Do Estate and Gift Taxes Affect
the Timing of Private Transfers?
B. Douglas Bernheim, Department of Economics, Stanford University, and NBER
bernheim@stanford.edu
Robert J. Lemke, Department of Economics and Business, Lake Forest College
lemke@lakeforest.edu
John Karl Scholz, Department of Economics, University of Wisconsin – Madison, and NBER
jkscholz@facstaff.wisc.edu
December 31, 2003
We are grateful to Arthur Kennickell and his colleagues at the Board of Governors of the Federal Reserve for their
work developing and documenting the Surveys of Consumer Finances. Karen Pence provided exceptionally helpful
advice and programming assistance. We also thank Peter Brady, Peter Diamond, David Joulfaian, Kathleen
McGarry, Jim Poterba, Robert Rebelein, referees of this journal, and seminar participants at the University of
Florida, Office of Tax Analysis at the U.S. Treasury, and at the NBER Winter 2001 Public Economics Workshop for
their helpful comments and suggestions.
Abstract
Proposals to alter the estate tax are contentious and have been considered largely in an empirical
vacuum. This paper examines time series and cross-sectional variation to identify the effects of
estate and gift taxation on the timing of private transfers. The analysis is based on data from the
1989, 1992, 1995, 1998, and 2001 Surveys of Consumer Finances. Legislative activity during
this period reduced the tax disadvantage of bequests relative to gifts. Moreover, the magnitude
of this reduction differed systematically across identifiable household categories. We find that
households experiencing larger declines in the expected tax disadvantages of bequests reduced
inter vivos transfers relative to households experiencing small declines in the tax disadvantages
of bequests. This finding is consistent with the hypothesis that the timing of transfers is
responsive to applicable gift and estate tax rates. The results also provide evidence of a
systematic bequest