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Contents
How the Estate and Gift Tax Works .................................. 2
General Rules ............................................... 2
Special Rules for Family Owned Farms and Businesses ................ 5
The Generation Skipping Transfer Tax ............................. 6
E conom ic Issues ...................................................6
The Distributional Effect of the Estate and Gift Tax ................... 6
E ffect on Saving ...............................................8
Effect on Farms and Closely Held Businesses ....................... 12
Effects of the M arital Deduction ................................. 14
A Backstop for the Income Tax ................................. 15
Effects of the Charitable Deduction .............................. 16
Efficiency Effects, Distortions, and Administrative Costs ............. 17
Effects on State Estate and Inheritance Taxes ....................... 20Policy Options ...................................
Repealing the Estate and Gift Tax .................
Increasing the Credit or Converting it to an Exemption
Taxing the Capital Gains of Heirs vs. the Estate Tax . .
Concerns of Farms and Family Businesses ..........
Reform Proposals and Other Structural Changes .....
Conclusion .......................................
Appendix: Estate and Gift Tax Data .................... . . . . . . . . . . . . . .2 1
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. . . . . . . . . . . . . . .2 8List of Figures
Figure 1. Estate Tax Rates in 2002 ................................... 21
List of TablesNum erical Example .........................................
Numerical Example Continued with Taxes and Credits ..............
Table 1: Estate Tax Deductions and Burdens, 2000 .................
Table 2: Theoretical Effect of Estate Tax on Saving, By Bequest Motive
Table Al: The Filing Requirement and Unified Credit ..............
Table A2: Gross Estate Value of Taxable Returns Filed in 2000 .......
Table A3: Allowable Deductions on 2000 Returns .................
Table A4: 2003 Estate and Gift Tax Rate Schedule .................
Table A5: Credit for State Death Taxes ..........................
Table A6: Wealth Distribution of Taxable Returns Filed in 2000 ....... ... ..3
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Gravelle, Jane G. & Maguire, Steven. Estate and Gift Taxes: Economic Issues, report, January 31, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc824611/m1/3/: accessed July 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.