Arbeitspapier
Taxing bequests and consumption in the steady state
We study the optimal tax system in a dynamic model where differences in wages induce differences in inheritances, and the transition from parent ability to child ability is described by a Markov chain. We characterize expected inheritances in the steady state and show that the Atkinson-Stiglitz result on the redundancy of indirect taxes does not hold in this framework. In particular, given an optimal income tax, a bequest tax as well as a consumption tax are potential instruments for additional redistribution. For the bequest tax the sign of the overall welfare effect depends on the reaction of bequests and on inequality aversion, while for the consumption tax the sign is always positive because the distorting effect is outweighed by the induced increase in wealth accumulation. A necessary condition for a positive welfare effect is the empirically validated relation that more able individuals on average have more able parents than less able individuals.
- Language
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Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 1315
- Classification
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Wirtschaft
Taxation and Subsidies: Efficiency; Optimal Taxation
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- Subject
-
optimal taxation
bequest tax
consumption tax
- Event
-
Geistige Schöpfung
- (who)
-
Brunner, Johann K.
Pech, Susanne
- Event
-
Veröffentlichung
- (who)
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Johannes Kepler University of Linz, Department of Economics
- (where)
-
Linz
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Brunner, Johann K.
- Pech, Susanne
- Johannes Kepler University of Linz, Department of Economics
Time of origin
- 2013
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