An age-differentiated tax on bequests

Although fiscal systems around the world tax bequests at rates that do not explicitly depend on the age of the deceased, there exist several theoretical reasons to use that observable characteristic to differentiate the tax rate on bequests. This paper presents four arguments supporting an age-differentiated tax on bequests, that is, a tax rate on bequests that is varying with the age of the deceased. A first argument, which relies on the standard utilitarian criterion, supports a tax rate decreasing with the age of the deceased on the grounds that, as age increases, the accidental (inelastic) component of bequests declines, making taxation less desirable on efficiency grounds. However, three other arguments - avoiding influence of the tax on testamentary dispositions, compensating the unlucky short-lived and redistributing towards orphans in need - all support a tax rate on bequests increasing with the age of the deceased.