Tax treatment of bequests when donor benefits are discounted

Recent literature on bequest taxation has made a case for subsidizing bequests on efficiency grounds, with the rate of subsidy declining with the size of the bequest to equalize opportunities among inheritors. These results rely heavily on the fact that bequests benefit both the donor and the recipient, creating an externality that is not taken into account by donors. The double counting of the benefits of bequests is questionable on normative …