Introduction

Abstract

A tax on bequests, like any tax on personal wealth, is fundamentally motivated by the aim to counterbalance wealth inequality in society. The question thereby arises, whether bequests to future generations contribute to society’s wealth distribution, and hence are justified being taxed, or whether the inequality in wealth can solely be attributed to the inequality in earnings. In Germany, for example, it can be observed that the wealthiest 10% of the population receive 25% of the total income. However, indicating a significant difference in saving behavior, they possess a substantially even higher percentage of almost 60% of the entire national economy’s wealth. This distribution is similar in almost all industrialized countries. Recent work has therefore focused on intergenerational wealth transfers, implying widespread agreement that these transfers account for a significant fraction of household wealth. The quantitative estimates, however, vary widely: Kotlikoff and Summers (1981) conclude that roughly 50 to 80 percent of total wealth is generated by gifts and bequests, whereas Aaron and Munnell (1992) or Gale and Scholz (1994) estimate this figure between 25 and 50 percent.