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The optimal inheritance tax in the presence of investment in education

Michel Strawczynski

International Tax and Public Finance, 2014, vol. 21, issue 4, 768-795

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

Keywords: Investment in education; Inheritance tax; Threshold; H21; H23 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10797-014-9324-1

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