Raymond G. Batina and Toshihiro Ihori
- Published in print:
- 2000
- Published Online:
- October 2011
- ISBN:
- 9780198297901
- eISBN:
- 9780191685361
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198297901.003.0011
- Subject:
- Economics and Finance, Financial Economics
This chapter talks about the simple life cycle model. There are several models which are concerning with bequeathing and the results of policy analysis depend on the motive for bequeathing. In a ...
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This chapter talks about the simple life cycle model. There are several models which are concerning with bequeathing and the results of policy analysis depend on the motive for bequeathing. In a situation where the giving parent cares about the size of the bequest, the bequest acts like parental consumption and should be taxed under a consumption tax policy. On the contrary, if the giving parent cares about the full income of the offspring, then the bequest is more like an asset and should not be taxed under a consumption tax. This could maintain neutrality. However, if the population is made up of different people with different motives for bequeathing, it will be impossible to impose a consumption tax. Therefore, a proportional consumption tax will not be completely neutral with respect to decision-making in the existence of bequest.Less
This chapter talks about the simple life cycle model. There are several models which are concerning with bequeathing and the results of policy analysis depend on the motive for bequeathing. In a situation where the giving parent cares about the size of the bequest, the bequest acts like parental consumption and should be taxed under a consumption tax policy. On the contrary, if the giving parent cares about the full income of the offspring, then the bequest is more like an asset and should not be taxed under a consumption tax. This could maintain neutrality. However, if the population is made up of different people with different motives for bequeathing, it will be impossible to impose a consumption tax. Therefore, a proportional consumption tax will not be completely neutral with respect to decision-making in the existence of bequest.
