The vanishing bequest tax. The Comparative Evolution of Bequest Taxation in Historical Perspective

Graziella Bertocchi (graziella.bertocchi@unimore.it)

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: Bequest tax revenues have been constantly declining in all OECD countries for at least seventy years. We propose an explanation which is based on a dynamic politico-economic model where the evolution of bequest taxation is determined by wealth inequality. Since economic development induces a growing role of labor income and thus a reduction of wealth inequality, bequest taxation is reduced over time. Our model also explains cross-country differences in the level and speed of adjustment of the tax, by embedding structural reallocation from agriculture to manufacturing and a consequent shift of the tax base from easy-to-tax land to hard-to-tax capital. This implies a lower tax level, and a slower equalization-induced tax reduction, the higher is the tax avoidance rate and the less developed is the economy. Finally, the introduction of franchise restrictions which are gradually lifted over time allows the model to reproduce the humped-shaped long-term evolution of bequest taxation starting from the nineteenth century for those countries that are now modern industrial democracies, and also helps to explain the discrepancies currently observed between tax systems in developed and underdeveloped countries.

Keywords: Bequest Tax; Inequality; Structural Reallocation; Redistribution; Voting (search for similar items in EconPapers)
JEL-codes: H20 N40 O40 P16 (search for similar items in EconPapers)
Pages: pages 32
Date: 2007-10
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: THE VANISHING BEQUEST TAX: THE COMPARATIVE EVOLUTION OF BEQUEST TAXATION IN HISTORICAL PERSPECTIVE (2011)
Working Paper: The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective (2007)
Working Paper: The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective (2007)
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