Estate Taxes

The Tax Module also features an estate tax calculator used to project estate tax revenues under current law and policy proposals. In the absence of a publicly-available estate tax microdata source, we simulate estate-level data using survey data on wealth and IRS summary tables.

We start with wealth microdata from the Survey of Consumer Finances (SCF), a detailed survey of Americans’ asset and liability holdings. Death is then simulated through a mortality risk module (accounting for differences across age, gender, income, and marital status), creating a synthetic population of estates. We then adjust reported wealth to match that of actual estate tax aggregates published by the IRS and imputes key deductions. Finally, the estate tax returns are projected into the future using forecasts of mortality from PWBMsim. For more detail on how we produce our synthetic estate tax microdata, see this report.

The estate tax calculator includes all major elements of Form 706, including the unlimited marital deduction, deceased spousal unused exclusion, and gift tax integration. The Tax Module calculates estate tax liability for all decedents and simulates the timing of estate tax collections to produce estate and gift tax revenue projections.