La fiscalité du patrimoine et les La fiscalité du patrimoine et

La fiscalité du patrimoine et les
transferts intergénérationnels
Luc Arrondel,
Arrondel Cnrs & PjSE & Chaire Tdte
André Masson, Cnrs, Ehess & PjSE & chaire Tdte
Séminaire CDC
Paris, 17 juin 2013
- Why is wealth transfer taxation so low and more and more unpopular?
- « Toucher à l’héritage, c’est comme toucher à la famille »
“Interfering with inheritances is tantamount to interfering with the family”
- Taxfinh policy: Taxing (much) more (large) family inheritances: putting the
case for France
Plan de l’intervention
Patrimoine: taxer sa détention du vivant ou sa transmission
1. Fiscalité du patrimoine: l’impopularité croissante des droits de
succession dans la plupart des pays
2. Discussion informelle, rôle de la famille, perplexités théoriques
3. Le cas français: une société de plus en plus patrimoniale
4. Le cas français: fiscalité successorale et réactions des épargnants
5 Réformes
5.
Réf
possibles
ibl d
de lla taxation
i d
des patrimoines
i i
&d
des transferts
f
6 Le dispositif Taxfinh appliqué à la France
6.
2
1. The full capital taxation puzzle: two puzzles
Since the 1960s in most developed countries…
 Revenue of wealth transfer taxation low and declining (% GDP)
GDP), or
even disappearing: the coming death of the “death tax”?
 Revenue of “lifetime”
lifetime (household) wealth or capital taxation much
higher – 10 to 20 more resp. – and non decreasing (% GDP)
 Lifetime capital taxation on households and enterprises (LCT):
- taxes on capital stock: annual property and wealth taxes
- taxes on capital income flows: annual corporate profits, rental income,
interest dividends and capital gains
interest,
 Lifetime wealth taxation: taxes on (non professional) household wealth,
excluding
g taxes on corporate
p
p
profits and capital,
p , and on business income
(including self-employed income)
1. Very strong collective preference for lifetime capital/wealth taxation
2. Diverging trends of the two components of capital taxation
3
1.1 Fig 1a : Estate, inheritance and gift taxes (% of total tax revenue)
A decreasing trend for a majority of countries (OECD)
4
Fig 1b : Estate, inheritance and gift taxes (% of total tax revenue)
Four exceptions with a non decreasing trend
5
Wealth transfer taxation in a long term perspective
 No more wealth transfer tax in the following countries
 E
Europe-Northern
N th
A
America:
i
C
Canada
d (1972)
(1972), Italy(2001*),
It l (2001*) P
Portugal
t
l (2003)
(2003),
Sweden (2004) Austria (2008), Switzerland (national), US (2000 => 2010)
(1977), New-Zealand
New Zealand (1992)
(1992), Malaysia
Malaysia, India
India,
 Others: Australia (1977)
Hong Kong (2005), Singapore (2008),
 Since 1980: 30 American States (State tax)
 Revenue of wealth transfer tax much higher in 1910 or in the 1930s
 Peak in 1910,, 1920s plunge
p g ((but high
g rates!),
), from 1930 to 1970 steady
y decline
 US peak later (Roosevelt years); high top marginal tax rates (US, UK)
 Our issue: declining trend since then
then, during the last 40 or 50 years
 Today, France & Belgium the only two countries with wealth transfer taxation
more than .5% of GDP
 France = somewhat inadvertent: tax exemption level not adjusted for inflation
6
Graphique A2: France: part des droits de succession
et de donation dans le budget public total
7
Graphique 2: Part des droits de succession et donation dans
les recettes fiscales totales & PIB ((US,, 1917-1997))
8
Graphique 3: Part des droits de succession et de donation
dans les recettes fiscales totales (1860-1970)
(
)
UK
NL
9
1.2 Wealth transfer taxation & lifetime capital taxation
 Revenue of lifetime wealth or capital taxation much higher than
wealth transfer taxation: puzzle 1
 Capital taxation in European union: 9% GDP (total tax revenue: 39% GDP)
30 times greater in most countries, 20 times in France, 15 times in Belgium
 Household wealth taxation: 13 times greater in total OECD
OECD, from 6 to 9 in
France, still above 5 in Germany & Belgium
 and non decreasing since the 1960s: puzzle 2
 Which does not say that the effective average rate of taxation per euro (say) of
capital has followed the same trend (see the Buish years for the US)
 This rate is a complex outcome of changes in tax rates (exemption thresholds,
ceilings, schedules) & distribution of capital (concentration among the rich when
taxes are progressive) & “avoision”
avoision (avoidance and evasion)
 Explanations of puzzles 1 & 2 must rely on specific aspects of
inheritances with respect to lifetime capital (death, family values)
 E.g. growing international tax competition is not a relevant argument
10
Figure 4: Capital taxes (% GDP)
Eurostat: 2007 superior than 1995 except in Italy
11
Fig 5 a : Wealth taxes (% GDP) - OECD tax on property**
A non decreasing trend for a majority of countries since 1975
12
Fig 5 b : Wealth taxes (% GDP)
