The Failure of Ricardian Equivalence Under Progressive Wealth Taxation

Andrew B. Abel

Although the Ricardian Equivalence Theorem holds under a linear estate tax schedule, it fails to hold under a nonlinear estate tax schedule. In a representative consumer economy, a temporary lump-sum tax increase reduces contemporaneous consumption. If different consumers face different marginal estate tax rates because they leave bequests of different sizes, a lump-sum tax increase redistributes resources from consumers in low marginal estate tax brackets to consumers in high marginal estate tax brackets; aggregate consumption mey rise, fall, or remain unchanged. These

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Year of publication:	July 1986
Authors:	Abel, Andrew B.
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Vermögensteuer \| Wealth tax \| Ricardianische Äquivalenz \| Ricardian equivalence \| Theorie \| Theory \| Erbschaftsteuer \| Inheritance tax \| Konsumentenverhalten \| Consumer behaviour
Description of contents:	departures from Ricerdian Equivalence hold more generally under any nonlinear tax on saving, wealth or income accruing to wealth

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