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GINI DP 21: Transfer Taxes and Inequality

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

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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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. Graziella Bertocchi, 2011. "The Vanishing Bequest Tax: The Comparative Evolution Of Bequest Taxation In Historical Perspective," Economics and Politics, Wiley Blackwell, vol. 23(1), pages 107-131, 03.
  2. 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.
  3. Joulfaian, David, 2004. "Gift taxes and lifetime transfers: time series evidence," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1917-1929, August.
  4. Wojciech Kopczuk, 2006. "Bequest and Tax Planning: Evidence From Estate Tax Returns," NBER Working Papers 12701, National Bureau of Economic Research, Inc.
  5. 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.
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  7. Gorodnichenko, Yuriy & Martinez-Vazquez, Jorge & Peter, Klara Sabirianova, 2007. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," IZA Discussion Papers 3267, Institute for the Study of Labor (IZA).
  8. 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.
  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. McGarry, Kathleen, 1999. "Inter vivos transfers and intended bequests," Journal of Public Economics, Elsevier, vol. 73(3), pages 321-351, September.
  11. 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.
  12. 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.
  13. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  14. 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.
  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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