Three exceptions with a decreasing trend
13
2.1 A more efficient or equitable wealth transfer tax?
Disregarding familial & existential aspects of inheritance
 Donor angle: spec
spec. arguments against lifetime capital taxation (LCT)
 LCT taxes “young” wealth in the process of being built => age-based taxation?
 LCT creates distortions in the life
life-cycle
cycle allocation of consumption (1+r)
 LCT taxation can come to more than 100% of annual disposable income (GD)
 Evaluation of wealth difficult
difficult, especially for an annual tax on property
 Beneficiary angle: specific reasons in favor of bequest taxation
 Wealth transfers are unearned income that does not come from talent, effort or
merit => Inheritance is a main factor of life chances inequality
 Bequests contribute to wealth concentration & reproduction of wealth inequality
 Inheritance received by unable/idle heirs (Mill) or makes heirs lazy (Carnegie)
 Wealth transfer tax may also be a way to tax “unrealized”
unrealized (latent) capital gains…
gains
provided exemption levels are not too high
14
Common objections to lifetime wealth & wealth transfers taxation
 Capital mobility & jurisdictional competition for mobile tax bases
 See Brülhart & Parchet ((2011)) on Swiss “cantons”
 Distortions & disincentives effects on saving
 Price elasticities of savings & bequests are similar and low: 0.1 to 0.2
 Childless couples leave as much bequests as others
 Administrative costs
 Inevitable costs of inheritance, anyway: legal act of transmission, change of
property ownership => easier to tax when an official transaction occurs
 “Double taxation”: income, savings & then wealth transfers are taxed
 Inheritance tax is paid by the beneficiary => parents have already paid the tax?
 More convincing for gifts, whenever the donor pays the tax
 Horizontal inequality (applies also to lifetime capital taxation)
 Inheritance tax will depend on the asset structure and parents’ tax engineering.
15
Factors in support of higher lifetime capital taxation (LCT)
 Tax illusion (irrational beliefs?)
 “People prefer to pay an annual property tax equal to 1% of their property value
(or 25% of their 4% annual return) for 30 years rather than pay 30% of their
(Piketty Saez)
property value all at once when they inherit the asset”
asset (Piketty-Saez)
 Refers to a dynastic family with full intergenerational pooling of resources
 Reverse could be said to be true: get the taxation over when you inherit
 Capital market imperfections: borrowing constraints, random rates of return
U d perfect
f t capital
it l markets,
k t LCT & INHT equivalent
i l t (first
(fi t best,
b t one period)
i d)
Under
 Can capital market imperfections explain a very strong preference for LCT?
The answer is a priori Yes (Piketty
(Piketty-Saez
Saez, see below)
 Can they explain the diverging trends of LCT & INHT? Probably No, since
these imperfections are not greater today than fifty years ago
A dynamic piece of political economy still missing to explain the tax puzzle
16
2.2 Family values & links against wealth transfer
taxation
 A “virtue
virtue tax”
tax
 “When you have worked your entire life to build up capital, you should be able to
leave it to yyour children tax free” ((N. Sarkozy)
y)
 A “death tax”
 Double loss + prevents the deceased from “living
living on”
on through the bequest
 A tax on family business & a tax on family estate
 Double taxation
 Parents have already been taxed in their lifetime
Additi
lh
i
t l iinequality
lit
 Additional
horizontal
 A “sudden death” tax & a tax on family disharmony
 Such arguments explain a strong aversion to family transfer taxation
 But arguments not new, though varying in space & time (Beckert, 2008)
17
Increasing strength since the 1960s or 1970s: Why? How to observe
it?
