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The optimal inheritance tax in the presence of investment in education

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  • Michel Strawczynski

Abstract

This paper provides an example aimed at calculating the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: (1) The optimal inheritance tax schedule includes a threshold, estimated between 2.5 and 5.5 times per-capita GDP. This result holds for a Rawlsian social planner that maximizes the welfare of the poorest individual, who does not leave bequests. (2) Contrary to the result of a 100 % tax on pure accidental bequests, the optimal simulated tax rates are between 28 %, for the case of educational bequests, and 57 %, for the case where educational and accidental bequests interact. This range is in line with existing schedules in developed economies. Copyright Springer Science+Business Media New York 2014

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  • Michel Strawczynski, 2014. "The optimal inheritance tax in the presence of investment in education," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 768-795, August.
    • Handle: RePEc:kap:itaxpf:v:21:y:2014:i:4:p:768-795
    DOI: 10.1007/s10797-014-9324-1
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    Cited by:

    1. Erlend E. Bø & Elin Halvorsen & Thor O. Thoresen, 2019. "Heterogeneity of the Carnegie Effect," Journal of Human Resources, University of Wisconsin Press, vol. 54(3), pages 726-759.
    2. Yotam Peterfreund & Michel Strawczynski, 2024. "An Economic Justification for Rignano's Inheritance Tax Proposal," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 52(4), pages 201-212, December.

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    More about this item

    Keywords

    Investment in education; Inheritance tax; Threshold; H21; H23;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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