998

The majority staff at Congress's Joint Economic Committee has taken a look at the inheritance tax and found it wanting on a number of grounds.

According to a new JEC study of the economic effects of the estate tax:

  • It raises little tax revenue because most if not all of the receipts are offset by losses under the income tax -- as wealthy parents shift assets to their children and thus lower their own income tax liability.
  • It reduces incentives to save and invest -- and probably has cut the country's capital stock by almost $500 billion during this century.
  • Compliance and avoidance costs are huge -- with compliance costs roughly offsetting dollar-for-dollar the revenue raised.
  • The estate tax does little to reduce inequality.

Thus, the evidence is that the costs of the estate tax outweigh the benefits.

Source: Perspective, "Death and Taxes," Investor's Business Daily, December 17, 1998; Dan Miller (Chief Economist), "The Economics of the Estate Tax," December 1998, Joint Economic Committee, U.S. Congress, Washington, D.C.


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