2.3 Optimal taxation theory & the family aspect of bequests
 A three generation family… in the steady state
 Each generation first a receiver of parental wealth (higher INHT) & then a
bequeather to its own children (lower INHT): trade-off between the two angles
 Bequest motives: family and non family motives
 Non family motives: high transfer tax (100% on accidental bequests?)
 Accidental bequests (not gifts): life-cycle needs (utility of consumption)
 Capitalist bequests (and gifts): direct, present utility of wealth or of transfer
Ch it bl gift-giving
ift i i as a special
i l case
 Charitable
 Do not depend on the presence of children
Non family motives: bottom (accidental) & top (capitalist) of the social ladder
 Family motives (also gifts): exchange or altruism
 Exchange: to be loved (strategic), to be paid in return (cash exchange) or to be
cured (insurance): no gifts in the strategic case. No usable result for taxation
18
Altruistic bequest motives
1. The stronger the form of altruism, the lower the optimal tax on
bequests: “virtue tax”
 From weaker to stronger forms: tax can become negative (Fahri & Werning)
 Simple joy of giving: parental utility of bequest
=> stronger if after-tax bequest (Cremer-Pestieau-Rochet)
y of g
giving:
g utility
y from net-of-tax capitalized
p
bequest
q
((Piketty-Saez)
y
)
 ‘Altruistic’ jjoy
 Beckerian altruism: utility from the utility of children (Fahri-Werning)
 Parents take into account the children
children’s
s own resources: “Compensatory”
Compensatory bequests
between siblings and generations; Gifts made when the children need it most
 (Barro) dynastic altruism: infinite horizon – if bequests operative (Chamley)
Tax inter vivos gifts less than inheritance: they are presumably more often
driven by altruism & received earlier, when the beneficiary needs them most
Tax more non-linear transfers: presumably less often driven by altruism.
19
Useful but limited contributions of the theory of
optimal
p
capital
p
taxation
2. The more important (/ labor income), observable & unequal is
i h it
inheritance
received,
i d the
th more it should
h ld b
be ttaxed
d (Pik
(Piketty-Saez)
tt S
)
 Gives national determinants of optimal tax on inheritance
3. The greater specific capital market imperfections, the higher lifetime
capital taxation (collective preference for LCT: Piketty-Saez)
 Fuzzy frontiers between capital and labor incomes: self-employed & top
executives can take advantage of differential tax treatment of labor and capital
 Random & uninsurable rate of return to wealth over a generation (including
latent or realized capital gains)
LCT could act as an efficient substitute to wealth transfer taxation
 Whenever the latter does not appear easily feasible or seems too unpopular for
whatever reasons (Cremer-Pestieau-Rochet, Piketty-Saez)
 Still, these reasons are not well understood =>
20
2.4 Low & falling bequest taxation: perplexities (1)
Quotations from supporters of capital taxation
 Piketty-Saez
Pik tt S
(2012):
(2012)
“The large gap between optimal capital tax theory and practice as one of
the most important failures of modern public economics”
 Cremer-Pestieau (2012):
“Our basic goal is to finance government services with a tax that is as
efficient, fair and painless as possible. On all counts, it is difficult to imagine
a better tax than the estate tax”
tax
 Cremer (2010):
Clearly, death taxation more than any other generates controversy at all
“Clearly
levels: political philosophy, economic theory, political debate and public
opinion” …
21
Perplexities (2): Cremer (2010) on death taxation
 “…Opponents claim that it is unfair and immoral (donor angle)
 It adds to the pain suffered by mourning families and it prevents small business from
passing from generation to generation. Because of many loopholes, people of equivalent
wealth pay different amounts of tax depending on their acumen at tax avoidance. It hits
families that were surprised by death (and it is therefore sometimes called a tax on
sudden death). It penalizes the frugal and the loving parents who pass wealth on to their
children, reducing incentive to save and to invest.
 Supporters of the tax
tax, in contrast,
contrast retort that it is of all taxes the most efficient and
the most equitable (donee angle)
 They assert that it is highly progressive and counterweight existing wealth concentration
concentration.
They also argue that it has few disincentive effects since it is payable only at death and
that it is fair since it concerns unearned resources. For a number of social philosophers
and classical economists, estate or inheritance taxation is the ideal tax.
