Author： Kopczuk Wojciech
Publisher： American Economic Association
ISSN： 0002-8282
Source： The American Economic Review, Vol.103, Iss.3, 2013-05, pp. : 472-477
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Abstract
I consider optimal nonlinear taxation of income and bequests with a joy-of-giving bequest motive and explicitly characterize the optimal estate tax rate. The optimal formula trades off correction of externality from giving and discouraging effort of children due to income effect generated by bequests. The analysis shows that optimality of a positive tax on bequests rests on the strength of the effect of bequests on behavior of future generations. The analysis also suggests that inheritance, rather than estate tax, is better suited to implement the optimal policy.
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