The Moral Case for Abolishing the Inheritance Tax
How it violates freedom of conscience and destroys productivity.
There is a common belief among left-wing "progressives" that failure to enforce the inheritance tax will result in increased income disparities among racial, ethnic and social groups. The tax is a way of allocating the already-taxed income of wealth creators among the general population in a manner, it is imagined, that will ease society toward the moral position any fair and just society ought to occupy: one that has achieved total equity among groups, and one that establishes metaphysical egalitarianism as an appropriate characteristic of the human condition.
But let us start from the beginning. When one is the offspring of a deceased wealth creator who is being taxed on her inheritance, exactly what is she being taxed on? Let us call this person Catherine. Catherine’s father, Mario, migrated from Poland to the United States in 1946 and started a small business in construction without government help. He started out as a construction laborer, saved his money and, after fifteen back-breaking, torturous years, began a roofing company based on a loan acquired from a loan shark. On account of his broken English and lack of a formal education he was unable to acquire a loan from a reputable financial institution. In five years, Mario owned four such companies. By the time Catherine was born her father was the sole owner of a dozen roofing companies in the state of Illinois. He had also expanded his businesses to include plumbing and house painting, and even started a moving franchise. Mario was a millionaire by the time Catherine was five—allowing her American-born mother to homeschool her and her two younger brothers.
Catherine’s father had learned how to invest his money wisely by studying the stock market, and he even become a day trader as a hobby during his retirement years after moving to California. When he died peacefully in his sleep from heart failure at the age of ninety, just two months after his wife’s death, Catherine and her brothers, now in their mid-fifties, inherited a fortune in excess of US$20M.
When Catherine and her brothers are subjected to an astronomical inheritance tax on money that their father bequeathed to them, the state is making a presumptuous judgment against the moral judgments of Mario that his children are worthy of the full returns on his productive efforts.
Such efforts are results of values, virtues and capabilities that Mario achieved in his character. The inheritance tax, therefore, is an assault against his values, grit, perseverance, resilience, and tenacity. He was already taxed for creating jobs, wealth, and income for others through his wealth creation endeavors. The inheritance tax imposed on his children is an attempt to re-direct his choices and decisions by way of expropriating his wealth and giving it to others in a manner of which he would not have approved. Mario’s wealth was a product of his values and virtues which cannot be redistributed in reality; therefore, “legalized theft” or inheritance appropriation must be justified by appealing to some collectivist premise on the order of: it benefits the common or public good.
This widespread canard among left-progressives is promulgated without an answer to the question: who determines the public or common good for society? There is no such thing as society. The latter is merely the aggregate of several individuals. And second, what legal and moral metric is being employed to determine a conception of the good? In a free society everyone conceives of the good for him- or herself as determined by his or her values, principles, choices and sensibilities.
If in death Mario’s estate is taxed by means of government appropriation, his efforts to aid his children’s well-being have been morally compromised. He was unable to fully pass on his wealth based on his desires and moral intentions. There is no difference between that situation and denying him the freedom to finance Catherine’s education while he was still alive, or the freedom to spend his already-taxed income on any of his children in a manner he desired.
What makes the inheritance tax so egregious is not that it is a form of double taxation. The violation of the moral principle that secures Mario’s right to his income is not made worse by a double violation. The initial violation is itself improper.
It is rewarding the unearned for the productive efforts of another by violating the value endorsements of the wealth creator (Mario). In this case his children earned such endorsements simply by being values to their father, and by their right of inheritance which is derived from his right to dispose in an unencumbered manner the products of his labor.
Mario’s already-taxed wealth is further taxed in its inheritable form to finance the well-being of individuals who do not constitute a value or a good for him. One could make this case for income tax in general. Such a case can and ought to be made, only it is outside the scope of this article. The notable egregious nature of the inheritance tax lies in the fact that its beneficiaries are penalized under the dubious pretext that they did not earn the income they are inheriting and that, therefore, any abstract member of a society is as equally entitled to a portion of the created wealth of the wealth creator whose freedom to apportion, allocate and dispose of his wealth is compromised via an appropriative government whose judgments about what constitutes the good supersedes that of the wealth creator.
The rights of the non-productive, the social ballasts, and the non-valued take precedence over Mario’s moral conscience, whose sovereign right to his property is violated via a usurpative act on the part of the state.
The inheritance tax is, as we can see, a nefarious violation of the right to one’s conscience and the logical corollaries that stem from it: freedom of judgment to make decisions, choices and actions in one’s name; and, further, freedom to use one’s property acquired through one’s own efforts in any manner so long as it does not violate the rights of others.
The moral message issued by the enforcers of the inheritance tax is that income inequality is intrinsically bad; that it is made worse by failure to inflict a social penalty in the form of a tax on the beneficiaries of inherited wealth.
Income inequality stems from the ineradicable fact that we are not all equal. Some people are more intelligent than others, more athletically skilled than others, more beautiful, more frugal, more moral, and just more talented than others. These disparities in capabilities, whether the result of natural causes or human choices and initiatives, along with competition among human beings, all lead to unequal outcomes.
The inheritance tax sends a message predicated on a theme of entitlement. That theme states that because one is regarded as a collective part of an amorphous whole that gets constituted as an indiscriminate “social good” to everyone but no one in particular, that one’s mere existence constitutes a mortgage on the bequeathed savings of another.
The other moral malfeasance of the inheritance tax is that it sanctions the principle that upholds equal rights from unequal causes, and equal rewards for unequal performance. The inheritance tax, therefore, legitimizes the principle not of political egalitarianism or equality before the law, which is an inalienable right. It promotes the idea of metaphysical egalitarianism that overlooks the impossibility of redistributing individually curated capabilities. It sanctions the dictum: he who does not make and own the pie, nevertheless has equal shares to all its slices.
To indiscriminately believe that one has the right to inherit another’s wealth through redistribution by the state is to believe that the responsibility for one’s life and fate are not one’s own but that of others. It is another method in which the state engages in social eugenics by engendering infantilism among citizens by sending the categorical message that the default duty of preserving one’s life lies with those who are financially better off than oneself.
Such a belief and the principle that secures it are not promoters of the right to life, liberty, self-preservation and flourishing. They are, instead, the divine right to stagnation, arrested development and cognitive ossification.
Jason D. Hill is professor of philosophy at DePaul University in Chicago, and a Shillman Journalism Fellow at the Freedom Center. His areas of specialization include ethics, social and political philosophy, American foreign policy and American politics. He is the author of several books, including We Have Overcome: An Immigrant’s Letter to the American People (Bombardier Books/Post Hill Press). His new forthcoming book is What Do White Americans Owe Black People: Racial Justice in the Age of Post Oppression. Follow him on Twitter @JasonDhill6.