Introduction Estate taxation has always been the controversial issues for tax policy for years. There are people who are adherent to this kind of levy but there are also people who are not in favor of this type of tax. Supporters of estate tax argue that this tax helps cut down controlling powers and promotes fairness of economic opportunity – to distribute the assets of the rich (ctj Q&A). Critics on the other hand argue that estate taxation lessens the incentives for wealth accumulation in two ways by reducing the incentive to make revenue and by adding the incentive to spend (Kopczuk & Slemrod, 2000). Estate tax discourages savings, harms small enterprises and farms, and death is an inappropriate time to impose a tax (Gravelle, 2003). The savings and hard works of parents to leave their children large inheritance may lessen because of high estate taxes, which in effect, the parents would have to work more and save more to cover the high taxes they would pay at the time of transfer (Joulfaian). The federal government imposed estate taxation several times in history and it was repealed at a certain period. Even in our time, the government repealed estate tax temporarily.1 Imposing taxes on capital gains and other related incomes affect the individual’s saving …show more content…
There are examples that mentioned in Caballe (1995) and Laituer (2001) about estate tax that affects capital stocks. In another study made by Gale and Perozek (2001), they discussed that savings are depending on the true intention of transferring a property. Lastly, the effect of estate tax is based on experimental and theoretical studies. Other researches and studies rely on the effects of income taxes. However, income tax is different from estate tax hence comparison of the two cannot be valid enough. Estate tax cannot be directly compared to income tax as the savings on this two can be different consequence in a