220. L. Kaplow, Transfer Motives and Tax Policy, 11/97; subsequently published as Tax Policy and Gifts in AEA Papers and Proceedings, Vol. 88, No. 2, May 1998, 283-288.
Abstract: This paper considers the optimal tax treatment of voluntary transfers to individuals in a framework that integrates redistributive income taxation and estate and gift taxation. Under this formulation, redistributive considerations become secondary. The optimal tax treatment of transfers depends upon the differences between expenditures on transfers and ordinary personal consumption. It turns out that some types of transfers confer a sort of positive externality on donees, some create tax revenue externalities, and some affect donors' and donees' marginal utilities of income in a manner relevant to the optimal taxation problem. Different types of transfers have qualitatively different effects.