Key Takeaways
- While Americans have become wealthier over the past two decades, a smaller percentage of households are paying the estate tax now versus in the past, research from Brookings finds.
- Researchers attribute this decline to changes in federal tax law over the past 50 years. The most recent change occurred in 2017 with the Tax Cuts and Jobs Act.
- With trillions of dollars expected to change hands over the next 20 years, researchers warn that, as fewer households pay estate tax, wealth inequality could worsen.
Even as American households have grown substantially wealthier over the past 25 years, those who pay estate tax has shrunk dramatically.
In 2021, only one in every 1,300 estates paid the estate tax, new research from Brookings, a progressive think tank, found. That’s less than 0.1% of decedents’ estates or estates of people who passed away that year.
And the share of such estates who pay the estate tax has fallen dramatically over the years. For instance, in 1972 6.5% of decedent’s estates paid the estate tax while by 1997 that figure was down to 2.1%.
Meanwhile, household net worth for Americans more than doubled to $139 trillion in 2021 versus $47.5 trillion in 1997.
Why Are So Few Households Paying Estate Tax?
In their preliminary report, researchers say that, since 1981, multiple federal tax law changes have resulted in fewer households paying the estate tax.
“These changes have had the effect of all but eliminating the estate tax, except for the very richest households,” they write.
Most recently, the Tax Cuts and Jobs Act (TCJA) more than doubled the estate tax exemption, from $11.18 million in 2018 to $5.49 million in 2017. That threshold has grown to $13.99 million for 2025.
Some provisions in the TCJA, including this exemption limit, are set to expire at the end of this year. If that happens, the estate tax exemption limit could fall to roughly $7 million (pre-2018 levels after adjusting for inflation) in 2026.
However, the Trump administration and Republican lawmakers are trying to extend the TCJA, which could mean that the higher estate tax exemption may remain.
Increasing Wealth Inequality, Lower Government Revenue
With many Americans expected to transfer their wealth over the next few decades, researchers at Brookings said the dwindling number of households paying the estate tax could worsen wealth inequality.
Through 2048, roughly $100 trillion will be transferred from Baby Boomers and older generations, according to an estimate by Cerulli Associates.
“The U.S. can expect the largest flows of intergenerational wealth transfers over the next several decades in modern history, and a substantial share of that wealth—especially among the very wealthiest households—will be passed down within families in a way that maintains family dynasties and increases wealth inequality,” the Brookings researchers write.
It also affects government coffers. Estate tax changes have caused the federal government to lose revenue: in 1972, the estate tax generated 0.4% of GDP in revenue. By 2021, the tax produced just 0.08% of GDP in revenue.
Although, if the government needs to raise revenue it could always look to lower the exemption limit according to Dennis Huergo, Vice President at Wealth Enhancement Group
“Lowering the estate tax exemption is low-hanging fruit with fewer ramifications for their voter base,” Huergo wrote in a December email to Investopedia.
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