Economic justification for Rignano's Inheritance Tax Proposal

Rignano (1919) proposed to tax heavier the inheritances that were transferred between more than one generation. The lack of an economic model showing the rational of Rignano's tax scheme, drove policy makers to ignore his proposal and to avoid its implementation. In this paper we build a model that fits the philosophical basis of his views, by using the accidental bequests model. This model implies that inheritances can be passed on through generations when demise of parents occurs early, creating an inefficient transfer of wealth which mimics the world described by Rignano. After broadening this model to allow investment in education, we find that Rignano's tax scheme improves efficiency in resources allocation; moreover, we find that it performs better than traditional tax schemes – a proportional tax on estates and a tax beyond a minimal threshold - for increasing social utility. By providing an economic justification for Rignano's scheme, we hope to induce researchers and policy makers to deepen research and discuss implementation of some aspects of his approach