Abstract

A Tax—Not an Attack—on Families

The inheritance tax defended

Illustration
Ellen Weinstein

In recent years, political discourse has often focused on the idea of family values. Another contentious political issue has been the inheritance tax. The two topics commingle in a recent paper by Anne Alstott, in which she considers whether the inheritance tax is compatible with family values.

“The estate tax far more than the income tax has been a target for the claim that it compromises family life, probably because the estate tax imposes a large, once-a-generation tax,” says Alstott, the Manley O. Hudson Professor of Law and director of the Fund for Tax and Fiscal Policy Research at Harvard Law School.

Alstott contends that while the law protects the right to use one’s resources for the benefit of the family unit, the imposition of an inheritance tax does not necessarily threaten family ideals. In “Family Values, Inheritance Law, and Inheritance Taxation,” published in the Tax Law Review, she identifies three different conceptions of the family: liberal, which values individual freedom; conventional, which upholds traditions of family obligation; and functional, which emphasizes the family’s social role in maintaining economic security. All of these visions of the family can coexist with the inheritance tax, but “the three ideals do have markedly different implications for the terms of inheritance law and inheritance taxation,” she writes.

The ideal of the liberal family—its right to do with one’s property as one wishes—is often cited as contrary to an inheritance tax, according to Alstott. But the state may legitimately claim a share of an individual’s wealth and still uphold this individualist theory of the family, she says, as long as it maintains neutrality; for example, an individual may leave her money to her children or to a home for poodles, without state interference.

The conventional conception of the family differs in that it favors inheritance remaining within the confines of the family. Yet the state can still take its share of inheritance taxation without compromising this ideal, Alstott argues. At the same time, the inheritance tax could accommodate the conventional family by adopting favorable rules for family bequests and family businesses.

The functional concept likewise can be compatible with the inheritance tax as long as exemptions are offered that allow family members to provide economic security for each other, Alstott notes. If the goal were truly to ensure that family functioned as a source of financial insurance, inheritance law could even require people to leave wealth to those family members in the most need, she adds.

Inheritance taxes would endanger family values only if they confiscated so much wealth that they prevented liberal, conventional and functional families from carrying out their ideals—something no one in the political arena is proposing, she says. Thus, she believes that the inheritance tax as it now functions in America does not disrespect the family.

“Within the range of political options on the table, there remains ample room for individual autonomy and family identity transmission to coexist with paying a share of wealth at death to the state,” says Alstott.

Excerpt: All in the Family

“Inheritance taxation is obviously a tax matter, and as such it raises familiar issues about the relationship of the individual and his property to the state. At the same time, inheritance taxation also forms part of inheritance law—the body of law that regulates the transmission of property by gift during life and by bequest during death. And inheritance law is intimately bound up in ideals about the family: the family is, after all, one of the key institutions for transmitting assets, knowledge, and values across generations, and in the broadest sense the family itself forms part of the structures of inheritance that determine what children receive from their elders.”

From “Family Values, Inheritance Law, and Inheritance Taxation,” in Tax Law Review

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