Amlan Roy Chowdhury

Economics 103
Professor Brendan Cushing-Daniels
Ethics and Taxation

Ethics and Taxes on Inheritance

According to John Rawls, a professor of the Harvard University and a moral and political

philosopher, it’s not fair if the children of the underprivileged and poor have much lower

prospects in life than those born to a wealthy family, merely because of the family they were

born into; therefore, steep inheritance taxes are justified. Rawls accentuates the imbalance that

surfaces from unregulated inheritance with the quote “unequal inheritance of wealth is no more

inherently unjust than the unequal inheritance of intelligence.” (Rawls, 245). From a

socioeconomic perspective, Rawls’ sentiments regarding the implementation of taxes on

inherited wealth seem very reasonable. In complete approval of Rawls’ stance on the morality of

taxes on inherited wealth, I believe that taxation on inheritance is ethical and must be made

compulsory in order to stimulate equity and to ensure a balanced distribution of wealth in the

society.

The first and most significant consequence of the implementation of a tax on inheritance

is the establishment of social equity. Such a policy would act to greatly diminish the wealth gap

that exists between the rich and poor in that society. Equality in society ensures that everybody

within the society is well off with sufficient opportunities, while at the same time, everyone is

guaranteed an impartial distribution of these opportunities among households. That is, equality

ensures that the high income households in the society are not made better off with monetary and
non-monetary benefits, while the low-income are made worse off from deprivation of those

benefits.

Regarding the issue of taxation, implementation of an equitable tax distribution is an

absolute necessity. In his paper “Ethics and Taxation”, Ronald Green discusses the significance

of an equitable tax distribution: “However productive or splendid a society may be, it is

intolerable if it is unjust (Rawls, 1971: 3), and however much a tax may protect or promote the

other values we have mentioned, it is morally unacceptable if it is seriously inequitable” (Green,

151). With this statement, Green questions the morality of an unjust tax system. Green also

quotes Rawls’ standpoint on an unjust society. According to Rawls, productivity and efficiency

within a society cannot compensate for its immoral and unfair policies. Such policies involve an

unfair tax system. An unjust and inequitable tax policy leads to nothing but unsolicited divisions

within the society. Hence it is deemed “intolerable” and “morally unacceptable” in society.

A tax system is morally corrupt if individuals who have acquired a sizeable amount of

property from their family are not charged for their inheritance. Such a treatment would be unjust

to the descendants of the underprivileged population, as they only inherit a petty figure.

Consequently, these individuals suffer worse life prospects and undergo severe hardships all

along compared to their more fortunate counterparts. Only a small minority of these individuals

are able to fight past setbacks and enjoy success. On the contrary, those fortunate enough to

inherit substantial wealth enjoy better prospects without being too productive. These individuals

ease their ways past setbacks by using their dominion over large wealth, their financial influence

and their high esteem in the society. Popular opinions within the less well-off community

suggest that the large amount of inherited wealth is often undeserved. Analysis of these distinct

circumstances reveals that children from a wealthy background have significantly greater access
to education, nutrition, healthcare and countless other benefits. Such circumstances feed into the

vicious cycle of poverty and perpetuates inequality in the society. Any form of unregulated

transfer of property from one generation to the next only intensifies the division in our already

segmented society.

Discriminatory circumstances that arise from the undeserved possession of family wealth

call for ethical reforms to the tax policies. According to Rawls the productive means to be fully

cooperating members of a society relies on the steady dispersal over time of the ownership of

capital and resources by the laws of inheritance and legacy, on fair equality of opportunity

secured by provisions for education and training, and the like, as well as on institutions that

support the fair value of the political liberties (Rawls, XV). In this quote Rawls stresses the

contributions of equality of opportunity and the redistribution of wealth toward coherence within

the society. Rawls asserts that everyone can be made better off without making anyone worse off

through the unbiased distribution of capital and resources and the equitable provision of

education and training. The most effective form of reform lies, however, with Green’s theory of

distributive justice.

The theory of distributive justice primarily emphasizes on the reduction of economic

inequalities amongst the citizen. Green categorizes distributive justice into “Natural Liberty and

Formal Equality of Opportunity”, “Fair Equality of Opportunity” and “Equality of Outcome”

(Green, 156-157). Fair Equality of Opportunity justifies one’s take on the morality of inheritance

taxes. “Some persons are seriously handicapped by the circumstances of birth or by early home

environment. Thus, it is argued that elemental fairness requires making substantial social efforts

to correct or to compensate for these imbalances.”(Green, 157). Green contends that equitable

distribution in the society requires effective measures that will make up for the discrimination
that is prevalent in the society. Therefore, in order to reward those with an inconvenienced

economic background (in our case, those born to a low-income household), a tax has to be levied

on those who have been inherently favored (those with a wealthy background).

In addition, the notion of imposing a tax on inheritance is far more effective in reducing

inequality as opposed to the policy of progressive/proportional taxation. Progressive/

proportional taxation on income helps to generate government revenue, which in turn is

distributed in acts of social welfare such as the provision of public goods and services and

promotion of education and training. Even though this will significantly improve prospects for

low income households in the long run, it will not have any direct consequences on the inherent

differences that exists in the society. Moreover the government may even decide to procure

goods and services, using tax funds, which will never entirely benefit low-income households

(such as reinforcing the national defense). Utilizing tax proceeds in this manner is ineffective and

unethical. However, the enacting of a tax on inheritance has a direct consequence on the

reduction of inequality. Such a tax makes those with a wealthy background financially worse off,

without affecting the financial soundness of low income households; which is one of the

fundamental motivations in the appeal for equity. It also prevents the concentration of power

detrimental to the fair value of political liberty and fair equality of opportunity (Rawls, 245),

stating that it diverts away a significant part of the financial and political bequest that has been

acquired by the wealthy.

The redistributive properties of an inheritance tax further facilitate equitable distribution.

In Theory of Justice, Rawls advocates the possibility of using tax proceeds collected from the

inheritance taxes in the aid of those in need. The potential impact of introducing such policy in

order to facilitate equitable distribution is substantial.

 The idea of an inheritance may directly challenge the right of individuals to bequeath

their properties to their descendants, which will surely raise controversy regarding morality. In

its defense, the taxation on inherited wealth will induce considerable reforms in the way the

society functions. It will successfully minimize the differences between the rich and poor who

share this society. As a result, the segments that divides our society can be eliminated and social

unity can be restored. Therefore, tax on inheritance that revolves around the restoration of social

equity is indisputably ethical and morally correct.

Bibliography:

Green, R. 1984. “Ethics and Taxation: A Theoretical Framework,” The Journal of Religious
Ethics, 12(2): 146-61.
Rawls, John. A Theory of Justice. Cambridge, MA: Belknap of Harvard UP, 1971. Print.