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GINI DP 21: Transfer Taxes and Inequality

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  • Jappelli, T.
  • Padula, M.
  • Pica, G.

Abstract

This study surveys the existing debate on the taxation of the intergenerational transfers. Understanding the effect of transfer taxes on the intergenerational transmission of wealth requires answering the difficult question of what is the effect of taxes on bequest. On the one hand, the economic literature is far from sharing a unanimous view on the exact nature of the motive to leave bequests. On the other, data problems, and in particular lack of data on donors, makes it hard to provide conclusive evidence on the matter. To put the debate in context, we review the legislation on the taxation of intergenerational transfers in several OECD countries. Institutional arrangements on estate taxations vary widely between countries. Despite such heterogeneity, the revenues from taxing intergenerational transfers are generally low, and decreasing from 1% in the mid-sixties to 0.4% after 1980. We take this trend as broadly indicative that little redistribution takes place through taxation of intergenerational transfers. The available evidence and the related theoretical issues make it hard to establish a causal link between the increase in wealth and income inequality and the vanishing transfer tax.

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Bibliographic Info

Paper provided by AIAS, Amsterdam Institute for Advanced Labour Studies in its series GINI Discussion Papers with number 21.

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Date of creation: Dec 2011
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Handle: RePEc:aia:ginidp:21

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  1. B. Douglas Bernheim & Robert J. Lemke & John Karl Scholz, 2001. "Do Estate and Gift Taxes Affect the Timing of Private Transfers?," NBER Working Papers 8333, National Bureau of Economic Research, Inc.
  2. Poterba, James, 2001. "Estate and gift taxes and incentives for inter vivos giving in the US," Journal of Public Economics, Elsevier, vol. 79(1), pages 237-264, January.
  3. Douglas Holtz-Eakin & Donald Marples, 2001. "Distortion Costs of Taxing Wealth Accumulation: Income Versus Estate Taxes," NBER Working Papers 8261, National Bureau of Economic Research, Inc.
  4. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
  5. Yuriy Gorodnichenko & Jorge Martinez-Vazquez & Klara Sabirianova Peter, 2007. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0720, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. Bertocchi, Graziella, 2007. "The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective," CEPR Discussion Papers 6115, C.E.P.R. Discussion Papers.
  7. Joulfaian, David, 2006. "The Behavioral Response of Wealth Accumulation to Estate Taxation: Time Series Evidence," National Tax Journal, National Tax Association, vol. 59(2), pages 253-68, June.
  8. Joel Slemrod & Wojciech Kopczuk, 2000. "The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors," NBER Working Papers 7960, National Bureau of Economic Research, Inc.
  9. Wojciech Kopczuk, 2010. "Economics of estate taxation: a brief review of theory and evidence," NBER Working Papers 15741, National Bureau of Economic Research, Inc.
  10. Wojciech Kopczuk, 2007. "Bequest and Tax Planning: Evidence from Estate Tax Returns," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1801-1854, November.
  11. Blinder, Alan S, 1975. "Distribution Effects and the Aggregate Consumption Function," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 447-75, June.
  12. Caballe, Jordi, 1995. "Endogenous Growth, Human Capital, and Bequests in a Life-Cycle Model," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 156-81, January.
  13. McGarry, Kathleen, 1999. "Inter vivos transfers and intended bequests," Journal of Public Economics, Elsevier, vol. 73(3), pages 321-351, September.
  14. Joulfaian, David, 2004. "Gift taxes and lifetime transfers: time series evidence," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1917-1929, August.
  15. Jappelli, Tullio & Padula, Mario & Pica, Giovanni, 2010. "Estate Taxation and Intergenerational Transfers," CEPR Discussion Papers 7701, C.E.P.R. Discussion Papers.
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