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

Abstract

When accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity, the tax administration should partition the population into two groups: One consisting of people who do not receive an inheritance and the other of those who do. The first tagged group gets a second-best tax à la Mirrlees; the second group a first-best tax schedule. The solution implies that receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals will necessarily face a bequest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100%. With a Rawlsian social welfare function, the low-ability types too face a more than 100% tax on bequests.

Keywords

JEL codes

Replaced by

Helmuth Cremer, Firouz Gahvari, and Pierre Pestieau, “Accidental bequests: a curse for the rich and a boon for the poor”, The Scandinavian Journal of Economics, vol. 114, n. 4, December 2012, pp. 1437–1459.

Reference

Helmuth Cremer, Firouz Gahvari, and Pierre Pestieau, “Accidental bequests: a curse for the rich and a boon for the poor”, TSE Working Paper, n. 09-119, November 2009.