Inheritance vs Wealth Tax: An Optimal Taxation Problem with Heterogeneous Agents

Details

Supervisors

Maniquet, François

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie, à finalité approfondie

Abstract

Should we tax wealth, inheritance, or both? This paper attempts to answer this question through a model in which agents live two periods and display heterogeneity in preferences. The first result is that the two instruments are diverse, as they affect different taxpayers and produce different behavioral responses. The second result is that society should use only the wealth tax for efficiency and fairness reasons. Indeed, wealth accumulation is less elastic to the wealth tax than bequest accumulation is to the inheritance tax. From the point of view of fairness, the wealth tax is preferable because it is paid by the whole society and not only by a part, namely those who want to leave an inheritance to their children.