Last updated on 04/13/2016
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We analyze the role of the gap r-g between the return of return on capital r and the growth of the economy g rate in a political economy model of bequest taxation. Higher values of r-g lead to higher wealth inequality, and higher and more progressive optimal taxes on bequest. These conclusions hold only under certain specific but reasonable assumptions regarding the bequest motive, the relative magnitudes of bequest and labor income inequality, and the nature of the political economy process.