Efficiency aspects of increasing inheritance taxes while decreasing income taxes

Abstract

This article tries to shed some light on the economic efficiency aspects of a tax reform that would increase inheritance taxes while decreasing income taxes. An analysis of labour market decisions following the activation of such a reform is presented. An international comparison of inheritance tax collection shows that almost all industrial countries impose an inheritance tax. However, government revenue from inheritance and gift taxes in Europe is lower than 1% of GDP and is very low in the United States as well. Applying the proposed reform could increase work hours and delay retirement decisions.