The Optimal Inheritance Tax in the Presence of Investment in Education

This paper calculates the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: 1) The optimal inheritance tax schedule includes a threshold, estimated between 2.5 and 5.5 times per-capita gdp. This result holds for a Rawlsian Social planner that maximizes the welfare of the poorest individual, who does not leave bequests. 2) Contrary to the result of a 100 percent tax on accidental bequests, the optimal simulated tax rates are between 28 to 42 percent. These results are in line with existing schedules in developed economies