Eric P. Rakowski (UC-Berkeley) presents Taxing Dominion: Unconsumed Gifts and Transfer Taxation at UCLA today as part of its Tax Policy and Public Finance Workshop Series, moderated by Kirk Stark & Eric Zolt:

The paper explores the extent to which donees should be taxed when they pass on gratuitously gifts they have received instead of consuming those gifts themselves. Holding and then donating a gift offers advantages to a donee, such as security, the satisfaction of helping individuals or causes the donee most wants to aid, or better treatment by people who hope to profit from the donee’s generosity. The paper suggests that the insurance value of gifts kept in reserve should be considered a taxable benefit, whereas the case for taxing the power to select the next set of beneficiaries is much weaker. After examining one influential attempt to outline a tax that would reach these benefits as part of a comprehensive wealth transfer tax proposal — the Progressive Annual Wealth and Accessions Tax (PAWAT) proposed by Britain’s Meade Committee — the paper concludes that the PAWAT is unattractive because it rests on implausible assumptions. Nevertheless, its shortcomings can be overcome by adopting two separate taxes simultaneously: a consumption tax that applied to consumed gifts that did not vary with the length of time those gifts were held prior to consumption, and a tax on holding gifts that were later re-gifted that varied directly with how long the gifts were held.