Behavioral Responses to Wealth Transfer Taxation: Bunching Evidence from Germany

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstractIncreasing inequality in recent decades has triggered a heated debate on whether wealth transfer taxation is an appropriate countermeasure to the perpetuation of inequality. A major factor in making progress in this discussion is understanding how taxpayers respond to incentives generated by wealth transfer taxes. Using administrative tax records from Germany, this paper investigates behavioral responses to a very large transfer tax kink in the inheritance and inter vivos gift tax schedule. We find sharp bunching of taxable inheritances and even larger bunching of taxable inter vivos gifts. However, because the kink is large, the underlying taxable inheritance and gift elasticities are moderate and amount up to 0.11. In line with the notion of accidental bequest models, further evidence suggests that the amount of wealth bequeathed is uncertain.This may explain the small size of the inheritance elasticities. Based on the results, the present paper lends strong support to the hypothesis that wealth transfers are relatively inelastic along the intensive margin in the short term.JEL codes: H21, H24, H26, H31

Behavioral Responses to Inheritance and Gift Taxation: Evidence from Germany

“…Furthermore, the bunching of gifts is consistently larger than that of inheritances and also increases in closer kinship. 9 Beyond these similarities, my paper, and also its earlier versions [Glogowsky 2015[Glogowsky , 2016, are much more comprehensive. Crucially, I extend the bunching approach to double-kinked tax schedules.…”

Better Bunching, Nicer Notching

“…The rest of this paper focuses on the second problem of the identification strategy, namely the problem of identifying the elasticity, ε, using the distribution of y instead of the distribution of y = y + e. In fact, our methods apply to the many examples of bunching that do not have friction errors, for example, Figure 4 by Glogowsky (2018) and Figure 1 by Goncalves and Mello (2018). The study of identification in the presence of optimization frictions is deferred to future research.…”

How do Taxes Affect the Trading Behavior of Private Investors? Evidence from Individual Portfolio Data

“…Following for example Chetty et al (2011) and Glogowsky (2016), we calculate the elasticity parameter based on the excess mass b using the following equation:…”