 The truth probably lies between these two opposite camps. For economists this tax
lik all
like
ll taxes should
h ld b
be jjudged
d d against
i
the
h two criteria
i i off equity
i and
d efficiency
ffi i
to
which one could add that of simplicity and compliance.”
22
Perplexities (3): Kopczuk
 Kopczuk:
K
k altruistic
lt i ti b
bequestt tto b
be subsidized
b idi d
 Externality: utility gain both for giver & beneficiary
 Negative conclusions on theoretical & empirical work…
 “Despite a large body of work on bequest motives, we have little consensus
regarding reasons that people have for leaving bequests”.
 => No compelling theoretical conclusions regarding taxation of gifts and estates
 “The
Th optimal
ti l estate
t t tax
t rates
t att the
th top
t off the
th di
distribution
t ib ti are likely
lik l to
t be
b positive
iti
but precisely stating this point is an open issue. Optimal [estate] taxation
arguments having to do with redistribution for welfarist reasons are not strong”
 Only taxation of very large estates => danger of “plutocracy”
 “On the other hand,, if there are negative
g
externalities from wealth concentration
[which] has an adverse effect on the political process or constitutes a danger to
democracy, i.e. when some individuals are “big” relative to the state, then estate
taxation could be part of the optimal tax structure
structure. Determining whether such
externalities exist is an ongoing research issue.”
23
3. Une société de plus en plus patrimoniale
3.1
3
1
La concentration accrue du p
patrimoine aux
mains des plus âgés
24
Détention du logement principal
selon la classe d'âge
g
25
Source: enquêtes actifs financiers 1986, 1992 et patrimoine 1998, 2004 et 2010
Patrimoine moyen relatif selon l'âge depuis 20 ans
26
Source: enquêtes actifs financiers 1986, 1992 et patrimoine 1998, 2004 et 2010
Patrimoine median relatif selon l'âge depuis 20 ans
27
Source: enquêtes actifs financiers 1986, 1992 et patrimoine 1998, 2004 et 2010
3. Une société de plus en plus patrimoniale
3.2
3
2
Le p
poids croissant des transmissions dans
les ressources nationales
28
Rapport héritage / revenu national brut:
France 1820-2008 ((Piketty,
y, 2011))
2 méthodes convergentes? Courbe reste en U (1914-) sans correction
29
Nombre de successions et de donations déclarées
30
Transmissions déclarées (héritage et donations)
aux enfants en 2000
31
Nombre de donateurs selon la classe sociale
en 2004 et 2010
2010
2004
32
Enquête « Patrimoine », Insee 2004-2010, population des ménages ayant des enfants hors domicile
Nombre de donateurs selon la richesse brute
en 2010
2010
2004
33
Enquête « Patrimoine », Insee 2004-2010, population des ménages ayant des enfants hors domicile
Nombre de donateurs selon la richesse brute
en 2010
2010
2004
34
Enquête « Patrimoine », Insee 2004-2010, population des ménages ayant des enfants hors domicile
4. Fiscalité successorale et pratiques de transmissions
4.1
4
1
Le cadre législatif
g
et fiscal
35
Le cadre législatif et fiscal
La législation sur les successions : réformes récentes
Dans son programme é
D
économique,
i
lle candidat
did S
Sarkozy
k
dé
déclarait
l i : "Je
"J veux que
95 % des Français soient exonérés des droits de succession. Quand on a
travaillé toute sa vie et qu'on a créé un patrimoine, on doit pouvoir le laisser en
franchise d'impôt à ses enfants"
 La loi du 21 août 2007 dite "en faveur
du travail, de l'emploi et du pouvoir
d'achat"
d
achat (dite loi TEPA) a répondu
grandement à cette proposition.
36
 La loi du 19 juillet 2012 est revenue sur
certains aspects de la loi TEPA.
Le cadre législatif et fiscal
37
Le cadre législatif et fiscal
38
Les seuils d’exemption au cours du temps
39
39
4.Fiscalité successorale et pratiques de transmissions
4.2
Les donations et héritages aident
aident-ils
ils à
s’installer ?
40
Faut-il inciter les transmissions précoces?
L effet Carnegie : « Il vaudrait mieux pour la
L’effet
race humaine que les millions de riches soient
jetés à la mer au lieu qu’ils encouragent les
fainéants les ivrognes et les bons à rien »
fainéants,
Andrew Carnegie
(1835-1919)
Fondement de la charité scientifique :
« Quand on fait la charité, il faut avant tout aider ceux qui veulent
s’aider eux-mêmes. » (Carnegie, L’évangile de la richesse)
41
 à sa mort, il ne lègue à sa famille que 15 millions de $, à peine 5%
de sa fortune.
