Working Paper: NBER ID: w18792
Authors: Emmanuel Farhi; Ivn Werning
Abstract: We develop a theory of optimal estate taxation in a model where bequest inequality is driven by differences in parental altruism. We show that a wide range of results are possible, from positive taxes to subsidies, depending on redistributive objectives implicit in the cardinal specification of utility and social welfare functions. We propose a normalization that is helpful in classifying these different possibilities. We isolate cases where the optimal policy bans negative bequests and taxes positive bequests, features present in most advanced countries.
Keywords: No keywords provided
JEL Codes: H0; H2; H21; H23; H24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental Altruism (D64) | Optimal Estate Tax (H21) |
| Redistributive Objectives (D63) | Optimal Estate Tax (H21) |
| No Weight on Children's Welfare (I39) | Optimal Estate Tax = 0 (H21) |
| Positive Weight on Children's Welfare (I38) | Subsidies on Estates (H24) |
| Extreme Preferences for Equality of Opportunity (D63) | Positive Tax on Estates (H24) |