Estate Tax Rates Research Articles

ПЕРСПЕКТИВЫ РЕФОРМИРОВАНИЯ НАЛОГООБЛОЖЕНИЯ НЕДВИЖИМОСТИ В КОНТЕКСТЕ УСТОЙЧИВОГО РАЗВИТИЯ БЮДЖЕТНОЙ СИСТЕМЫ

Real estate taxation is one of the main sources of income for subnational budgets, but the traditional property valuation model does not work in most emerging market economies, bringing minimal fiscal impact. In this regard, the creation of a framework for the integration of households in the shadow sector with the official sector, the introduction of real estate tax rates depending on the occupied area is crucial for the sustainability of the budget system. Tax administration can be facilitated through tools based on satellite imagery and blockchain technology, and linking the amount of property tax paid to basic public services is crucial to ensure its political acceptability.

The role of real estate tax in the fiscal policy of the European Union and economic reconstruction of Ukraine

Introduction. In the modern conditions of economic development, an important task is to study the specific features of real estate tax administration in the European Union in order to implement best practices in the Ukrainian system, especially during martial condition and postwar reconstruction of Ukraine. European experience shows that the real estate tax, using the right approach, can become one of the important provisions of the revenue side of budgets at various levels. The purpose of the paper is to substantiate the theoretical and applied provisions of real estate taxation in the European Union and the formation of measures for effective administration of real estate tax in modern Ukrainian fiscal practice. Results. The paper examines the current features of real estate taxation in the European Union. Emphasis is placed on specific procedures for applying real estate tax rates in some European countries. A comparative analysis of the elements of real estate tax in the European Union and Ukraine is conducted. The monitoring of system-wide trends in the development of property taxation in the European Union and Ukraine revealed a high degree of compliance of domestic and European property tax systems. In particular, in Ukraine, as well as in the EU member states, there is an increasing role of property taxes in the fiscal policy of the state and municipalities. Attention is drawn to the controversial provisions and prospects of riches taxation, which can serve as a potential in solution budget problems of national economies. Conclusions. The actual normative positions on optimization of property taxation in Ukraine in the conditions of martial condition are systematized. The conducted research made it possible to form scenarios for strengthening the fiscal potential of the real estate tax in Ukraine, taking into account the experience of the European Union in the period of economic recovery.

Diversification of Fiscal and Economic Consequences of Municipal Tax Policy on the Example of Real Estate Tax

The aim of the article was to assess the fiscal and economic differentiation of the municipal tax policy on the example of real estate tax in Polish cities with poviat status. This is an important theoretical and practical issue. On the one hand, the application of high tax rates may contribute to an increase in the budgetary revenues of cities, and on the other hand, may discourage potential investors from operating in the city and deteriorate its economic and social condition. The research allowed to state that the use of municipal tax policy is an instrument that strongly regulates fiscal and economic processes taking place in local government. It was found that the largest real estate tax revenues were in cities with a fiscal tax policy (where the highest tax rates were applied), while cities with relatively low real estate tax rates achieved in 2018-2020 an average revenue three times lower than cities applying fiscal tax policy. Moreover, the research proved that the most developed local governments in terms of socio-economic use applied fiscal tax policy. The least developed socially and economically was the group of cities with a liberal tax policy, and therefore applying relatively low tax rates.

Study of a System Dynamics Model of Wuhan Commodity Housing Price

Commodity housing is the most important product in the development of modern civil engineering, and it is also the frontier problem of modern engineering project management research. The progress of civil engineering in China can be seen to a great extent through the development of commercial housing. In order to solve the severe problem of rapid growth of commodity housing price in China, considering the advantages of system dynamics theory, a system dynamics model of commodity housing price is constructed. Eight subsystems, namely, housing demand, housing supply, housing price, urban population, urban economy, housing land, housing tenancy, and macro‐control, are studied. Taking the relevant data of Wuhan as an example, the Vensim DSS is used for simulations. In addition, a validity test and sensitivity test are used to verify the validity and feasibility of the model, respectively. Based on the model, it is successfully predicted that the price of commercial housing in Wuhan will reach 18,207.9 yuan/m2 in 2030, which provides a more systematic method of prediction for synthesis simulation of commercial housing markets. From the perspective of the developer loan interest rate, real estate tax rate, purchase restriction, and other policies, we show that the developer loan interest rate regulation policy has the strongest effect on guiding the change in commercial housing prices in Wuhan. Generally, this study provides insight into the responses that the national government could use to control housing prices.

