Edited by Emilio Albi and Jorge Martinez-Vazquez
* Helmuth Cremer and Pierre Pestieau 1 INTRODUCTION Taxes are rarely popular but those on wealth and wealth transfers are particularly controversial. Opponents claim that they are unfair and immoral. Because of many loopholes, people of equivalent wealth pay different amounts of tax depending on their acumen at tax avoidance. They penalize the frugal and the loving parents who accumulate wealth for their children, reducing incentive to save and to invest. Concerning the wealth transfer taxes per se, they allegedly hit families that are surprised by death (hence they are sometimes called a tax on sudden death or even a death tax). Supporters of these taxes, in contrast, retort that they are of all taxes the most efficient and the most equitable. They assert that they are highly progressive and counterweigh existing wealth concentration. They also argue that they have less disincentive effects than other taxes. For a number of social philosophers and classical economists, estate or inheritance taxation is even the ‘ideal tax’. Clearly, wealth taxation more than any other generates controversy at all levels: political philosophy, economic theory, political debate, and public opinion. The truth probably lies between these two opposite camps. For economists these taxes like all taxes should be judged against the two criteria of equity and efficiency to which one could add that of simplicity and compliance. In this survey we study the two major types of taxes levied on wealth: those applied sporadically or periodically on a person’s wealth (net wealth taxes), and those applied...
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