[en] While there is little agreement regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subjected to a confiscatory tax. We re-examine 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 children, we show that, whereas the 100 percent 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 can no longer be used as a redistributive tool, so that ex post egalitarianism rejoins the 100 percent tax view.
Disciplines :
Economic systems & public economics
Author, co-author :
Fleurbaey, Marc; Paris School of Economics (CNRS), Paris, France
Leroux, Marie-Louise; Université du Québec à Montréal (UQAM), Montreal, Canada
Pestieau, Pierre ; Université de Liège - ULiège > Ecole de Gestion de l'Université de Liège
Ponthiere, Gregory; Université catholique de Louvain, Louvain-La-Neuve, Belgium
Zuber, Stephane; Paris School of Economics (CNRS), Paris, France
Language :
English
Title :
Premature deaths, accidental bequests, and fairness*
The authors would like to thank T. Andersson, G. Asheim, J.‐M. Baland, F. Bourguignon, K. Cuff, J. Davila, H. d'Albis, B. Decerf, J.‐F. Laslier, A. Masson, T. Piketty, J.‐P. Platteau, D. Sachs, B. Villeneuve, B. Wigniolle, three anonymous reviewers, as well as participants of seminars at Namur, PSE, CESifo, AFSE (Paris), Canadian Economics Association (Montréal), Canadian Public Economist Group conference (Toronto), SAET (Taipei), SSCW (Seoul), LAGV (Aix‐en‐Provence), IIPF (Helsinki), EEA (Cologne), UQAM, Université Laval, and University Paris‐Dauphine, for their comments and suggestions on this paper. The authors acknowledge funding from the Fonds de Recherche du Québec‐Société et Culture (FRQSC), from the Social Science and Humanities Research Council (SSHRC) of Canada, from the TSE/SCOR chair “Risk Market and Value Creation” and from the Agence Nationale de la Recherche (France), as part of the Fair‐ClimPop project (ANR‐16‐CE03‐0001‐01) and the Investissements d'Avenir program (PGSE‐ANR‐17‐EURE‐0001).
Andreoni, J. (1989), Giving with impure altruism: applications to charity and Ricardian equivalence, Journal of Political Economy 97, 1447–1458.
Becker, G., Philipson, T., and Soares, R. (2005), The quantity and quality of life and the evolution of world inequality, American Economic Review 95 (1), 277–291.
Benhabib, J. and Zhu, S. (2008), Age, luck and inheritance, NBER Working Paper No. 14128.
Blumkin, T. and Sadka, E. (2004), Estate taxation with intended and accidental bequests, Journal of Public Economics 88, 1–21.
Boadway, R. (2012), From Optimal Tax Theory to Tax Policy: Retrospective and Prospective Views, MIT Press, Cambridge, MA.
Brown, J. R. (2004), Life annuities and uncertain lifetimes, NBER Reporter: Research Summary Spring.
Christensen, K., Johnson, T., and Vaupel, J. (2006), The quest for genetic determinants of human longevity: challenges and insights, Nature Review Genetics 7, 436–448.
Cremer, H., Gavahri, F., and Pestieau, P. (2012), Accidental bequests: a curse for the rich and a boon for the poor, Scandinavian Journal of Economics 114, 1437–1459.
Davidoff, T., Brown, J., and Diamond, P. (2005), Annuities and individual welfare, American Economic Review 95 (5), 1573–1590.
Farhi, E. and Werning, I. (2013), Estate taxation with altruism heterogeneity, American Economic Review, Papers and Proceedings 103, 3.
Fleurbaey, M. (2008), Fairness, Responsibility and Welfare, Oxford University Press, Oxford.
Fleurbaey, M. (2010), Assessing risky social situations, Journal of Political Economy 118, 649–680.
Fleurbaey, M. and Maniquet, F. (2010), Compensation and responsibility, in K. J. Arrow, A. K. Sen, and K. Suzumura (eds), Handbook of Social Choice and Welfare, Volume 2, North-Holland, Amsterdam, 507–604.
Fleurbaey, M. and Maniquet, F. (2011), A Theory of Fairness and Social Welfare, Cambridge University Press, Cambridge.
Fleurbaey, M., Leroux, M. L. and Ponthiere, G. (2014), Compensating the dead, Journal of Mathematical Economics 51 (C), 28–41.
Fleurbaey M., Leroux M. L., Pestieau, P., and Ponthiere, G. (2016), Fair retirement under risky lifetime, International Economic Review 57, 177–210.
Glomm, G. and Ravikumar, B. (1992), Public versus private investment in human capital endogenous growth and income inequality, Journal of Political Economy 100, 818–834.
Hammond, P. (1987), Altruism, in The New Palgrave: A Dictionary of Economics, Macmillan, London.
Hurd, M. (1989), Mortality risk and bequests, Econometrica 57, 779–813.
Kaplow, L. (1995), A note on subsidizing gifts, Journal of Public Economics 58, 469–477.
Kaplow, L. (2008), The Theory of Taxation and Public Economics, Princeton University Press, Princeton, NJ.
Kopczuk, W. and Lupton, J. (2007), To leave or not to leave: the distribution of bequest motives. Review of Economic Studies 74, 207–235.
Leach, J. (2009), Income disparity, inequity aversion and the design of the healthcare system, Scandinavian Journal of Economics 111, 277–297.
Lockwood, L. (2012), Bequest motives and the annuity puzzle, Review of Economic Dynamics 15, 226–243.
Lockwood, L. (2018), Incidental bequests and the choice to self-insure late-life risks, American Economic Review 108 (9), 2513–2550.
Mian, A., Straub, L., and Sufi, A. (2021), Indebted demand, Quarterly Journal of Economics 136, 2243–2307.
Mill, J. S. (1848), Principles of Political Economy, John W. Parker, London.
Mirrlees, J. A. (2007), Taxation of gifts and bequests, slides for a talk at the James Meade Centenary conference, 12–13 July 2007.
Miyazawa, K. (2006), Growth and inequality: a demographic explanation, Journal of Population Economics 19, 559–578.
Piketty, T. and Saez, E. (2013), A theory of optimal inheritance taxation, Econometrica 81, 1851–1886.
Pimentel, D. et al. (1998), Ecology of increasing disease, BioScience 48, 817–826.
Vickrey, W. (1945), An integrated successions tax, republished inArnott, R., Arrow, K., Atkinson, A., and Drèze, J. (eds) (1994), Public Economics: Selected Papers by William Vickrey, Cambridge University Press, Cambridge.
Yaari, M. E. (1965), Uncertain lifetime, life insurance, and the theory of the consumer, Review of Economic Studies 32, 137–150.
