Professor James Feigenbaum from Utah State University will be visiting and giving a talk at UNSW, funded by CEPAR. James' main research areas are in macroeconomics with a variety of other interests including lifecycle models, finance and econophysics. He is also the associate editor of the Journal of Economic Dynamics and Control.
Previous work on estate taxes has largely ignored the effects of the rates that depend on the age of heirs, although the existing U.S code through its Generation-Skipping Transfer Tax levies a higher tax on estates passed directly to grandchildren when children are still alive. Using a two-period overlapping-generations model, we examine how steady-state welfare varies as a function of the estate tax rates imposed on young vs old heirs. Contrary to the existing code, we find that welfare is significantly improved, on account of a higher present value of lifetime income, if the tax rate paid by young heirs is set to zero while a very high tax is imposed on old heirs.