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Optimum Taxation of Inheritance

Johann Brunner () and Susanne Pech ()

No 2008-02, NRN working papers from The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria

Abstract: Inheritances create a second distinguishing characteristic of individuals, in addition to earning abilities. We incorporate this fact into an optimum income taxation model with bequests motivated by joy of giving, and show that a tax on inherited wealth is equivalent to a uniform tax on consumption plus bequests. These taxes are desirable according to an intertemporal social objective if, on average, high-able individuals inherit more wealth than low-able. We demonstrate that such a situation results as the outcome of a process with stochastic transition of abilities over generations, if all descendants are more probable to have their parent’s ability rank than any other.

JEL-codes: H21 H24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Date: 2008-09
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Related works:
Working Paper: Optimum Taxation of Inheritances (2008) Downloads
Working Paper: Optimum taxation of inheritances (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:jku:nrnwps:2008_02

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