Faut-il inciter les transmissions précoces?
Citation de Warren Buffet
« Une personne très riche doit laisser suffisamment à
ses enfants p
pour q
qu'ils fassent ce q
qu'ils veulent mais
pas trop pour qu'ils ne fassent rien. »
42
42
Faut-il inciter les transmissions précoces ?
« La vie est mal faite : quand on
est plus âgé, on a moins de
b
besoins
i ett plus
l d
de revenus [[ett
de biens]. Quand on est jeune,
on a beaucoup de besoins et
peu de revenus. Je crois à la
mobilité du capital, du
patrimoine. Le problème de la
France, c'est qu'on hérite trop
t d »
tard.
43
Ages moyens de transmission et de réception
patrimoniales: 1984-2000
44
44
Donations et fiscalité
Mises en place durant l'été 2004 (Loi du 9 août relative au soutien à la
consommation et à l'investissement)
l investissement), les « donations Sarkozy » permettaient des
dons d'argent (aux enfants, petits-enfants, neveux ou nièces) en franchise de
droits : 20 000 € puis 30 000 € (par bénéficiaire et par donateur) jusqu'en
décembre 2005.
2005
Destinée à « encourager les jeunes générations à consommer », elle devait
palier le fait que les enfants
enfants, supposés plus dispendieux
dispendieux, héritent de plus en plus
tard. Ce type de donation a rencontré un public important. On a compté près
de 1 600 000 actes enregistrés fin 2005, correspondant à un montant global de
26 milliards d'euros,
d euros, soit un quart des donations et successions déclarées.
45
Les transferts sont-ils utiles à leur bénéficiaire ?
1. Achat de sa résidence principale
46
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
2. Création ou reprise d’entreprise
47
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
1. Probabilité d’acheter sa résidence principale
Référence : PR en
(
couple (sans
patrimoine de
départ), parents
de la PR et du
conjoint en vie,
bac pro ou
technique, PR et
conjoint
j i t actifs
tif
48
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
1. Probabilité d’acheter sa résidence principale
Référence : PR en
(
couple (sans
patrimoine de
départ), parents
de la PR et du
conjoint en vie,
bac pro ou
technique, PR et
conjoint
j i t actifs
tif
49
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
1. Probabilité d’acheter sa résidence principale
Référence : PR en
(
couple (sans
patrimoine de
départ), parents
de la PR et du
conjoint en vie,
bac pro ou
technique, PR et
conjoint
j i t actifs
tif
50
Probabilité de créer ou reprendre une entreprise avant l'âge de…
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
2. Probabilité de devenir indépendant (en %)
Référence : PR
en couple
(sans
patrimoine de
départ),
parents de la
PR ou du
conjoint en vie,
bac +2, père
et mère
ouvriers,
employés,
cadres ou
professions
intermédiaires ,
conjoint actif
51
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
2. Probabilité de devenir indépendant (en %)
Référence : PR
en couple
(sans
patrimoine de
départ),
parents de la
PR ou du
conjoint en
vie, bac +2,
père et mère
p
ouvriers,
employés,
cadres ou
professions
intermédiaires ,
conjoint actif
52
Probabilité de créer ou reprendre une entreprise avant l'âge de…
Enquête « Patrimoine », Insee 2010
Les transferts sont-ils utiles à leur bénéficiaire ?
2. Probabilité de devenir indépendant (en %)
Référence : PR
en couple
(sans
patrimoine de
départ),
parents de la
PR ou du
conjoint en vie,
bac +2, père et
mère ouvriers,
employés,
cadres ou
professions
intermédiaires ,
conjoint actif
53
Probabilité de créer ou reprendre une entreprise avant l'âge de…
Enquête « Patrimoine », Insee 2010
5.1 The lesson of other social sciences:
Inheritance subject to a fundamental indetermination
indetermination…
 Inheritance (H): 2 key principles: contradictory & incommensurate
P1 continuity of individual property for economic activity => family morality
P1:
(children & family business): more the point of view of the parent-saver
H = virtue saving
 P2
P2: hereditary status & charges => reproduction of inequality/social stratification
 => Q2 (anti P2):
P2) social justice & efficiency (if unable heirs): beneficiary angle
H = unearned windfall gain
 Theoretical indetermination:
indetermination family morality (P1)
vs.
