Enactment

• In 1916, the federal government created the estate tax in response to the concern that the current "consumption taxes" imposed the heaviest burden on the poorest citizens. The estate tax was seen as a justifiable way of balancing the revenue system and curbing the perpetuation of great dynastic wealth in a few families.
  
  

Progressive Taxation

• Like the income tax, the estate tax is a progressive tax. In 1916, estates over $50,000 (about $11 million in today's dollars) were taxed, from 1 to 10 percent; an estate had to reach $5 million to be taxed at the highest rate.
  
  

Rate Increase

• In 1917, the estate tax rates were increased to 2 percent for the first $50,000, up to 25 percent for estates over $10 million. Since 1916, rates have fluctuated, peaking at 77 percent in 1941.
  
  

The Revenue Act of 1924

• In 1924, Congress enacted the gift tax to prevent wealthy people from evading taxation by giving their estates away.
  
  

Overhaul

• The Tax Reform Act of 1976 revamped the estate and gift tax system and placed a cap of 70 percent on estate tax rates. The Economic Recovery Act of 1981 further reduced the tax rate to 50 percent. In 1997, estate exclusion amounts increased from $600,000 to $1 million.
  
  

Modern-Day Estate Tax

• The Economic Growth and Tax Relief Reconciliation Act of 2001 was an attempt to gradually eliminate the estate tax, by increasing the exclusion amount and decreasing the tax rate. As of 2009, the estate tax is alive and well, with a maximum tax rate of 46 percent and an exclusion amount of $3.5 million.