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State revenue from death and gift taxes

One of these things is not so certain anymore

Estate taxes are commonly called “death taxes” because they’re levied on the value of everything you own at the time of death. Only estates valued above a filing threshold, set in 2024 at $13.61 million, are taxed by the Internal Revenue Service. Similarly, the only gifts that are taxed are those valued above $18,000.

The FRED graph above shows data from the US Census on the revenue collected quarterly by all 50 states and the District of Columbia from estate (death) and gift taxes between 1994 and 2023. The data are divided by GDP to make it easier to observe the proportional size of this source of revenue over time.

The relative value of the revenue generated by these taxes has declined by about two-thirds since the Economic Growth and Taxpayer Relief Reconciliation Act of 2001 reduced federal tax rates and increased exemptions. Afterward, many states repealed their own estate taxes.

Had Benjamin Franklin seen our FRED graph, he might have penned a different thought about the certainty of death and taxes—or at least about the certainty of “death” taxes.

How this graph was created: Search FRED for “State Tax Collections: T50 Death and Gift Taxes for the United States.” Next, click on the “Edit Graph” button and select the “Line 1” tab to customize the data. Start by searching for “Gross Domestic Product, Millions of Dollars, Not Seasonally Adjusted.” Click on “Add” and then type the formula (a/b). Make sure to click on “Apply.”

Suggested by Diego Mendez-Carbajo.

Tracking inflation with sugar and sweets?

Inflation reflects how prices of goods and services in the economy are changing. One measure of inflation is the consumer price index (CPI), which is the common headline number reported in the media.

The numbers for the CPI are released monthly, so it can be hard to tell what the CPI is doing on a daily or weekly basis. But what if there were prices you could observe directly that would serve as a closely related proxy for the CPI?

The FRED graph above shows that the CPI for all items and the CPI for sugar and sweets move similarly. Another way to say this is that these two price indices are highly correlated. Since 1947 the correlation is 0.99, and since the middle of 2020 the correlation is 0.97. Having a positive correlation that’s this close to 1 means that, as the CPI for sugar and sweets increases, so does the CPI for all items.

So, are price changes for sugary treats an indication of price changes overall? Well, this correlation between the two indices might be spurious. As an earlier FRED Blog post described it, “because time series can exhibit a common trend, it becomes difficult to interpret whether there is a relationship between them beyond that common trend.”

One way to investigate potential spurious correlation is to see if there is also a correlation in the growth rates of the two variables. We do this in our second graph by plotting the growth rate from the month prior for both price indices.

The correlation between the growth rates is 0.97 since 2020, which suggests this correlation is sound and not spurious. So, you could track the prices of candy or cookies on a daily or weekly basis at the grocery store to gauge what’s going on with the CPI for all items.

How these graphs were created: First graph: Search FRED for and select the “CPI for All items” series. In the “Edit Graph” panel, use the “Add Line” tab to search for and select “CPI Sugar and Sweets.” To normalize the data, selecte the last option in the the “Units” dropdown menu: “Index (Scale value to 100 for chosen date)”; choose 1990-01-01 and click “Copy to All.” Display the graph since 1947-01-01, which is the common start of the two series. Second graph: From the first graph, choose Units “Percent Change,” click “Copy to All,” and display the graph since 2000-01-01.

Suggested by B. Ravikumar and Amy Smaldone.

Rates related to monetary policy

The fed funds rate stays between the discount rate and the reverse repo rate

Different interest rates are involved in the monetary policy process: The federal funds rate (FFR) gets most of the news headlines, but deeper reporting refers to the interest rate on reserve balances (IORB) and the discount rate, as well as something called the overnight reverse repurchase agreement (ON RRP) rate. At first glance, the relationship among these rates might be difficult to parse; so let’s take a moment to sort it out.

The target range for the effective FFR is set by the FOMC, while other rates tend to be determined by market forces. Rather than set an exact number, the FOMC sets a range and aims to keep the effective FFR in that range.

To help maintain the rate in this target range, the Board of Governors sets the IORB rate and the FOMC sets the ON RRP Rate to nudge the FFR up or down within the range. More information on these rates can be found in this FRED Blog post by Jane Ihrig and Scott Wolla.

The Discount Window is a facility through which banks can borrow directly from the Fed—typically as a last resort for banks that weren’t able to borrow from other banks or had insufficient cash on hand. The primary credit rate (often referred to as the discount rate) is the rate banks pay for borrowing from the Fed, a rate set by each Bank’s board of directors. It’s unlikely banks would borrow at higher market rates if they could borrow from their Federal Reserve Bank, which makes the discount rate an effective ceiling on the FFR target range.

The ON RRP rate, on the other hand, serves as a floor for the FFR as financial institutions (theoretically) wouldn’t lend funds for a rate below the ON RRP rate, since they would be able to earn a higher and risk-free interest by putting their money at the Federal Reserve instead of loaning it out. The above FRED shows that the FFR stays between the discount rate and the ON RRP.

Find more information on the relationship between these tools in this Page One Economics essay also by Jane Ihrig and Scott Wolla.

How this graph was created: Search FRED for federal funds rate and select the daily federal funds effective rate series. From the “Edit Graph” panel, search for and select “IORB.” Repeat for “Overnight Reverse Repurchase Agreements Award Rate” and “Discount Window Primary Credit Rate.” Restrict the date range to the past year.

Suggested by Jack Fuller and Nathan Jefferson.

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