Incentive Effects of Inheritances and Optimal Estate Taxation

Wojciech Kopczuk

47 citations0/0 files storedAmerican Economic Review

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Economic and Fiscal Studies Corporate Taxation and Avoidance Fiscal Policy and Economic Growth

Abstract

I consider optimal nonlinear taxation of income and bequests with a joy-of-giving bequest motive and explicitly characterize the optimal estate tax rate. The optimal formula 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 rests on the strength of the effect of bequests on behavior of future generations. The analysis also suggests that inheritance, rather than estate tax, is better suited to implement the optimal policy.

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2002The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes 2013A Theory of Optimal Inheritance Taxation 2005On the undesirability of commodity taxation even when income taxation is not optimal 2010Progressive Estate Taxation*2005Indirect taxation is superfluous under separability and taste homogeneity: a simple proof 2012Taxation of Intergenerational Transfers and Wealth

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