The optimal inheritance tax in the presence of investment in education

Michel Strawczynski

doi:10.1007/s10797-014-9324-1

The optimal inheritance tax in the presence of investment in education

Michel Strawczynski^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

This paper provides an example aimed at calculating the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: (1) The optimal inheritance tax schedule includes a threshold, estimated between 2.5 and 5.5 times per-capita GDP. This result holds for a Rawlsian social planner that maximizes the welfare of the poorest individual, who does not leave bequests. (2) Contrary to the result of a 100 % tax on pure accidental bequests, the optimal simulated tax rates are between 28 %, for the case of educational bequests, and 57 %, for the case where educational and accidental bequests interact. This range is in line with existing schedules in developed economies.

Original language	English
Pages (from-to)	768-795
Number of pages	28
Journal	International Tax and Public Finance
Volume	21
Issue number	4
DOIs	https://doi.org/10.1007/s10797-014-9324-1
State	Published - Aug 2014

Bibliographical note

Discussion paper series (Feher Institute)
Publisher name: The Federmann School of Public Policy & Government, 2012.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities
SDG 17 Partnerships for the Goals

Keywords

Inheritance tax
Investment in education
Threshold

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10.1007/s10797-014-9324-1

Cite this

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title = "The optimal inheritance tax in the presence of investment in education",

abstract = "This paper provides an example aimed at calculating the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: (1) The optimal inheritance tax schedule includes a threshold, estimated between 2.5 and 5.5 times per-capita GDP. This result holds for a Rawlsian social planner that maximizes the welfare of the poorest individual, who does not leave bequests. (2) Contrary to the result of a 100 \% tax on pure accidental bequests, the optimal simulated tax rates are between 28 \%, for the case of educational bequests, and 57 \%, for the case where educational and accidental bequests interact. This range is in line with existing schedules in developed economies.",

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AB - This paper provides an example aimed at calculating the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: (1) The optimal inheritance tax schedule includes a threshold, estimated between 2.5 and 5.5 times per-capita GDP. This result holds for a Rawlsian social planner that maximizes the welfare of the poorest individual, who does not leave bequests. (2) Contrary to the result of a 100 % tax on pure accidental bequests, the optimal simulated tax rates are between 28 %, for the case of educational bequests, and 57 %, for the case where educational and accidental bequests interact. This range is in line with existing schedules in developed economies.

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The optimal inheritance tax in the presence of investment in education

Abstract

Bibliographical note

UN SDGs

Keywords

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