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The Comparative Evolution of Bequest Taxation in Historical Perspective

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Author Info
Graziella Bertocchi ()

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Abstract

Bequest tax revenues have been constantly declining in all OECD countries for at least seventy years. We propose an explanation which is based on a dynamic politico-economic model where the evolution of bequest taxation is determined by wealth inequality. Since economic development induces a growing role of labor income and thus a reduction of wealth inequality, bequest taxation is reduced over time. Our model also explains cross-country differences in the level and speed of adjustment of the tax, by embedding structural reallocation from agriculture to manufacturing and a consequent shift of the tax base from easy-to-tax land to hard-to-tax capital. This implies a lower tax level, and a slower equalization-induced tax reduction, the higher is the tax avoidance rate and the less developed is the economy. Finally, the introduction of franchise restrictions which are gradually lifted over time allows the model to reproduce the humped-shaped long-term evolution of bequest taxation starting from the nineteenth century for those countries that are now modern industrial democracies, and also helps to explain the discrepancies currently observed between tax systems in developed and underdeveloped countries.

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Publisher Info
Paper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 005.

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Length: pages 32
Date of creation: Oct 2007
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Handle: RePEc:mod:recent:005

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Web page: http://www.recent.unimore.it/
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Related research
Keywords: Bequest Tax; Inequality; Structural Reallocation; Redistribution; Voting;

Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
N40 - Economic History - - Government, War, Law, and Regulation - - - General, International, or Comparative
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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