Optimal Taxation of Bequests in a Model with Initial Wealth* |
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Authors: | Johann K. Brunner Susanne Pech |
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Affiliation: | 1. University of Linz, A‐4040 Linz, Austria johann.brunner@jku.at;2. University of Linz, A‐4040 Linz, Austria susanne.pech@jku.at |
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Abstract: | We formulate an optimal‐taxation model where parents leave bequests to their descendants for altruistic reasons. In contrast to the standard model, individuals differ not only in earning abilities, but also in initial (inherited) wealth. In this model, a redistributive motive for an inheritance tax – which is equivalent to a uniform tax on all expenditures – arises, given that initial wealth increases with earning abilities. The introduction of the inheritance tax either increases intertemporal social welfare or has an ambiguous effect, depending on whether the external effect related to altruism is accounted for in the social objective. |
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Keywords: | Expenditure tax inheritance tax intergenerational wealth transfers H21 H24 |
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