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A Differential Incidence Analysis of a Tax Reform From an Income Tax to a Consumption Tax in the Presence of Bequests

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  • Raymond G. Batina

    (Washington State University)

Abstract

This article studies the properties of a switch from an income tax to a consumption tax in the presence of bequests. The author shows that the consumption tax will distort the bequest decision if bequests are taxed at the consumption tax rate but not when bequests are exempt. It is possible that including bequests in the tax base under the consumption tax may reduce the incentive to save. The main benefit from reforming the tax system may arise from the switch away from the income tax and not in the move toward the consumption tax if bequests are taxed.

Suggested Citation

  • Raymond G. Batina, 1999. "A Differential Incidence Analysis of a Tax Reform From an Income Tax to a Consumption Tax in the Presence of Bequests," Public Finance Review, , vol. 27(3), pages 353-370, May.
    • Handle: RePEc:sae:pubfin:v:27:y:1999:i:3:p:353-370
    DOI: 10.1177/109114219902700305
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    References listed on IDEAS

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    2. Rebelein, Robert P., 2005. "Intergenerational Strategic Behavior and Crowding Out in a General Equilibrium Model," Vassar College Department of Economics Working Paper Series 74, Vassar College Department of Economics.

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