The Bequest Tax as Long-Term Care Insurance

Johann Brunner (johann.brunner@jku.at)

No 3901, CESifo Working Paper Series from CESifo

Abstract: I study a model of a representative individual who has a motive for leaving bequests and is at risk of needing long-term care in old age. I assume - as is typical for OECD countries - that the individual is not fully insured against this risk. Moreover, at realization the individual is unable to adapt labor supply or consumption; then expenditures for long-term care result in a one-to-one reduction of the estate. In this situation a tax on bequests provides insurance and its introduction causes a smaller deadweight loss than an income or consumption tax. I also characterize the optimal tax and transfer system in this model.

Keywords: estate tax; long-term care insurance (search for similar items in EconPapers)
JEL-codes: H21 H24 I13 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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