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Accidental bequests: a curse for the rich and a boon for the poor

Author Info

Listed author(s):
  • Cremer, Helmuth
  • Gahvari, Firouz
  • Pestieau, Pierre

Abstract

When accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity, the tax administration should partition the population into two groups: One consisting of people who do not receive an inheritance and the other of those who do. The first tagged group gets a second-best tax à la Mirrlees; the second group a first-best tax schedule. The solution implies that receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals will necessarily face a bequest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100%. With a Rawlsian social welfare function, the low-ability types too face a more than 100% tax on bequests.

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File URL: http://www.tse-fr.eu/sites/default/files/medias/doc/wp/pe/wp_pe_119_2009.pdf
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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-119.

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Date of creation: Nov 2009
Handle: RePEc:tse:wpaper:21970
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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Keywords: Accidental bequests; estate tax; tagging; first best; second best;

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Find related papers by JEL classification:
  • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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  1. Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 2003. "Capital income taxation when inherited wealth is not observable," Journal of Public Economics, Elsevier, vol. 87(11), pages 2475-2490, October.
  2. MICHEL, Philippe & PESTIEAU, Pierre, 2002. "Wealth transfer taxation with both accidental and planned bequests," CORE Discussion Papers 2002059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Wojciech Kopczuk, 2003. "The Trick Is to Live: Is the Estate Tax Social Security for the Rich?," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1318-1341, December.
  4. Antoine Bommier, 2006. "Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November.
  5. Lant Pritchett & Lawrence H. Summers, 1996. "Wealthier is Healthier," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 841-868.
  6. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  7. repec:adr:anecst:y:2006:i:83-84:p:05 is not listed on IDEAS
  8. Helmuth Cremer & Firouz Gahvari & Jean-Marie Lozachmeur, 2010. "Tagging and Income Taxation: Theory and an Application," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 31-50, February.
  9. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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Cited by:

  1. Chen, Yu-Fu & Funke, Michael, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," SIRE Discussion Papers 2010-48, Scottish Institute for Research in Economics (SIRE).

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