Abstract:

This paper provides an example aimed at calculating the optimal inheritance tax in a model in which inheritances are used to finance investment in education. Two results are obtained: 1) The optimal inheritance tax schedule includes a threshold, estimated  between 2.5 and 5.5 times per-capita GDP. This result holds for a Rawlsian social planner that maximizes the welfare of the poorest individual, who does not leave bequests. 2) Contrary to the  result of a 100 percent tax on pure accidental bequests, the optimal simulated tax rates are  between 28 percent, for the case of educational bequests, and 57 percent, for the case where educational and accidental bequests interact.  This range is in line with existing schedules in developed economies.