This paper uses the theoretical framework of Piketty
and Saez (2013) to compute optimal inheritance tax rates for Italy. Using realistic parameters and survey data, we find evidence for positive optimal inheritance tax rates in the top 12% of the distribution of bequests received. We further investigate the theoretical interpretation for the welfare effects summarised in the optimal tax formula and the role of government in this economy. Then, we argue that tax rates are positive at the top of the bequest distribution because the benefits of redistribution outbalance the direct and indirect costs of inheritance taxation. Given diminishing marginal utility of consumption, bequests received seem to play a key role in our findings due to their polarisation at the top of the distribution. Finally, we discuss policy implications for Italy in view of the current inheritance tax law.
How to Cite:
Alosa, F., 2020. Optimal Inheritance Taxation: Should the Rich pay more?. The Public Sphere: Journal of Public Policy, 8(1).