The Crucial Role of Social Welfare Criteria for Optimal Inheritance Taxation
23 Pages Posted: 21 Feb 2017
Date Written: February 21, 2017
This paper calibrates the full social optimal inheritance tax rate derived by Piketty and Saez (2013) and shows that different assumptions on the form of the social welfare function lead to very different optimal inheritance tax rates, ranging from negative (under a utilitarian criterion) to positive and large (even assuming joy of giving motives). The paper also calibrates the optimal tax rate by percentile of the distribution of bequest received, as Piketty and Saez do, but accounting for heterogeneity in wealth and labor income. The result is that the optimal tax rate from the perspective of the non-receivers varies significantly, contrary to the constant tax rate obtained by these authors.
Keywords: optimal taxation, inheritance, social welfare criteria
JEL Classification: H21, H23, H24
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