Optimal Taxation of Bequests and Inter-Vivos Transfers

Bogazici University, Economics Seminars

Hakki Yazici (Sabanci University)

Optimal Taxation of Bequests and Inter – Vivos Transfers

Date: Friday, November 9, 2012
Hour: 15:00

Place: Natuk Birkan Building, Murat Sertel Lounge

Abstract: We study optimal bequest and intervivos taxation in a model with altruistic parents where parents know their children are going to have self-control problems regarding their life-cycle saving decisions. We show that, even if the parent agrees with the planner about the optimal saving behavior of their offsprings, they still transfer too much relative to social optimum, and hence parental wealth transfers should be taxed. Importantly, this tax result is independent of whether government has access to savings taxes that enables it to discipline the life-cycle saving behavior of the children. In the extensions section, we show that the optimality of positive taxes on transfers remain valid even when (1) parents are naive in the sense that they do not realize the offsprings’ self-control problems and (2) when children (young-adults) face borrowing constraints.

Boğaziçi Üniversitesi
Ekonomi Bölümü
Natuk Birkan Binası K.2
Tel: 0212 359 6505
Faks: 0212 287 2453

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