Forschungsprojekt ::

Essays on Wealth Transfer Taxation

Projektbeschreibung

My thesis will consist of three to four research articles on wealth transfers and their taxation. I am especially interested in optimal estate taxation and behavioral responses to this type of taxation. Not only researchers of different disciplines have given much attention to the controversial topic of wealth transfer taxation in recent years. It has also been a substantial part of the political and social discourse. Inheritance and estate tax reforms in the last decade illustrate the political dynamics in this field. Fundamental changes in wealth transfer taxation have taken place in the US as well as in several member states of the EU. I am looking forward to contributing to this exciting field by conducting theoretical, empirical, and experimental research. In the first year of my PhD, I started two theoretical projects.
My first project is “Optimal Estate Taxation: More (about) Heterogeneity across Dynasties”. I study optimal estate taxation under intergenerational correlation in bequeathing behavior in a model with heterogeneously altruistic parents. Within economics, there is absolute agreement that optimal tax policy crucially depends on the individuals’ bequest motives. However, little has been said about the effects of correlated bequeathing behavior across generations within a dynasty. Preferences may be correlated due to genetic and cultural transmission. Additionally, bequests received by an individual may influence own bequests left via the channel of indirect reciprocity. Two-generation models often consider only the bequeathing behavior of one generation. In contrast, Piketty and Saez (2013) model a dynamic economy with a discrete set of (more than two) generations. However, random draws of an arbitrary ergodic distribution determine the preferences for bequeathing within and across generations which does not allow for systematic intergenerational patterns. With the help of my extended model, I derive two insights for optimal estate taxation. First, such a correlation increases the optimal linear estate tax. Second, the estate tax to be paid by an individual should be based on the size of bequests received by the individual. These results hold for the tax rate in the case of linear estate taxation as well as for marginal tax rates in the case of nonlinear estate taxation.
Lately, I started my second project (joint with Dominika Langenmayr) which is about optimal estate taxation of business assets. Our project is motivated by the privileged estate taxation of businesses in Germany and many other countries (e.g. France, Spain, Sweden, Ireland). We wish to find answers to the question whether (and under which conditions) the government should tax business assets at a lower rate than private assets in the case of inheritance. Additionally, we are interested in whether potential privileges in taxation should be strictly limited to continued firms.