A Differential Incidence Analysis of a Tax Reform From an Income Tax to a Consumption Tax in the Presence of Bequests

Raymond G. Batina
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Raymond G. Batina: Washington State University

Public Finance Review, 1999, vol. 27, issue 3, 353-370

Abstract: This article studies the properties of a switch from an income tax to a consumption tax in the presence of bequests. The author shows that the consumption tax will distort the bequest decision if bequests are taxed at the consumption tax rate but not when bequests are exempt. It is possible that including bequests in the tax base under the consumption tax may reduce the incentive to save. The main benefit from reforming the tax system may arise from the switch away from the income tax and not in the move toward the consumption tax if bequests are taxed.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:27:y:1999:i:3:p:353-370

DOI: 10.1177/109114219902700305

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