The amount of wealth held by very high-income people in the US has grown dramatically in recent years. It is more concentrated than other member countries of the Organisation for Economic Co-operation and Development (OECD), and the next few decades will see the largest set of intergenerational wealth transfers in history. But few estates will be taxed by the current estate tax—because estates valued at less than $15 million are not subject to the estate tax. TPC finds that rolling back recent legislation to 2001 levels—when estates valued at less than $1.19 million in today’s dollars were taxed—would increase the number of estates taxed from 3,900 to almost 100,000. Over 80 percent of the tax would be paid by those with incomes in the top 40 percent of the income distribution.

Why do some estates pay no estate tax?

In 2001, the estate tax exemption—the amount protected from taxation when an estate is transferred to an heir—was just $675,000 (or $1.2 million in today’s dollars). In 2009, the exemption increased to $3.5 million, and in 2017, $11 million. The One Big Beautiful Bill Act pushed the estate tax exemption to $15 million. 

How would lower exemption levels affect current estate taxpayers? 

To find out, TPC simulated the effects of decreasing the current $15 million estate tax exemption to lower levels:

• Option 1: Set the exemption at $10 million
• Option 2: Set the exemption at $7.5 million
• Option 3: Set the exemption at its 2009 level of $3.5 million, adjusted for inflation to $5.17 million 
• Option 4: Set the exemption at its 2001 level of $0.675 million, adjusted for inflation to $1.19 million

Option 4—the least generous exemption level—would result in almost 100,000 families paying the tax. The other three options would reduce the exemption level less, with the first option reducing the exemption to $10 million and option 2 cutting the $15 million exemption in half. Neither the first nor second option would increase the number of taxable returns filed above 10,000. The third option would return the estate tax exemption to its inflation-adjusted 2009 level of $5.17 million, an aspect of a proposal by Senator Chris Van Hollen (D-MD). This would increase the number of taxable returns filed to 12,300 in 2026. 

How would exemption levels affect different income groups?

Generally, lowering the estate tax exemption would keep most of the additional tax concentrated among the highest-income families, but returning to the 2001 level would affect more families and shift more of the additional liability to those with income below $119,700.

In the first three options, estate taxpayers in the top quintile of income, or those with incomes above $226,600, would pay around 75 percent of the change in tax liability. The changes in tax liability among the bottom four quintiles would be mostly borne by the fourth quintile, or those with income between $119,700 and $226,600. In contrast, option 4 would increase the share of estate tax change to almost 50 percent for the bottom four income quintiles, or those with income below $226,600. Among them, those with income below $119,700 would bear 18.3 percent of the tax change.

Wealth in the US is highly concentrated among a small number of people. As a result, lowering the estate tax exemption would primarily increase taxes on the wealthiest households. A return to 2001 levels would extend liability further down the income distribution, but still only to a relatively small number of families.