One aspect of the possible repeal of the estate and gift taxes is the effect it would have on the budgets of states. Most states collect estate or inheritance taxes that piggyback the federal estate and gift tax system. Without the federal transfer tax system, many states will be forced to give up revenue, to raise taxes in other areas, or to create new state inheritance taxes. President Bush’s plan would cut $50 billion from the annual budget after about ten years, at which time states would lose about $9 billion per year.

State inheritance taxes account for 1% to 2% of states’ yearly budgets.