PROPERTY TAX AS A TOOL FOR FINANCIAL REGULATION OF PUBLIC WELFARE

Introduction. With the approval of the concept of inclusive development, the demand for scientific research aimed at finding ways to implement it in financial practice is growing, which will have a positive impact on indicators of public welfare. In this context, an important task is to ensure the integration of the principles of inclusive development into the practice of property taxation, which will ensure an increase in its efficiency and fairness. The purpose is to reveal the social aspects of property tax, including assessing the compliance of the tax collection mechanism with the principles of fairness and inclusiveness of taxation, as well as the impact of property tax on the welfare of payers, taking into account their differentiation by the level of personal income. Methods. In the article, when studying the social aspects of levying property tax, general scientific and special methods are applied, namely, generalization, comparison, grouping, tabular analysis. Results. It has been substantiated that property tax has a varied effect on public welfare, acting as a tool for ensuring the redistribution of wealth between various social groups, attracting shadow incomes to taxation, withdrawn from it thanks to schemes to minimize tax liabilities, an instrument for curbing speculation in the housing market, as well as an important source of budget revenues, which are largely directed to social goals. It has been proven that in domestic practice, real estate tax has a pronounced regressiveness and discriminatory nature in relation to payers with lower incomes. Real estate tax rates are too low, which is more beneficial for wealthy citizens and leads to losses in local budget revenues. This made it possible to argue the advisability of switching to a cost approach to determining the tax base, but only available within an appropriate institutional environment. Perspectives. Further scientific research should be directed towards finding the optimal approach to establishing the base of real estate, as well as ensuring the inclusiveness of taxation, when opportunities for tax evasion will be minimized.

The Equity Premium and the One Percent

AbstractWe show that in a general equilibrium model with heterogeneity in risk aversion or belief, shifting wealth from an agent who holds comparatively fewer stocks to one who holds more reduces the equity premium. From an empirical view, the rich hold more stocks, so inequality should predict excess stock market returns. Consistent with our theory, we find that when the U.S. top ($\textrm{e.g.}$, 1%) income share rises, subsequent 1-year excess market returns significantly decline. This negative relation is robust to controlling for classic return predictors, predicting out-of-sample, and instrumenting inequality with estate tax rate changes. It also holds in international markets.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

The effect of death tax on the labour supply of donors: evidence from TRA97

ABSTRACTExploiting estate tax cuts from the Taxpayer Relief Act of 1997 (TRA97), this paper estimates the effect of death tax on the labour supply of living potential donors. To this end, difference-in-difference with multiple imputation approach is applied to micro-level panel data. This paper finds that the estate tax cuts makes no difference in labour force participation or working hours of potential donors in a statistically meaningful way, although the TRA97 reduces marginal estate tax rates by 37.51% on average. This finding suggests that the death tax causes no meaningful distortion of living potential-donors’ labour supplies at either extensive or intensive margin.

DETERMINING AN ASSET’S TAX BASIS IN THE ABSENCE OF A MEANINGFUL TRANSFER TAX REGIME

Until recently, in those circumstances where there was a valuation range with respect to a particular asset, executors faced a choice: among estates subject to the estate tax, declaring a high value would increase the estate tax liability; however, due to the Internal Revenue Code’s “basis equal to fair market value” rule applicable at death, declaring a low value would expose heirs to a greater capital gains tax on subsequent asset disposition. Because the estate tax rates were higher and that tax was immediate (as opposed to deferred until a later sale by the heir), executors typically minimized asset values, with the corresponding effect of tax basis diminishment. This commonplace strategy thus negated the possibility that taxpayers might exploit the basis equal to fair market rule. But this is often no longer the case. Through a series of exemption level increases, tax rate reductions, and other reforms, Congress has gutted the nation’s transfer tax system. What remains is a teetering transfer tax system that applies only to a handful of the wealthiest taxpayers. For the rest, the transfer tax system provides no disincentive to executors from assigning the highest defensible valuations to a decedent’s assets, opening the opportunity to capitalize upon the basis equal to fair market value rule. Unfortunately, the I.R.S. lacks the tools and resources to combat this practice. To preserve the integrity of the capital gains tax and the revenue that it produces, Congress must therefore intercede.

Estate Taxation and Human Capital with Information Externalities

This paper investigates the effects of estate taxation when firms cannot directly observe worker skill levels. Imperfect labor market signaling gives rise to an information externality that causes workers to free-ride off of others' human capital acquisition. Inherited wealth exacerbates the information externality because risk-averse workers with larger inheritances exert less effort to acquire skills. By reducing these inheritances, an estate tax induces greater skill acquisition effort, resulting in a higher number of skilled workers, and in many cases, increased wages and output. In a parametrized model, I establish that the optimal estate tax rate is significantly above zero.

