cover image: Premature Deaths, Accidental Bequests and Fairness /

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Premature Deaths, Accidental Bequests and Fairness /

28 Nov 2017

While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subject to a conÖscatory tax. We propose to reexamine the optimal taxation of accidental bequests in an economy where individuals care about what they leave to their o§spring in case of premature death. We show that, whereas the conventional 100 % tax view holds under the standard utilitarian social welfare criterion, it does not hold under the ex post egalitarian criterion, which assigns a strong weight to the welfare of unlucky short-lived individuals. From an egalitarian perspective, it is optimal not to tax, but to subsidize accidental bequests. We examine the robustness of those results in a dynamic OLG model of wealth accumulation, and show that, whereas the sign of the optimal tax on accidental bequests depends on the form of the joy of giving motive, it remains true that the 100 % tax view does not hold under the ex post egalitarian criterion.
economics economy labor market labour economics mathematical optimization mathematics utilitarianism tax labor economic inequality optimal tax egalitarianism lagrange multiplier
ISSN
23687207
Pages
33
Published in
Ottawa, ON, CA

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