Accidental bequests: a curse for the rich and a boon for the poor

Abstract

When accidental bequests signal otherwise unobservable individual characteris- tics such as productivity and longevity, the population should be partitioned into two groups: those who do not receive an inheritance those who do. The first tagged group gets a second-best tax à la Mirrlees; the second group, when its type is fully revealed, a first-best tax schedule. Receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals face a be- quest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100% and may even be negative.