Optimal taxation of wealth transfers when bequests are motivated by joy of giving

Johann Brunner () and Susanne Pech ()

No 2011-12, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: Inherited wealth creates a second distinguishing characteristic of individuals, in addition to earning abilities. We incorporate this fact into a model of optimal labor income taxation, with bequests motivated by joy of giving. We find that taxes on bequests or on inheritances allow further redistribution, if in the parent generation initial wealth and earning abilities are positively related. On the other hand, these taxes distort the bequest decision; thus, the overall effect on social welfare is ambiguous. A tax on all expenditures of a generation (a uniform tax on consumption plus bequests) has the same redistributive effect as an inheritance tax but does not distort the bequest decision.

Keywords: optimal taxation; inheritance tax; expenditure tax; intergenerational wealth transfer (search for similar items in EconPapers)
JEL-codes: H21 H24 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-09
New Economics Papers: this item is included in nep-acc and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Optimal Taxation of Wealth Transfers When Bequests are Motivated by Joy of Giving (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2011_12

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