September 1, 1996

Federal Transfer Taxation

The Effect on Saving, Capital Accumulation, and Economic Dissipation
  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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The federal government levies taxes on property transfers at death, during life, and to grandchildren or more remote descendants. Referred to collectively as “transfer taxes,” these taxes attract little interest in the public policy forum because they produce little revenue—only 1% of annual federal tax revenues, and because most Americans have no first-hand experience with transfer taxes. However, transfer taxes have significantly adverse economic effects that are grossly disproportionate to the tax revenues they generate. Transfer taxes penalize success and the creation of wealth. The adverse effects of transfer taxes on saving and capital formation, therefore, are costs imposed on society as a whole.

Read the article at Sage Journals Online.