The Inheritance Tax as Component of an Optimal Tax System in Austria?

Inheritance tax has a pronounced redistributive effect. At the same time, it burdens parents' capital formation to provide for their descendants. A detailed analysis shows, however, that a wide variety of motives are effective for the transfer of wealth. The economic consequences of taxation depend on these motives and have been investigated in a number of empirical studies, particularly in the USA. In the models of optimal tax theory, the extent to which differences between individuals are taken into account is also decisive: The more comprehensively this is done, the more sensible it seems to be to also use inheritance tax to collect tax revenue. Other important aspects include the interpretation of inheritance tax as insurance against long-term care expenditure, the treatment of business transfers and the problem of wealth concentration. Finally, some conclusions are drawn for Austrian tax policy.