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Pareto-improving bequest taxation

Grossmann, Volker ; Poutvaara, Panu

In: International Tax and Public Finance, 2009, vol. 16, no. 5, p. 647-669

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    Titre
    • Pareto-improving bequest taxation
    Auteur
    • Grossmann, Volker. Department of Economics, University of Fribourg, Bd. de Pérolles 90, 1700, Fribourg, Switzerland
    • Poutvaara, Panu. CESifo, Munich, Germany
    Type de document
    • Postprint
    Langue
    • Anglais
    Publié dans
    • International Tax and Public Finance, 2009, vol. 16, no. 5, p. 647-669. Springer US; http://www.springer-ny.com
    Autre version électronique
    Identifiant OAI-PMH
    • oai:doc.rero.ch:319971
    Summary
    Altruistic parents may transfer resources to their offspring by providing education, and by leaving bequests. We show that in the presence of wage taxation, asmall bequest tax may improve efficiency in an overlapping-generations framework with only intended bequests, by enhancing incentives of parents to invest in their children's education. We also calculate an optimal mix of wage and bequest taxes with alternative parameter combinations. In all cases, the optimal wage tax rate is clearly higher than the optimal bequest tax rate, but the latter is generally positive when the required government revenue in the economy is sufficiently high. If educational investment is partly unobservable for the government, these results qualitatively hold also when allowing for education subsidies