Optimum taxation of inheritances

We incorporate the fact that inheritances create a second distinguishing characteristic of individuals, in addition to earning abilities, into an optimum income taxation model with bequests motivated by joy of giving. We show that a tax on inheritances and a uniform tax on all expenditures including bequests are equivalent and that either is desirable, according to an intertemporal social objective, if on average high-able individuals have larger inherited endowments than low-able. We demonstrate that such a situation results as the outcome of a process with stochastic transition of abilities over generations, if all descendants are more probable to have their parent's ability rank than any other.

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Year of publication:	2008
Authors:	Brunner, Johann K. ; Pech, Susanne
Publisher:	Munich : Center for Economic Studies and Ifo Institute (CESifo)
Subject:	Erbschaftsteuer \| Optimale Besteuerung \| Theorie

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Series:	CESifo working paper ; 2319
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	568608380 [GVK] hdl:10419/26364 [Handle]
Classification:	H21 - Efficiency; Optimal Taxation ; H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
Source:	EconStor