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Progressive Estate Taxation

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  • Emmanuel Farhi
  • Ivan Werning

Abstract

For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration.

Suggested Citation

  • Emmanuel Farhi & Ivan Werning, 2006. "Progressive Estate Taxation," NBER Working Papers 12600, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12600
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    References listed on IDEAS

    as
    1. Emmanuel Farhi & Iván Werning, 2010. "Progressive Estate Taxation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 635-673.
    2. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059.
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    4. Narayana R. Kocherlakota, 2005. "Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation," Econometrica, Econometric Society, vol. 73(5), pages 1587-1621, September.
    5. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 205-229.
    6. Emmanuel Farhi & Ivan Werning, 2005. "Inequality, Social Discounting and Estate Taxation," NBER Working Papers 11408, National Bureau of Economic Research, Inc.
    7. Stefania Albanesi & Christopher Sleet, 2006. "Dynamic Optimal Taxation with Private Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 1-30.
    8. Mikhail Golosov & Aleh Tsyvinski & Iván Werning, 2007. "New Dynamic Public Finance: A User's Guide," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 317-388, National Bureau of Economic Research, Inc.
    9. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    10. Mikhail Golosov & Narayana Kocherlakota & Aleh Tsyvinski, 2003. "Optimal Indirect and Capital Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 569-587.
    11. Andrew Atkeson & Robert E. Lucas, 1992. "On Efficient Distribution With Private Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 427-453.
    12. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October.
    13. Jesus Seade, 1982. "On the Sign of the Optimum Marginal Income Tax," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 637-643.
    14. Stefania Albanesi & Christopher Sleet, 2004. "Dynamic Optimal Taxation with Persistent Private Information," 2004 Meeting Papers 49, Society for Economic Dynamics.
    15. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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