Incentive Effects of Inheritances and Optimal Estate Taxation

Wojciech Kopczuk

No 18747, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I consider nonlinear taxation of income and bequests with a joy-of-giving bequest motive and explicitly characterize the estate tax rate structure that maximizes social planner's welfare function. The solution trades off correction of externality from giving and discouraging effort of children due to income effect generated by bequests. The analysis shows that optimality of a positive tax on bequests in this context rests on the strength of the effect of bequests on behavior of future generations, and suggests that inheritance rather than estate tax is better suited to implement the corresponding policy.

JEL-codes: E21 H2 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-acc, nep-mac and nep-pbe
Note: EFG PE
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Citations: View citations in EconPapers (34)

Published as Wojciech Kopczuk, 2013. "Incentive Effects of Inheritances and Optimal Estate Taxation," American Economic Review, American Economic Association, vol. 103(3), pages 472-77, May.

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Journal Article: Incentive Effects of Inheritances and Optimal Estate Taxation (2013)
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