Premature deaths, accidental bequests and fairness
(2022) The Scandinavian journal of economics — Vol. 124, n° 3, p. 709-743 (2022)
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- Abstract
- While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subjected to a confiscatory tax. We reexamine the optimal taxation of accidental bequests by introducing a concern for compensating individuals for a premature death. Assuming that individuals care about what they leave to their offspring, we show that, whereas the 100 % tax view holds under the utilitarian criterion, the ex post egalitarian criterion (giving priority to the worst-off ex post) implies subsidizing accidental bequests so as to compensate the short-lived. In a second-best setting, compensating the short-lived justifies taxing total bequests at a rate increasing with the age of the deceased. Finally, when the model is extended to an intergenerational setting, accidental bequests cannot be used as a redistributive tool anymore, so that ex post egalitarianism rejoins the 100 % tax view.
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Citations
Fleurbaey, M., Leroux, M.-L., Pestieau, P., Ponthiere, G., & Zuber, S. (2022). Premature deaths, accidental bequests and fairness. The Scandinavian journal of economics, 124(3), 709-743. https://doi.org/10.1111/sjoe.12478 (Original work published 2022)