Anne Alstott (Yale University - Law School) has posted Equal Opportunity and Inheritance Taxation on SSRN. Here is the abstract:
Equality of opportunity is understood to be one of the bedrock principles supporting the taxation of inheritance. The idea is that inherited wealth offers an unjustified head start for some individuals at the expense of others. In political theory, this principle is closely identified with the branch of liberalism known as resource equality. But the resource equality ideal has not been fully translated into the legal literature. The classics of the legal literature use the term “equal opportunity” quite generally and often blend equal opportunity with goals that are quite distinct, like wealth equalization.
This Essay revisits the topic of inheritance taxation to see whether a single-minded focus on equality of opportunity, interpreted as resource equality, can shed new light on questions of legal design. I conclude that the present estate tax and major proposals for inheritance taxation only weakly track the equal opportunity principle. A system of inheritance aimed at equality of opportunity would look radically different than current law or the classic proposals for reform, in at least four dimensions.
First, the equal-opportunity principle suggests that inheritance taxation should be combined with a social inheritance, meaning a government expenditure program that would pay a universal, public inheritance. Second, in an equal-opportunity regime, gifts and inheritance received from close relatives should be taxed, while those received from peers, spouses, friends, and strangers should be exempt. This counterintuitive rule would reverse the standard result, which is to tax inheritance from parents, children, and other close relatives at the same rates or at lower rates. Third, the equal opportunity view implies that there should be no penalty on so-called “generation-skipping transfers,” which occur when a grandparent leaves her wealth to her grandchildren rather than to her children. Fourth and finally, equal opportunity suggests that gifts and bequests received by younger individuals should be taxed at higher rates than those received by older individuals.