The effect of estate tax change on the controlling shareholding structure and corporate value of family firms

AbstractManuscript typeEmpiricalResearch question/issueEstate tax planning has always been a primary concern of large shareholders when arranging the controlling shareholding structure of family firms. This paper provides evidence on the effect of a drastic change in estate tax on the shareholding structure of family‐controlled firms in Taiwan, as well as the impact of these changes on the firms' corporate value. We examine a 2008 policy change in Taiwan that substantially reduced the estate tax from a maximum rate of 50% to a single tax rate of 10%.Research findings/insightsWe analyze a 12‐year period from 2002 to 2014 looking at data of family‐controlled, listed companies with IPOs prior to 2001. The empirical results reveal a reduced motivation among controlling families to circumvent estate tax through altering the shareholding structure after the law change. The results also reveal a positive impact on firm value as a result of the reduction in the tax burden of controlling families. These findings contribute to the family firm and tax literature and provide insight into the effects of tax policy change on the controlling structure of family firms and the consequent benefits on firm value.Theoretical/academic implicationsTo the best of our knowledge, this paper is the first empirical study that establishes a significant relationship between estate tax and tax‐avoidance behaviors reflected in the change of the shareholding structure of a family firm. Many research topics linking estate tax with other corporate governance issues in family firms are here unexplored.Practitioner/policy implicationsFor the policymaker, this study highlights the increase of firm value due to a reduction in the estate tax rate. Moreover, a tax‐friendly environment can help the controlling family commit themselves to the proper management of the firm instead of expending effort on tax minimization to safeguard their wealth.

Housing Related Fees and Real Estate Tax Rates in Cities in the Netherlands

Housing Related Fees and Real Estate Tax Rates in Cities in the Netherlands

Effects of Demographic Structure and Tax Policies on Real Estate Prices

This paper compared the effects of demographic structure and tax policies on real estate prices by using an overlapping generation model under two situations: real estate as an investment good and real estate as a consumption good. We found that both economic growth rate and market interest rate play the important roles in both situations. In the former situation with real estate as an investment good, when the economic growth rate is higher (lower) than the market interest rate, the youth dependency ratio, the elderly population ratio, real estate tax rate, and income tax rate are reversely (positively) correlated with real estate prices. In the latter situation with real estate as a consumption good, the effect of the young dependency ratio and income tax rate on real estate prices reveals a positive (negative) correlation when the economic growth rate is higher (lower) than the market interest rate .

To own or not to own your life insurance policy?

Life insurance proceeds are generally subject to the estate tax. An exception is when the policy is owned by the beneficiaries and the insured gives up ownership and control, including the ability to change beneficiaries. Should the insured strategically own the policy contract and potentially subject proceeds to estate and inheritance taxes, or relinquish control, with the beneficiaries owning the policy, and escape such transfer taxes? This paper addresses how the estate tax influences the choice of life insurance ownership. Using samples of estate tax returns, the empirical evidence suggests that those facing high estate tax rates are more likely to forgo ownership and have proceeds excluded from their estates, and provides further evidence on the incentive effect of taxes and in support of the strategic bequest motive.

The Politics of Oligarchy: Taxation, Financial Regulation, Power Resources, and the Super-Rich in the United States, 1918-2012

The rise of the super-rich in the United States during the last thirty years has rekindled concerns about oligarchic political influences. Following recent theoretical work by Winters (2011), we conceptualize oligarchy as a defense against threats to income accumulation by the super-rich. We focus on two threats: taxes and financial regulations. In addition, we consider the potential role of countervailing power resources: Democratic Congressional power and unions. Using annual multiple time-series data covering 1918 through 2012 and Vector Autoregression (VAR) analysis, we find that the pre-tax income of the top 0.1% decreases in response to shocks in capital gains tax rates and marginal income tax rates, but not estate tax rates. Financial deregulation, the loss of Democratic seat share in Congress, and declines in labor union membership have likewise enhanced the income share of the top 0.1%. While tax rates on regular incomes and capital gains do not respond to the power of oligarchs, estate tax cuts, financial deregulation, and declines in Democratic seats in Congress accelerate following a windfall for the top 0.1%. Overall, the results imply that as oligarchs get richer, they minimize income and wealth loss due to the estate tax while enhancing their ability to extract rents in financial markets. But at the same time, the power resources of labor and society have important impacts on oligarchic incomes and top tax rates.

