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Estate Taxation, Entrepreneurship, and Wealth

  • Marco Cagetti
  • Mariacristina De Nardi

We study the effects of abolishing estate taxation in a quantitative and realistic framework that includes the key features that policy makers are worried about: business investment, borrowing constraints, estate transmission, and wealth inequality. We use our model to estimate effective estate taxation. We consider various tax instruments to reestablish fiscal balance when abolishing estate taxation. We find that abolishing estate taxation would not generate large increases in inequality, and would, in some cases, generate increases in aggregate output and capital accumulation. If, however, the resulting revenue shortfall were financed through increased income or consumption taxation, the immensely rich, and the old among those in particular, would experience a welfare gain, at the cost of welfare losses for the vast majority of the population.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13160.

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Date of creation: Jun 2007
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Publication status: published as Marco Cagetti & Mariacristina De Nardi, 2009. "Estate Taxation, Entrepreneurship, and Wealth," American Economic Review, American Economic Association, vol. 99(1), pages 85-111, March.
Handle: RePEc:nbr:nberwo:13160
Note: PE
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