The inheritance tax is often framed as a mechanism to reduce inequality and is therefore seen as a good thing. John Burn-Murdoch, a columnist for the Financial Times, has written a Twitter thread that purports to make conservative-sounding arguments in favor of taxing inheritance. He focuses on the idea of equality of opportunity and meritocracy to make the case that it is unjust that some people get massive inheritances while most people get nothing.
What he misses, as Iain Murray points out, is any consideration of property rights. The equality concerns are fundamentally secondary to the property-rights concerns that the inheritance tax presents.
Individuals accumulate wealth over their lives. As they accumulate it, they also distribute it. They invest in businesses, donate to charity, give gifts to their friends and family, etc.
Then, one day, they die. What happens with their wealth now? People write wills that say what happens with their wealth when they die (and there are other legal processes for people who don’t have wills). The will is basically a way of saying, “Now that I’m not here anymore to decide how the wealth I accumulated is distributed, here’s who I want to have it.”
I suppose a person could say in their will, “Give it to the government.” But they don’t, generally speaking. They believe their wealth is put to better use by giving it to their families, charities, etc.
Who are politicians to say they are wrong in that judgment? They didn’t accumulate the wealth. They didn’t develop the individual’s personal and business relationships. They don’t know what a specific community might benefit from, or what a family business might need.
Moreover, conservatives rightly object to the government making those decisions with too much of a person’s income when he is living. Conservative opposition to income-tax increases — and support for income-tax cuts — is based on the principle that individuals know better how to spend their money than the government does. The actual record of government spending should confirm that principle. That principle doesn’t change when someone dies and his income is aggregated.
The inheritance tax is fundamentally based on two assumptions:
- Your wealth is ultimately the state’s, or at least a big chunk of it is; and
- The state knows how to distribute your wealth better than you do.
Conservatives should reject both of those assumptions. Neither of them is true. And neither of them is primarily about equality. The arguments against them are primarily about the fundamental importance of private property rights and the inherent problems with government planning.