Incentive Effects of Inheritances and Optimal Estate Taxation

I consider optimal nonlinear taxation of income and bequests with a joy-of-giving bequest motive and explicitly characterize the optimal estate tax rate. The optimal formula trades off correction of externality from giving and discouraging effort of children due to income effect generated by bequests. The analysis shows that optimality of a positive tax on bequests rests on the strength of the effect of bequests on behavior of future generations. The analysis also suggests that inheritance, rather than estate tax, is better suited to implement the optimal policy.

Broadening the Tax Base and Its Effect on Fiscal Policy

The Tax Reform Act of 1986 signed by President Ronald Reagan, and the Economic Growth and Tax Relief Reconciliation Act of 2001, signed by President George W. Bush are the most significant tax reforms the United States has seen in the past thirty years. While both bills have gained notoriety for “broadening the tax base” by eliminating tax preferences and deductions, neither approach has been clearly proposed as an answer to the current fiscal cliff. Half the political base blames the “Bush tax cuts” for current fiscal deficits because of the massive decrease in tax rates without compensating for lost revenue. The other half admires the “Reagan tax cuts” for broadening the tax base while lowering rates, but do not seem to believe those principles can translate to today’s economy. Indeed, experts do not agree that past, proven principles can help stabilize the current economy. The current United States debt level and yearly deficit should trigger appropriate tax policies to create greater revenue from the tax code. In this paper, I propose that the primary focus of tax reform should be lowering the budget deficit through increased tax revenue. There are primarily two ways in which the tax code can generate revenue: (1) increase the individual income tax rates, or (2) broaden the tax base by making more income subject to taxation. Broadening the tax base is a more viable option than simply raising individual income tax rates because of the inherent fairness and efficiency that accompanies base broadening. Reform through base broadening eliminates taxpayer’s ability to take deductions and equitably places more taxpayers on the same footing from a taxation perspective. As in the 1980’s, broadening the base will result not only in decreasing the national debt and yearly deficit, but could potentially give a greater number of Americans larger take-home pay. Both political parties have pandered to interest groups causing tax reform to be arithmetically easy, but almost politically impossible. Tax reform is political by nature because any change to existing policy and legal structures comes from political bodies changing legislation. While the Tax Reform Act of 1986 and the Bush tax cuts of 2001 and 2003 dealt with many complex issues such as government spending, corporate tax rates, and gift and estate tax rates, both approaches relied on politics, not arithmetic, nor policy to produce tax reform. This paper will attempt to compare the two acts while narrowing its analysis on individual income tax rates and the effects broadening the tax base has on fiscal policy. Part I sets out taxation and broadening the base. Part II shows the history and politics of the respective tax reform acts. Part III compares the two reforms of Reagan and Bush. Part IV analyzes the effects prior reforms could have on the current United States economy if implemented today, with a special focus on broadening the tax base. Part V sets out the potential solutions for tax reform with an emphasis on President Obama’s and former 2012 Republican Presidential candidate Mitt Romney’s tax plans. Ultimately, this paper concludes that broadening the tax base is the best way of addressing, at least in part, the current United States debt.

Policy Responses to Fiscal Restraints: A Difference-in-Discontinuities Design

We evaluate the effect of relaxing fiscal rules on policy outcomes applying a quasi-experimental research design. In 1999, the Italian central government introduced fiscal rules aimed at imposing fiscal discipline on municipal governments, and in 2001 the rules were relaxed for municipalities below 5,000 inhabitants. This institutional change allows us to implement a difference-in-discontinuities design by combining the before/after with the discontinuous policy variation. Our estimates show that relaxing fiscal rules triggers a substantial deficit bias, captured by a shift from a balanced budget to a deficit that amounts to 2 percent of the total budget. The deficit comes primarily from reduced revenues as unconstrained municipalities have lower real estate and income tax rates. Finally, we investigate the heterogeneity in policy responses across municipalities to provide new evidence about the costs and benefits of restricting fiscal policy. The impact is larger if the mayor can run for reelection, the number of political parties seated in the city council is higher, voters are older, the performance of the mayor in providing public good is lower, and cities are characterized by historical deficit, consistently with models on the political economy of fiscal adjustment.

To Own or not Own Your Life Insurance Policy?

Life insurance proceeds are generally subject to the estate tax. An exception is when the policy is owned by the beneficiaries and the insured gives up ownership and control, including the ability to change beneficiaries. Should the insured strategically own the policy contract and potentially subject proceeds to estate and inheritance taxes, or relinquish control, with the beneficiaries owning the policy, and escape such transfer taxes? This paper addresses how the estate tax influences the choice of life insurance ownership. Using samples of estate tax returns, the empirical evidence suggests that those facing high estate tax rates are more likely to forgo ownership and have proceeds excluded from their estates, and provides further evidence on the incentive effect of taxes and in support of the strategic bequest motive.

