Interstate Competition and State Death Taxes: A Modern Crisis in
Historical Perspective State death taxes are one of the oldest
forms of state revenue, dating back to the early 19th century.
Yet, as the 21st century begins, these taxes face a significant
crisis. In just the past five years, prompted by the 2001 repeal
of the federal "state death tax credit" that had facilitated
collection of these taxes, and yielding to increasingly vocal
anti-tax rhetoric, half of the states simply have abandoned this
form of tax revenue. This dramatic shift in state tax policy
impacts not only the states that have repealed death taxes, but
also those that still impose these taxes. The former now must
find alternate forms of revenue or reduce governmental
expenditures. The latter now must fear that taxpayers will "vote
with their feet," abandoning the states that impose death taxes
towards the growing number of states touting their more
favorable tax climates. As interstate competition to attract
these wealthy migrants inten