I examine behavioral responses to inheritance and gift taxes in a setting where individuals knew the tax would increase three months before the new tax code took effect. Using tax microdata from Brazil, I employ bunching and difference-in-differences (DD) methods and find that individuals significantly retime their wealth transfers to avoid taxes. Retimed gifts resulted in smaller inheritances for nearly three years. Moreover, I find that responses are sensitive to changes in top gift marginal tax rates and tax design (flat rates vs progressive brackets). Finally, evasion increased in the medium run in reform states, particularly among small inheritances.
Gedeao Locks (Thu,) studied this question.