Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174925 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6802
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subject to a confiscatory tax. We propose to reexamine the optimal taxation of accidental bequests in an economy where individuals care about what they leave to their offspring in case of premature death. We show that, whereas the conventional 100 % tax view holds under the standard utilitarian social welfare criterion, it does not hold under the ex post egalitarian criterion, which assigns a strong weight to the welfare of unlucky short-lived individuals. From an egalitarian perspective, it is optimal not to tax, but to subsidize accidental bequests. We examine the robustness of those results in a dynamic OLG model of wealth accumulation, and show that, whereas the sign of the optimal tax on accidental bequests depends on the form of the joy of giving motive, it remains true that the 100 % tax view does not hold under the ex post egalitarian criterion.
Subjects: 
mortality
accidental bequests
optimal taxation
egalitarianism
OLG models
JEL: 
D63
D64
D91
H31
J10
Document Type: 
Working Paper
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