THE NON-EQUALIZATION OF TRUE GIFT AND ESTATE TAX RATES

Before 1976, the affluent transferred most of their wealth to their heirs through bequests, not gifts even though gifts faced lower statutory tax rates. This suggests the affluent were not acting altruistically. However, bequests had the advantage that unrealized capital gains were forgiven at the moment of transfer. Taking this into account, I derive true marginal gift and estate tax rates. Contrary to previous research, I find that the affluent failed to equalize these true rates, both before and after 1976. This represents stronger evidence that the large transfers made by the affluent were not motivated by altruism.