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Title:The bequest tax as long-term care insurance PDF Logo
Authors:Brunner, Johann K.
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Finance 3901
Abstract:I study a model of a representative individual who has a motive for leaving bequests and is at risk of needing long-term care in old age. I assume - as is typical for OECD countries - that the individual is not fully insured against this risk. Moreover, at realization the individual is unable to adapt labor supply or consumption; then expenditures for long-term care result in a one-to-one reduction of the estate. In this situation a tax on bequests provides insurance and its introduction causes a smaller deadweight loss than an income or consumption tax. I also characterize the optimal tax and transfer system in this model.
Subjects:estate tax
long-term care insurance
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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