=> do not tax H
social justice & efficiency (Q2) => tax H
- Social thinkers of the 19th century: Durkheim, Marx-Bakounine
 Inheritance taxation design
 Find a way to reconcile P1 (family morality) & Q2 (social-efficient justice)
54
How to explain the growing aversion to the inheritance tax?
 … which does not affect (so much) other forms of capital
 Could be due either to an increasing role of P1 family values or to weaker Q2
specific values of social justice, or more probably to both factors
 Weaker Q
Q2 values ((“left-wing”
g economists))
 More efficient lobbying by increasingly powerful rich people (Stiglitz)
success , no matter its origin,
 View of the rich & of wealth: wealth = sign of “success”,
inheritance or personal achievement (Beckert)
 Rising
g P1 values ((underestimated byy economists?))
 The family appears increasingly as a safe haven against growing insecurity and
declining economic growth
 It reflects waning trust in capital markets, the Welfare State, returns to
education, and possibilities for upward social mobility
We h
W
have no d
definite
fi it empirical
i i l prooff off thi
this social
i l & cultural
lt l change…
h
Objections (Ohlsson for Sweden, Jappelli for Italy)
55
More efficient lobbying of the rich as they get richer?
 The growing unpopularity of wealth transfer taxation due to
 False beliefs of people overestimating their propensity to bequeath - or the
probability of becoming rich one day (Piketty-Saez)
y to manipulate
p
information and the beliefs of other p
people
p to make them
 Rich try
support policies that go against their own interest – in favor of the rich (Stiglitz)
 Lobbying by the rich against inheritance taxation has become more and more
efficient o
owing
ing to rising wealth
ealth ineq
inequality
alit and concentration
 As the rich get richer, the more they have to lose from planned redistribution reforms
and the more resources they have to resist such attempts
 In 2009, only 1.6 % of US farm businesses paid estate tax and only 1.3% of taxable
estates were family businesses.
 But why have the strategies of the rich proved so successful for
estate taxation, and not so much for other forms of capital taxation?
 E
Economists
i
underestimate
d
i
the
h particularity
i l i off iinheritance
h i
where
h
ffamily
il values
l
&
intergenerational links as well as the relationship to (own) death play a key role
56
5.2 Possible reforms (1)
Solutions to the P1-Q2 dilemma
1 Lifetime capital taxation (LCT) as a substitute to bequest taxation
1.
 P1 values considered as a constraint; quite popular (Piketty-Saez & alii)
 Objective: reduce the quantitative importance of bequest in the long run (Q2)
How to distinguish between rent seeking wealth & productive investments?
LCT ignores the origin of wealth,
wealth whether due to inheritance
inheritance, life chances or
personal merit & effort => bad for Q2 issues
2 Tax bequest according to its origin – inheritance or personal
2.
saving (Nozick)
 Reconciles family morality P1 with efficient social justice Q2!
But the decomposition is impossible at the individual level at least for tax
purposes: complex & idiosyncratic interactions of the two components
57
Yet, a conventional decomposition is possible at a macro level, allowing for
international comparisons
Possible reforms (2)
3 Ignore
3.
I
family
f il values
l
& iintergenerational
t
ti
l lilinks?
k ?
