Behavioral responses to inheritance and gift taxation: Evidence from Germany

The desirability of inheritance and gift taxes depends on individuals’ tax responsiveness. This paper demonstrates how strongly, in what way, the German influences taxpayer behavior. To that end, it combines administrative data with cross-bracket variation: a convex kink liability precedes concave kink. Extending bunching approach to such double-kinked schedules, I document individuals tailor their taxable wealth transfers schedules. One type response dominates for inheritances: testators engage testament planning. magnitude testament-planning is comparable inter vivos gifts. However, neither overall responses gifts nor those inheritances heavily interfere revenue collection: associated short-run net-of-tax elasticities lie below 0.1.