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Premature Deaths, Accidental Bequests and Fairness

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Listed:
  • Marc Fleurbaey
  • Marie-Louise Leroux
  • Pierre Pestieau
  • Grégory Ponthiere
  • Stéphane Zuber

Abstract

While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subject to a confiscatory tax. We reexamine the optimal taxation of accidental bequests in an economy where individuals care about what they leave to their offspring in case of premature death. We show that, whereas the conventional 100 % tax view holds under the utilitarian social criterion, it does not hold under the ex post egalitarian criterion (giving priority to the unlucky short-lived). From the perspective of compensating the short-lived, it is optimal not to tax, but to subsidize accidental bequests. We examine the robustness of those results in a dynamic OLG model of wealth accumulation, and show that, whereas the sign of the optimal tax depends on the form of the joy of giving motive, it remains true that the 100 % tax view does not hold under the ex post egalitarian social criterion. Finally, we provide a second-best egalitarian argument for taxing bequests at a rate that is increasing with the age of the deceased.

Suggested Citation

  • Marc Fleurbaey & Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthiere & Stéphane Zuber, 2017. "Premature Deaths, Accidental Bequests and Fairness," CESifo Working Paper Series 6802, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6802
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    References listed on IDEAS

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    1. Thomas Piketty & Emmanuel Saez, 2013. "A Theory of Optimal Inheritance Taxation," Econometrica, Econometric Society, vol. 81(5), pages 1851-1886, September.
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    3. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2012. "Accidental Bequests: A Curse for the Rich and a Boon for the Poor," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1437-1459, December.
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    5. Marc Fleurbaey & Marie‐Louise Leroux & Pierre Pestieau & Gregory Ponthiere, 2016. "Fair Retirement Under Risky Lifetime," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 177-210, February.
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    More about this item

    Keywords

    mortality; accidental bequests; optimal taxation; egalitarianism; OLG models;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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