Premature deaths, accidental bequests and fairness

Marc Fleurbaey (1) , Marie-Louise Leroux (2) , Pierre Pestieau (3, 4, 5) , Grégory Ponthière (4, 5, 6) , Stéphane Zuber (4, 7, 8)

1 Princeton University
2 UQAM - Université du Québec à Montréal = University of Québec in Montréal
3 CORE - Center of Operation Research and Econometrics [Louvain]
4 PSE - Paris School of Economics
5 PJSE - Paris Jourdan Sciences Economiques
6 ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique
7 CNRS - Centre National de la Recherche Scientifique
8 CES - Centre d'économie de la Sorbonne

While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subject to a confi…scatory tax. We propose to reexamine the optimal taxation of accidental bequests in an economy where individuals care about what they leave to their offspring in case of premature death. We show that, whereas the conventional 100 % tax view holds under the standard utilitarian social welfare criterion, it does not hold under the ex post egalitarian criterion, which assigns a strong weight to the welfare of unlucky short-lived individuals. From an egalitarian perspective, it is optimal not to tax, but to subsidize accidental bequests. We examine the robustness of those results in a dynamic OLG model of wealth accumulation, and show that, whereas the sign of the optimal tax on accidental bequests depends on the form of the joy of giving motive, it remains true that the 100 % tax view does not hold under the ex post egalitarian criterion.

Mots clés: mortality; accidental bequests; optimal taxation; egalitarianism; OLG models

Domaines: Economies et finances

Marc Fleurbaey, Marie-Louise Leroux, Pierre Pestieau, Grégory Ponthière, Stéphane Zuber. Premature deaths, accidental bequests and fairness. 2017. ⟨halshs-01649527⟩