Age-Related Taxation of Bequests in the Presence of a Dependency Risk

Marie-Louise Leroux and Pierre Pestieau

No 8642, CESifo Working Paper Series from CESifo

Abstract: This paper studies the properties of the optimal taxes on bequests when individuals differ in wage and in their risks of mortality and old-age dependance. Survival is positively correlated to income but dependency is negatively correlated with it. The government cannot distinguish between bequests motives, that is whether bequests resulted from precautionary reasons or from pure joy of giving reasons. Instead, it observes the timing of bequests and the health status at death. Under the utilitarian social welfare criterion, we show that bequests taxation results from a combination of equity, insurance and public revenue motives. If redistribution concerns dominate insurance concerns, it is desirable to tax the most bequests of those individuals living long in good health and to tax the least bequests of those dying early. This is a direct consequence of the socio-demographic structure we assumed where richer agents live longer and in better health than poorer agents. To the opposite, if insurance concerns dominate redistributive concerns, early bequests should be the most taxed and, bequests under dependency the least taxed. Under the Rawlsian criterion, we find that early bequests should be the least taxed and bequests left by the healthy long-lived individuals should be the most taxed.

Keywords: bequest taxation; long term care; utilitarianism; Rawlsian welfare criterion; old-age dependency (search for similar items in EconPapers)
JEL-codes: H21 H23 I14 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-age, nep-hea, nep-pbe, nep-pub and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Age‐related taxation of bequests in the presence of a dependency risk (2022)
Working Paper: Age-related taxation of bequests in the presence of a dependency risk (2021)
Working Paper: Age-Related Taxation of Bequests in the Presence of a Dependency Risk (2020)
Working Paper: Age-related taxation of bequests in the presence of a dependency risk (2020)
Working Paper: Age-related taxation of bequests in the presence of a dependency risk (2020)
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