The Failure of Ricardian Equivalence Under Progressive Wealth Taxation

Andrew Abel

No 1983, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Although the Ricardian Equivalence Theorem holds under a linear estate tax schedule, it fails to hold under a nonlinear estate tax schedule. In a representative consumer economy, a temporary lump-sum tax increase reduces contemporaneous consumption. If different consumers face different marginal estate tax rates because they leave bequests of different sizes, a lump-sum tax increase redistributes resources from consumers in low marginal estate tax brackets to consumers in high marginal estate tax brackets; aggregate consumption mey rise, fall, or remain unchanged. These departures from Ricerdian Equivalence hold more generally under any nonlinear tax on saving, wealth or income accruing to wealth.

Date: 1986-07
Note: PE
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Citations: View citations in EconPapers (9)

Published as Abel, Andrew B. "The Failure of Ricardian Equivalence Under Progressive Wealth Taxation." Journal of Public Economics, Vol. 30, No. 1, (June 1986), pp . 117-128.

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Journal Article: The failure of Ricardian equivalence under progressive wealth taxation (1986)
Working Paper: The Failure of Ricardian Equivalence Under Progressive Wealth Taxation
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