Event Description
Professor Wei Cui hosts Linda Wu who will present on Behavioral Responses to Estate Taxation: Evidence from Taiwan, as part of the Tax Policy Seminar (LAW 411/566) this term.
To register online for a zoom link, please reach out to the Kris Neufeld at: neufeld@allard.ubc.ca.
Abstract
We quantify behavioral responses to estate taxation by exploiting two large reforms in Taiwan. Using administrative data and a difference-in-difference design, we find quick and asymmetric responses, with reported estates reacting more strongly to a tax increase than to a tax cut. The asymmetry is driven by larger adjustments in liquid assets and charitable exemptions under the tax increase. Several patterns indicate tax avoidance rather than real wealth changes: liquid assets reported at death differ from those held a year earlier, owners of closely held firms reduce book values by inflating liabilities before their deaths, and heirs show no labor supply changes despite sizable inheritance shocks. The asymmetry is consistent with tax avoidance with sunk costs, where taxpayers intensify avoidance when taxes rise but do not scale back when taxes fall. We derive sufficient statistics showing that applying the attenuated tax-cut elasticity to evaluate a tax increase would understate welfare costs and overstate net welfare effects by 61%.
Speaker
Linda Wu is a Postdoctoral Fellow at the Stone Centre on Wealth and Income Inequality. She will join the University of Michigan as an Assistant Professor of Economics in Fall 2026. Her main research fields are public finance and labor economics, with a focus on wealth transfers and capital taxation. She holds a PhD in Economics from University College London and is affiliated with the Stone Centre at UCL and the Rockwool Foundation Berlin.
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