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Policy Paper

Optimal Inheritance Taxation: Should the Rich pay more?

Author:

Francesco Alosa

GB
About Francesco

MSc Economics
Class of 2019
London School of Economics and Political Science

 

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Abstract

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).
Published on 20 Mar 2020.
Peer Reviewed

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