 P1 values considered irrelevant for the design of optimal bequest taxation:
normally wishful thinking: P1 arguments too pervasive today but
but…
 Social inheritance (Meade, Rawls):
 Inheritance (& gifts) received considered as an additional income for the beneficiary
 Combined with complete freedom to bequeath for the donor (a little of P1, still)
 To sidestep
p taxation,, the donor has to disperse
p
his wealth among
g a sufficient
number of beneficiaries with limited ex ante income (hence “social” inheritance)
 Avoid taxing too much self-accumulated wealth due to merit and effort (a little of P1)
4. Taxfinh design: Taxing (much) more (large) family inheritances
 Not incentives to gifts but strong disincentives to the transmission at death
 Justified by unprecedented sharp increase in life expectancy combined with the
parallel increase in the right of the surviving spouse =>
 Full property of parental wealth is obtained in our fifties
fifties, much later than before
before, and
wealth is kept by old parents, becoming more and more a rent
58
6.1 The Taxfinh design (1): an efficient & equitable tax
 The reform has not universal relevance: Where or when? FRANCE
 A large, increasing and more & more unequal annual flow of bequests relative
to GDP – meaning a rising share of “inherited wealth” = ideal tax base
 A strong & increasing concentration of wealth among the elderly at the expense
of younger,
younger liquidity-constrained
liquidity constrained households:
downward mobility of wealth
 Increase the range of legal ways to sidestep the inheritance tax
 Family altruism: (early) inter vivos transfers, long-term care insurance
 Social altruism: making charitable gifts and bequests (to duly registered charity
works and foundations)
 Reverse mortgage, French ‘viager’ (also with the capital transmitted to children)
 A “revealed
revealed preferences”
preferences approach that reconciles P1 and Q2 values
 Progressive inheritance taxation: also because low and middle class parents do
not make gifts
 Freedom to bequeath only outside the family in countries such as France
59
The Taxfinh design (2)
 An experimental design: no accurate information on potential effects
 What proportion of additional tax revenues will it bring in?
 What will be households’ reactions along the social ladder?
 How far will it increase and speed up the circulation of wealth to successive
generations through inter vivos transfers?
 To what extent will it foster charitable bequests?
 Reverse mortgage
mortgage, ‘viager’
viager , and so on
 Pitfalls
 At the
th momentt off the
th reform,
f
90 years old
ld h
households
h ld are stuck
t k (t
(transitory)
it )
 Sudden death – both parents (age control)
 Gifts,
Gift a luxury
l
good,
d have
h
a comparative
ti advantage,
d
t
but
b t are nott less
l
ttaxed
d
 Large horizontal inequality among families: true, but no insurance from the state
& the reform induces parents to prepare the transmission of their wealth
 Public transfers to the old should be maintained…
60
6.2 The Taxfinh reform in France (1)
 France meets all previous criteria for Taxfinh
 A large number of French senior households have sufficient financial means to
make early transfers that will speed up the welcome circulation of wealth
towards the young
 And (1) senior households…
 who benefit from a rather generous social protection for old days
 have reacted in the past to such tax incentives to earlier transmission by
substantially increasing the sums of gifts to their children (also in the US)
 And (2) by easing the recipient children’s cash constraints…
 early transfers significantly facilitate the children’s plans to buy housing, start up
ab
business,
siness etc.:
etc France 2004 & France 2010
 No Carnegie effect for wealth, on the contrary
 US case with less liquidity constraints: could be different??
61
The Taxfinh reform in France (2)
 The
Th exactt opposite
it off recentt or actual
t l policy
li proposals
l
 Tax more (large) family inheritances but number of ways out which are given a
comparative advantage
 And prompt reactions to avoid over-saving at old age & family inheritances
coming
g too late
 H taxation only against the rich who are not altruist at the family or social level,
or who do not prepare the transmission of their wealth
 In France today, the Taxfinh system would…
 limit the too large concentration of wealth among the elderly
 limit the increasing weight of transfers & wealth / GDP
 be efficient both for the downward circulation of wealth & the wealth projects of
the young households
 reduce both inter-age, social & life chances inequalities
 if gifts are also more taxed (but far less than inheritances)
62
 while raising tax revenue for the government
The Taxfinh reform in France (3)
p
 Transmissions p
patrimoniales 200 milliards,, impôts
10 milliards
 Taux moyen effectif d’imposition = 5 milliards: le doubler, 10%, encore limité,
rapporterait chaque année 10 milliards supplémentaires…
 Les 10% les plus riches : au moins 100 milliards de transmission, paient 7
milliards: taux moyen effectif = 7%. Le doubler pour eux seuls, 15%, encore
limité,
limité rapporterait en plus 7 à 8 milliards par an sans toucher aux autres 90%
 La réforme Hollande diminue la circulation du patrimoine et risque de
rapporter moins à court terme!! Celle de Sarkozy (2007) a diminué les
recettes en favorisant les donations… & a été remise en cause en 2011
Le plus surprenant: l’absence de débat sur les droits de succession
Taxfinh pourrait rapporter gros et ne lèse pas les familles aisées (réconcilie
P1 & Q2). Mais les réformes familiales déjà entreprises pour des gains
modestes risquent
q
d’hypothéquer
yp
q
une telle réforme
… une réforme pourtant « juste » et constituant un « marqueur de gauche »
63