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On the desirability of taxing bequests

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  • Georges Casamatta

    (LISA - Lieux, Identités, eSpaces, Activités - UPP - Université Pascal Paoli - CNRS - Centre National de la Recherche Scientifique, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider an infinite-horizon economy populated by two types of individuals, some individuals being more productive than others. Individuals live one period and are altruistic toward their children. Assuming that the allocation received by a given individual depends only on his type and the one of his parent, we first determine the second-best steady state allocation and then study the optimal bequest and labor income tax functions, that are assumed to be independent. We first demonstrate that the second-best is not implementable with such tax schedules. We then show, through numerical simulations, that the taxation of bequests could go either way. In some cases, it is optimal to redistribute from high to low bequests, while in other cases, large bequests should be subsidized and low bequests should be taxed. These simulations also suggest that the case for taxing large bequests is stronger when individuals are sufficiently altruistic.

Suggested Citation

  • Georges Casamatta, 2023. "On the desirability of taxing bequests," Post-Print hal-03879870, HAL.
    • Handle: RePEc:hal:journl:hal-03879870
    DOI: 10.1007/s00712-022-00809-4
    Note: View the original document on HAL open archive server: https://hal.science/hal-03879870
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    Keywords

    Bequests; Taxation; Steady state;
    All these keywords.

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