The Trick is to Live: Is the Estate Tax Social Security for the Rich?

Wojciech Kopczuk

No 9188, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Because estate tax liability usually depends on how long one lives, it implicitly provides annuity income. In the absence of annuity markets, lump-sum estate taxation may be used to achieve the first-best solution for individuals with a sufficiently strong bequest motive. Calculations of the annuity embedded in the U.S. estate tax show that people with $10 million of assets may be effectively receiving more than $100,000 a year financed at actuarially fair rates by their tax payments. According to my calibrations, the insurance effect reduces the marginal cost of funds (MCF) for the estate tax by as much as 30% and the resulting MCF is within the range of estimates for the marginal cost of funds for the income tax.

JEL-codes: H2 (search for similar items in EconPapers)
Date: 2002-09
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Journal of Political Economy, 2003, 111(6), 1318-1341.

Downloads: (external link)
http://www.nber.org/papers/w9188.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:9188

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9188

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().