The Economic Consequences Of Repealing The Estate Tax Law

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;"><span style="mso-bidi-font-weight: bold; mso-bidi-font-style: italic;">The federal estate tax has been a part of our tax structure since the founding of the country. It is the federal government’s only tax on accumulated transfers of wealth. From its inception in 1916, it has been applied only to very large estates. The transfer of wealth can take place during the individual’s life (gift) or at the time of death (estate).<span style="mso-spacerun: yes;">  </span>Both types of transfer are combined and taxed according to the Taxpayer Relief Act of 1976. The Taxpayer Relief Act of 1976 was an important legislation affecting the structure of both the federal estate and gift taxes. In this Act, a unified system of taxation was established which treats both transfers</span><span style="mso-bidi-font-style: italic;"> <span style="mso-bidi-font-weight: bold;">of wealth, either during the life of the owner (gift) or at his or her death (estate) uniformly.</span></span></span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 9pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">The recent legislation of 2001 made drastic changes to the tax rates and the level of exemptions of the 1976 federal estate tax. According to this legislation, the maximum estate tax rate will drop gradually during the period of 2002-2010. Beginning in 2002, the maximum unified tax rate is reduced from 55% to 50%. This drop will reach to 45% by the year 2007 and will remain unchanged till 2009. The limit of exemption for a taxable transfer of wealth will increase from $1,000,000 to $1,500,000 by the year 2004, to $2,000,000 by 2006, to $3,500,000 by 2009, and to infinity by 2010 (estate tax will be repealed).<span style="mso-spacerun: yes;">  </span>This original version of federal estate tax will come back in 2011, unless the Congress decides differently and changes the law.</span></span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 9pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;"><span style="mso-bidi-font-weight: bold; mso-bidi-font-style: italic;">Like other social, economic, and tax issues, the transfer of wealth tax (estate and gift) is subject to debate and disagreements. The opponents of the estate tax support their views by referring to the immorality aspect of the tax and its undesired economic consequences. The supporters of the estate tax present their arguments on the basis of fairness and the ability of the tax to encourage charitable contributions. In addition, they believe that t</span><span style="mso-bidi-font-style: italic;">he economic consequences of repealing the estate tax would ripple through our economy and reduce federal revenues. Consequently, it could bring inequity and unfair distribution of wealth among the citizens and eventually could culminate in high difference in the class level of citizens.</span></span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 9pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="mso-bidi-font-weight: bold; mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">In our view, the federal estate tax is a tax worth fighting to keep and attempting to improve. If it were repealed, the burden of taxes would be felt more by those who have no wealth and had paid their income taxes on their earned income once before. Consequently, the lawmakers should keep the federal estate tax and fixing it by adjusting the amount of exemptions and the tax rates to reasonable, effective, and fair levels.</span></span></span></p>

An Empirical Investigation Of The Minority Interest And Marketability Discounts In Valuation Of Closely Held Stock For Estate And Gift Tax Purposes

<p class="MsoBodyText2" style="margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The discounts for lack of marketability and minority interest are crucial in reducing the value of transferred interests of closely held companies for estate and gift tax purposes.<span style="mso-spacerun: yes;">  </span>Because the current highest marginal estate and gift tax rate is 49%, there is a strong inducement for CPAs, Attorneys, Investment Bankers, Financial Planners, and others who value these transfers to accurately gauge the judicially allowed discounts for lack of marketability and minority interests in the valuation of closely held stock.<span style="mso-spacerun: yes;">  </span>This study examines the relationship between Tax Court determined values for lack of marketability and minority discounts to closely held stock from the compromise percentages.<span style="mso-spacerun: yes;">  </span>Compromise percentage is defined as the mean of the percentage presented by the adversarial parties, the taxpayer, and the IRS, in a judicial action.<span style="mso-spacerun: yes;">  </span>Additionally, this relationship is examined across industry classifications.<span style="mso-spacerun: yes;">  </span>The period investigated covers January 1, 1973 through December 31, 2002.<span style="mso-spacerun: yes;">  </span>Both regular and memorandum decisions by the Tax Court are analyzed over this thirty-year span.<span style="mso-spacerun: yes;">  </span>Chi-square analysis is used to determine that the Tax Court determined values are not significantly different than the compromise percentages.<span style="mso-spacerun: yes;">  </span>Furthermore, this finding does not vary across industries.<span style="mso-spacerun: yes;">  </span>Regression and chi-squared results are augmented with descriptive statistics.</span></span></p>