Academic journal article Boston College Law Review

Considering Alternatives: Are There Methods Other Than the Estate and Gift Tax That Could Better Address Problems Associated with Wealth Concentration?

Academic journal article Boston College Law Review

Considering Alternatives: Are There Methods Other Than the Estate and Gift Tax That Could Better Address Problems Associated with Wealth Concentration?

Article excerpt


The estate and gift tax is in a precarious position. Once a well-accepted part of our country's overall tax system imposing significant levels of tax on large swaths of the population, today it applies only to the smallest percentage of the public, and at relatively modest rates. And still it is met with general antipathy, not just by Republican politicians who have long held estate tax repeal as one of their core platform positions, but even by some Democrats who treat it like Voldemort, the villain from the Harry Potter series whose name must not be spoken.1

One might conjecture that a diminished need for the estate tax has caused its unpopularity. But this is far from the case. Congress enacted the original estate tax to address wealth inequality, which by all accounts is at an all-time high today.2 Moreover, the notion of wealth inequality as a societal problem has received broad acceptance across political and socioeconomic spectra.3

This leaves us with a great contemporary conundrum: why are estate and gift taxes so reviled when the problem that the taxes were designed to address is so prevalent and so widely recognized? Regardless of the answer to this conundrum, a more promising way forward may involve abandoning the estate and gift tax in favor of an alternative, raising the question: are there methods other than the estate and gift tax that could better address problems associated with wealth concentration?

The accompanying series of articles by Professors David Duff, Miranda Perry Fleischer, and David Shakow provides a strong analytic structure to explore: (1) the underlying purposes for the current estate and gift tax;4 (2) possible alternative tax systems that could best fulfill these purposes;5 and (3) what these systems would look like in detail.6


The starting point for any inquiry about competing tax systems is to determine what problem we are trying to solve; only then can we consider which alternatives most effectively solve the problem.

For most tax systems, the answer is relatively straightforward: the purpose of a tax is to generate revenue for the government. Nevertheless, the estate tax is unlike other taxes because it fulfills multiple purposes and because it has generally done a fairly poor job in terms of generating revenue. As Professor Duff points out in Alternatives to the Gift and Estate Tax, since the end of World War II, income, consumption, and social security taxes have become the dominant means of raising revenue in most developed countries. 7 Indeed, in the United States, the percentage of revenue raised by estate and gift taxes has always been under 5%, and in 2015 it is expected to be under 1%.8 Moreover, even if Congress could revise the estate and gift tax in such a way as to generate greater revenue (by increasing rates and/or decreasing exemption amounts), these same results could be more efficiently accomplished through adjustments to other taxes.

Professor Duff explores-and ultimately rejects-other possible justifications for the current estate tax system. 9 These include the estate tax's role in contributing to the overall progressivity of the tax system by imposing a larger burden on those with greater ability to pay (promoting "vertical equity"), increasing the fairness of the system by capturing an ability to pay that is not otherwise captured by the existing system (promoting horizontal equity), and curbing overall concentrations of wealth.10 Professor Duff finds each of these rationales inadequate for purposes of justifying the estate tax, and this author generally agrees with his analysis.11 There is, however, an additional purpose of the estate tax that should be added to Professor Duff's list: the estate tax promotes fairness by providing an essential counterweight to the extraordinary benefits conferred on inherited wealth under our income tax system. …

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