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Accidental Bequests: A Curse for the Rich and a Boon for the Poor

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  • Helmuth Cremer
  • Firouz Gahvari
  • Pierre Pestieau

Abstract

When accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity, the tax administration should partition the population into two groups: One consisting of people who do not receive an inheritance and the other of those who do. The first tagged group gets a second-best tax à la Mirrlees; the second group a first-best tax schedule. The solution implies that receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals will necessarily face a bequest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100%. With a Rawlsian social welfare function, the low-ability types too face a more than 100% tax on bequests.
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  • Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2012. "Accidental Bequests: A Curse for the Rich and a Boon for the Poor," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1437-1459, December.
    • Handle: RePEc:bla:scandj:v:114:y:2012:i:4:p:1437-1459
    DOI: j.1467-9442.2012.01728.x
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    Cited by:

    1. Marie‐Louise Leroux & Pierre Pestieau, 2022. "Age‐related taxation of bequests in the presence of a dependency risk," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 92-119, February.
    2. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics 236, Economic Studies, University of Dundee.
    3. Leroux, Marie-Louise & Pestieau, Pierre, 2021. "Age and health related inheritance taxation," LIDAM Discussion Papers CORE 2021002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    5. Georges Casamatta, 2023. "On the desirability of taxing bequests," Journal of Economics, Springer, vol. 138(3), pages 195-219, April.
    6. Marc Fleurbaey & Marie‐Louise Leroux & Pierre Pestieau & Gregory Ponthiere & Stephane Zuber, 2022. "Premature deaths, accidental bequests, and fairness," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(3), pages 709-743, July.
    7. Marie‐Louise Leroux & Pierre Pestieau, 2023. "Age‐ and health‐related non‐linear inheritance taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(3), pages 897-912, August.
    8. Ponthiere, Gregory, 2023. "Social Insurance against a Short Life: Ante-Mortem versus Post-Mortem Policies," GLO Discussion Paper Series 1342, Global Labor Organization (GLO).

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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