Estate Tax Presents Moral Problems

Published January 23, 2011

A 2005 study of the estate tax by the Congressional Budget Office included this honest line: “Economic studies have had limited success in identifying how the estate tax may influence the behavior of farmers and small-business owners.”

That would describe much of the empirical evidence on many aspects of taxation, generally. Dramatic claims get made about the incentive effects or the lack of incentive effects. Dramatic claims get made for the estate tax’s role in reducing inequality or killing family farms or discouraging capital formation or leveling the economic playing field. But it is hard to know the size of any of these effects with much accuracy.

More importantly, perhaps, as in many areas of economics, one’s assessment of the empirical work conveniently lines up with one’s philosophical attitudes toward government. So I won’t pretend my dislike for the estate tax is because it hurts capital formation, say, which it certainly might. That’s not the main reason the estate tax bothers me.

Wrong to Tax Twice
I don’t like the estate tax on moral grounds.

It’s wrong for the government to tax people twice, once when they earn the money and once when they give it away, if the giving away is done after death, an arbitrary and unpredictable deadline.

It’s wrong for the government to create a tax that benefits tax lawyers and insurance companies for their creativity in structuring tax havens rather than helping to make the world a better place. And it’s wrong to tell the richest Americans that they will be punished for sharing the fruits of their labor or good fortune as they see fit, even if you or I might imagine in moments of hubris and envy that we could spend it so much more wisely.

Because the estate tax has long exempted most wealth from its clutches and because it is relatively easy to avoid, its economic effects are relatively small—unless you’re one of those talented tax lawyers. Let’s look for better ways to level the economic playing field. Fixing the education system (rather than just spending more money) would be a good place to start.

Russell Roberts ([email protected]) is a research fellow at Stanford University’s Hoover Institution and professor of economics at George Mason University. He is the host of EconTalk, a weekly podcast, and writes for, where this first appeared. Used with permission.