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Title:Pareto-improving bequest taxation PDF Logo
Authors:Grossmann, Volker
Poutvaara, Panu
Issue Date:2005
Series/Report no.:CESifo working papers 1515
Abstract:Altruistic parents may transfer resources to their offspring by providing education, and by leaving bequests. We show that in the presence of wage taxation, a small bequest tax may improve efficiency in an overlapping-generations framework with only intended bequests, by enhancing incentives of parents to invest in their children?s education. This result holds even if the wage tax rate is held constant when introducing bequest taxation. We also calculate an optimal mix of wage and bequest taxes with alternative parameter combinations. In all cases, the optimal wage tax rate is clearly higher than the optimal bequest tax rate, but the latter is generally positive when the required government revenue in the economy is sufficiently high.
Subjects:bequest taxation
bequests
education
Pareto improvement
JEL:H31
I21
H21
D64
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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