The Effects of Bequest Tax on Land Prices and Land Use

Abstract

The paper examines whether bequest taxation affects land use, using an overlappinggenerations model. In Japan, in assessing land for the purpose of inheritance taxation, the assessed value is less than the market value; however, other assets are valued at market value. Such an asymmetry creates a greater incentive for the older generation to hold land, because the probability of decease is higher for older than younger persons. With constant technology available in each generation, the inheritance tax is found to lead to inef®cient land use, sluggish conversion of land over time and higher land prices. JEL Classi®cation Numbers: H24, R14.

Distortionary Taxation, Excessive Price Sensitivity, and Japanese Land Prices

“…In the case of residential land price, the coiategration relationship expressed in the augmented PV model cannot be rejected at the 5 percent significance level in both 1958and 1958-1985. In 1958, the coefficient on the fundamental value FV is 0.763 which is significantly lower than unity.…”

Preventive investment and relief spending for natural disasters: Why do rescue operations cause big spending for prevention?

“…Although a property tax on rent is generally neutral on land use, capital gains and bequest taxes are not neutral on resource allocation. See Yamazaki (1996Yamazaki ( , 1999.…”