We present an empirical model of wealth transfer taxation in the revenue systems of the G7 countries-Canada, France, Germany, Italy, Japan, the UK, and the US-over the period from 1965 to 2009. Our model emphasizes the influences of population aging and of the stock of household wealth in an explanation of the past and likely future of this tax source. Simulations with the model using U.N. demographic projections and projections of household wealth suggest that even in France and Germany where reliance on wealth transfer taxation has been increasing for part of the period studied, wealth transfer taxes can be expected to wither away as population aging deepens over the next two decades. Our results indicate that recent tax designs that rely upon the taxation of wealth transfers to preserve equity in the face of declining taxation of capital incomes may be, in this respect, politically infeasible for the foreseeable future. We conclude by using the case of wealth transfer taxation to raise the general question of the extent to which the consistency of a proposed reform with expected political equilibria ought to play a role in the design of a normative policy blueprint.

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Keywords Bequests, Fixed effects estimation, Household wealth, Population aging, Revenue structure, Solidarity index, Wealth transfer taxation
Persistent URL dx.doi.org/10.1007/s10797-014-9325-0
Journal International Tax and Public Finance
Profeta, P. (Paola), Scabrosetti, S. (Simona), & Winer, S. (2014). Wealth transfer taxation: An empirical investigation. International Tax and Public Finance, 21(4), 720–767. doi:10.1007/s10797-014-9325-0