Recently, attention has focused on the estate tax. To date, however, the debate over estate taxes has been nearly devoid of standard considerations of deadweight loss. We develop a framework for computing the deadweight loss of a revenue-neutral switch from an estate tax to a capital income tax, focusing on the potential lifetime behavioral responses in anticipation of paying the estate tax, while requiring relatively few parameters to estimate. We conclude that eliminating the estate tax and replacing the revenue with that from a capital income tax will likely enhance economic efficiency. Specifically, using our baseline parameter estimates we estimate that the mean decrease in deadweight loss is $0.018 per dollar of wealth. There is, however, considerable heterogeneity in the estimated impact. Importantly, our estimates are based on data that do not contain the 'super-rich' who are most highly affected by the estate tax.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8261.
Length: Date of creation: Apr 2001 Date of revision: Handle: RePEc:nbr:nberwo:8261
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Find related papers by JEL classification: H2 - Public Economics - - Taxation, Subsidies, and Revenue
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Michael D. Hurd & James P. Smith, 2001.
"Anticipated and Actual Bequests,"
NBER Chapters,
in: Themes in the Economics of Aging, pages 357-392
National Bureau of Economic Research, Inc.
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