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Optimal Taxation of Bequests in a Model with Initial Wealth

Listed author(s):
  • Johann K. Brunner
  • Susanne Pech

We formulate an optimum-taxation model, where parents leave bequests to their descendants for altruistic reasons. In contrast to the standard model, individuals differ not only in earning abilities, but also ininitial (inherited) wealth. In this model a redistributive motive for an inheritance tax - which is equivalent to a uniform tax on all expenditures - arises, given that initial wealth increases with earning abilities. Its introduction increases intertemporal social welfare or has an ambiguous effect, depending on whether the bequeathing generation can adjust their behaviour and whether the external effect related to altruism is accounted for in the social objective.

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File URL: http://hdl.handle.net/10.1111/j.1467-9442.2012.01725.x
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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 4 (December)
Pages: 1368-1392

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Handle: RePEc:bla:scandj:v:114:y:2012:i:4:p:1368-1392
DOI: j.1467-9442.2012.01725.x
Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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