The Crucial Role of Social Welfare Criteria for Optimal Inheritance Taxation

23 Pages Posted: 21 Feb 2017

Date Written: February 21, 2017

Abstract

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

Suggested Citation

García-Miralles, Esteban, The Crucial Role of Social Welfare Criteria for Optimal Inheritance Taxation (February 21, 2017). Banco de Espana Working Paper No. 1706, Available at SSRN: https://ssrn.com/abstract=2921111 or http://dx.doi.org/10.2139/ssrn.2921111

Esteban García-Miralles (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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