Estate Taxation, Entrepreneurship, and Wealth

47 Pages Posted: 27 Jun 2007 Last revised: 18 Dec 2022

See all articles by Marco Cagetti

Marco Cagetti

University of Virginia; Federal Reserve Bank of Chicago

Mariacristina De Nardi

Federal Reserve Bank of Chicago; University College London, Economics Dpt.; National Bureau of Economic Research (NBER) - Public Economics

Date Written: June 2007

Abstract

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.

Suggested Citation

Cagetti, Marco and Cagetti, Marco and De Nardi, Mariacristina and De Nardi, Mariacristina, Estate Taxation, Entrepreneurship, and Wealth (June 2007). NBER Working Paper No. w13160, Available at SSRN: https://ssrn.com/abstract=992163

Marco Cagetti (Contact Author)

University of Virginia ( email )

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Federal Reserve Bank of Chicago ( email )

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Mariacristina De Nardi

University College London, Economics Dpt. ( email )

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Federal Reserve Bank of Chicago ( email )

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National Bureau of Economic Research (NBER) - Public Economics ( email )

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HOME PAGE: http://www.nber.org/~denardim

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