1982 85 2000 05 10
0
50
100
150
200
90 95 1715
James“Bud”Walton,a founder
ofWalmart,diedin 1995 witha
fortunethenestimatedat$1bn
Thenextyear,inheritance-tax
revenueinArkansasquintupled
Arkansasrepealedits
estatetaxin 2005
In 2001 Congressendedthe
federalcreditforstate-level
estatetaxes
If Georgiaaddeda16%estatetax,it wouldstandtogain$3.75bnintheory
Undercurrentlaw(noestatetax)
However,around35%ofbillionaireswouldrelocatetoavoidthetax,reducingthenetgainto$1.38bn
$4.86bnfromincometax
$4.86bn $3.75bn
$3.57bn $2.67bn Netgain$1.38bn
Netfiscalimpactoftypicalestatetax†
%ofGDP
-2 -1 210
HI
MN
OR
VT
ME
CT
NY
MD
MA
RI
IL
WA
PA
Thesestates
loserevenue
byhavingan
estatetax
←
ME
VT
WA IL NY MA
OR
MN
CT RI
MD
DC
HI
NH
ID MT ND MI
NV WY SD IA OH PA
CA UT CO MO KY WV DE
NM KS TN NC SC
AL GA
FL
AK
IN
NE VA
OK
TX
AR
NJ
WI
AZ
LA MS
Stateswithanestatetax*
2019
→Stateswithoutestatetaxestendtolureageingbillionaires
→Despitebillionaireflight,manystateswouldprofitfromtaxinginheritances
→Butstatesthattaxinheritancesstillreap windfalls from those who stay put
Sources: “Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy ”,
by Enrico Moretti and Daniel J. Wilson, Oct 2019; The Economist
*Or functionally equivalent inheritance tax †Change in net present value of billionaires’ tax
payments resulting from estate tax, based on a $5.5m exemption and 16% top rate, Nov 2019
Arkansas, estate-tax revenue, $m, 2017 prices
ChangesinlistedresidenceforAmericansaged 65 andoverontheForbes 400 list,2002-17
Georgia
Real net present value of future estate and income taxes paid by current billionaires, Nov 2019
California
Cumulative wealth moving
from states with estate
taxes to ones without
Moves that did not
reduce estate-tax liability
Florida
Sized by
aggregate
networth
$10bn
$1bn
The EconomistNovember 30th 2019 77
A
mong theDemocrats seeking Ameri-
ca’s presidency, wealth taxes are a core
division between the left and centre. Ex-
perts disagree on whether plutocrats can
wriggle out of such levies, because few rich
countries use them. Data on inheritance
taxes, a close cousin, are also spotty. But a
new study by Enrico Moretti of the Univer-
sity of California, Berkeley and Daniel Wil-
son of the Federal Reserve Bank of San
Francisco suggests that at the state level,
governments can reap gains from estate
taxes, even though they are easy to avoid.
Their working paper makes use of a nat-
ural experiment. Estate taxes in America
vary by state. However, before 2001 all ul-
tra-rich Americans paid the same rate, be-
cause the federal government offset state-
level estate taxes with a dollar-for-dollar
credit. George W. Bush’s first tax law ended
this rule. That made dying in Idaho, which
has no estate tax, cheaper than in Washing-
ton state, which charges up to 20%.
The rich can only avoid federal taxes by
renouncing citizenship. However, they can
dodge state levies by moving. If they priori-
tise preserving their heirs’ fortunes, then
states that taxed inheritances after 2001
should have become bereft of billionaires.
The study supports this theory. The au-
thors did not know where the rich resided
for tax purposes. Instead, they relied on
Forbesmagazine, which estimates billion-
aires’ net worth and assigns them to specif-
ic states. Starting in 2001, people whose
listed state changed were much more likely
to switch from states that charged an estate
tax to ones that did not than the reverse.
Overall, estate-tax states lost 35% of
their listed billionaires, and 50% of those
aged over 65. If such moves reflected real
changes in tax residence, they would cost
states both estate taxes and the income tax-
es the departed would otherwise have paid.
However, the windfall from billionaires
who stay is huge. In 1996 revenue in Arkan-
sas rose by $148m after Bud Walton, a foun-
der of Walmart, died. The authors find that
of the 13 states that kept the tax, nine came
out ahead. On average, states lose 60-70%
of potential estate-tax proceeds as the rich
flee. The rest can go to schools and roads.
Estate taxes do not always raise money.
A few states tax income so heavily that an
estate tax which led the rich to move away
would cost them revenue. But Forbes’s data
imply that enough tycoons want to “age in
place” to make their heirs juicy targets. 7
A new study tries to assess whether
inheritance taxes boost net revenues
Death and taxes
Graphic detailFiscal policy
