This is a response I wrote on a message board that I didn't want to get lost in the ether. It describes my thoughts on estate taxes and wealth generally pretty well, I think.

First, the comment to which I'm replying:

Extreme wealth passed down over multiple generations has a corrosive effect on society, because it tends to concentrate wealth in fewer and fewer people. People without a stake in the system have no reason to uphold it. You want an example? How about the French Revolution? Those who owned the most property, through inheritance, paid the least in taxes. How about the Russian Revolution? Or almost any revolution; the [greater] the disparity in wealth, the greater the violence.

Passing your wealth on to your children is fine. Passing it on to your grandchildren is fine. Passing wealth on to generations not yet born is a problem. That's the formula for a society where position is determined by birth rather than merit. I don't believe in the divine right of kings, and I don't believe in the modern equivalent.

We tax long term capital gains. Why shouldn't inheritances be taxed at that rate? Put a $1M threshold if you like. Hell, make it $10M. I have no problem with children living comfortable lives. I just don't want to see each generation get wealthier than the preceding one unless they actively earn it.

I believe in merit. I'm not against wealth, I'm against giving people money that they didn't earn. Whether the government does it or individuals do it, the result is the same: less productive people end up with more control over the economy than they deserve. Why tax people who earn their income when we can tax those who get their wealth through accident of birth?

My reply:

Interesting thoughts. The French Revolution is an interesting case; France itself became desperately poor and its regressive tax system couldn't let them recover. Fascinatingly enough, the revolution's Declaration of the Rights of Man and of the Citizen declared the natural right to life, liberty and property -- very much in line with Locke's thoughts on the matter. This, I believe, is where you and I disagree.

"I just don't want to see each generation get wealthier than the preceding one unless they actively earn it."

This is a stance I'm unwilling to take because it infringes on the right to property. If we concede that the wealthy man's wealth belongs to him because it is the fruit of his own labor, it naturally follows that he consequently can bequeath it on whomever he pleases. To take this property from the receiver is an affront to the natural rights of the one who earned it.

Giving people money they didn't earn is really beside the point: if we believe that men are free and that they own the labor of their body and work of their hands as Locke put it, then they also own the compensation they are given for that effort. If that man then chooses to gift that compensation to someone else, it is his choice and nobody else's business because the effort that produced that wealth is his own property.

Merit is also beside the point. If a strong estate taxation policy were put into place, we would tax the estate of the business tycoon, the investor, and the lotto winner equally. It could be argued that the business tycoon has the most merit and the lotto winner the least; how would you account for situations such as these? Should we convene panels to decide the relative merit of each person and assign them each a bracket? It is irrelevant because society assigned them merit long ago; the business tycoon by the businesses he ran, the investor by the companies he invested in, and the lotto winner by their stigma.

As for your question about inheritances, are they not already taxed? Consider the entirety of an estate: was the property not taxed when bought? Is it not taxed every year after? Are the furnishings in the home not taxed when purchased, and was the maker of those same furnishings not also taxed? Are the investments not taxed on gains? Are the cars and boats and planes not taxed when purchased, and taxed again yearly? Every single element of the estate was taxed at some point -- and the most valuable among them continue to be taxed yearly. For a government to waltz into a funeral hand extended because a father gave his son in death the kingdom he built in life is crass and greedy. Make no mistake, what you're advocating is simple greed; that the target of your envy is wealthy doesn't dissolve the basic fact that you would strip a person of a portion of his property simply because he has greater quantities of it than what you find appropriate.