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State Revenue from Estate, Inheritance, and Gift Taxes , Record No.: RS20853, Date: July 6, 2001 1 (July 6, 2001)

handle is hein.tera/crstax0161 and id is 1 raw text is: Order Code RS20853 Updated July 6, 2001 State Revenue from Estate, Inheritance, and Gift Taxes Steven Maguire Economic Analyst Government and Finance Division Summary P.L. 107-16, the Economic Growth and Tax Relief Reconciliation Act of 2001, repeals the federal estate tax for decedents dying after December 31, 2009. In addition, the Act repeals the credit for state death taxes for decedents dying after December 31, 2004 and replaces the credit with a deduction. Most state budgets will be affected because all states have estate and inheritances taxes which can be credited dollar-for- dollar against federal estate tax liability. In most states, the repeal of the tax and the significant increase in the federal exclusion equivalent, will also repeal or diminish state estate, inheritance, and gift taxes. Some state budgets depend on the estate tax more than others. As a percentage of tax revenue, the dependence on state death taxes ranges from 0.19% in Alaska to 4.610% in New Hampshire. As of July, 2001, 38 states have estate taxes that are dependent on the federal estate tax and 12 have independent estate taxes. In 2005, when the credit is repealed entirely, 40 states will be dependent on the federal estate tax. When the federal estate tax is repealed, most states will also have their estate tax repealed. This report will be updated as events warrant. The federal estate tax will be repealed gradually by the Economic Growth and Tax Relief Reconciliation Act of 2001. Repeal of the federal estate tax and increase of the exclusion amount (or its credit equivalent) will also repeal or diminish most state estate, inheritance, and gift taxes. In 1999, state estate and gift tax revenue was 1.5% of total state tax revenue, but there was considerable variation among the states. This report will briefly describe the federal credit for state death taxes and provide data on the relative importance of estate, inheritance, and gift taxes to each state. Background The federal credit for state estate, gift, and inheritance taxes first appeared in the Revenue Act of 1924, some eight years after the introduction of the federal estate tax. The Act stipulated that estates could claim a credit for state estate taxes up to 25% of the federal estate tax liability. After numerous modifications since its introduction, the federal credit is now a schedule of 21 gradually increasing rates beginning at 0% and eventually Congressional Research Service • The Library of Congress CRS Report for Congress Received through the CRS Web

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