Accidental bequests: a curse for the rich and a boon for the poor

Helmuth Cremer, Firouz Gahvari and Pierre Pestieau

No 591, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: When accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity, the tax administration should partition the population into two groups: One consisting of people who do not receive an inheritance and the other of those who do. The first tagged group gets a second-best tax à la Mirrlees; the second group a first-best tax schedule. The solution implies that receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals will necessarily face a bequest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100%. With a Rawlsian social welfare function, the low-ability types too face a more than 100% tax on bequests.

Keywords: Accidental bequests; estate tax; tagging; first best; second best (search for similar items in EconPapers)
JEL-codes: H21 (search for similar items in EconPapers)
Date: 2009-11
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Related works:
Journal Article: Accidental Bequests: A Curse for the Rich and a Boon for the Poor (2012)
Working Paper: Accidental bequests: a curse for the rich and a boon for the poor (2012)
Working Paper: Accidental Bequests: A Curse for the Rich and a Boon for the Poor (2010)
Working Paper: Accidental bequests: a curse for the rich and a boon for the poor (2009)
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