Optimum Taxation of Bequests in a Model with Initial Wealth

40 Pages Posted: 12 Mar 2010

See all articles by Johann K. Brunner

Johann K. Brunner

University of Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Susanne Pech

Johannes Kepler University Linz - Department of Economics

Date Written: March 2010

Abstract

We formulate an optimum-taxation model, where parents leave bequests to their descendants for altruistic reasons. In contrast to the standard model, individuals differ not only in earning abilities, but also in initial (inherited) wealth. In this model a redistributive motive for an inheritance tax - which is equivalent to a uniform tax on all expenditures - arises, given that initial wealth increases with earning abilities. Its introduction increases intertemporal social welfare or has an ambiguous effect, depending on whether the bequeathing generation can adjust their behaviour and whether the external effect related to altruism is accounted for in the social objective.

Keywords: optimum taxation, taxation of bequests

JEL Classification: H21, H24

Suggested Citation

Brunner, Johann K. and Pech, Susanne, Optimum Taxation of Bequests in a Model with Initial Wealth (March 2010). CESifo Working Paper Series No. 2977, Available at SSRN: https://ssrn.com/abstract=1568754 or http://dx.doi.org/10.2139/ssrn.1568754

Johann K. Brunner (Contact Author)

University of Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz
Austria
(43 732) 2468 8248 (Phone)
(43 732) 2468 9821 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Susanne Pech

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria

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