Just wealth transfer taxation

Introduction

Wealth transfer taxation has been a disputed topic for a long period of time and is likely to remain so. Over the next 50 years, the baby boom generation of individuals born between 1945 and 1964 will pass away. In the US, wealth transfers are expected to explode totaling $59 trillion, the greatest wealth transfer in the country’s history. ¹ At the same time, the level of wealth transfer taxation in the US is presently historically low, ² and during the presidential election campaign Donald Trump proposed to eliminate the estate tax altogether. ³

In this article, we suggest that a better solution is to reform the tax, and we introduce and defend a scheme originally presented by John Stuart Mill. Drawing on recent empirical research, we argue that a reform of the tax system along the lines suggested by Mill would yield a tax system that is more just without having substantial negative incentive effects. Furthermore, we claim that Mill’s case for wealth transfer taxation is particularly relevant in the US setting because it presents arguments in favor of an inheritance tax (a tax on the receiver) as opposed to the existing estate tax (a tax on the donor). ⁴

Mill proposed to set an upper limit on how much a person should be permitted to receive through bequests throughout his life. He based the proposal on a distinction between the right to bequeath and the right to receive bequests. According to Mill, a crucial aspect of the institution of private property was that every person should be free to bequeath. However, for Mill, it did not follow from private property that there is a corresponding (equally strong) right to receive. Mill justified the proposal claiming that it would target unearned (as opposed to earned) wealth and thus enhance equality of opportunity, which would ultimately be the best way to promote the greatest happiness for all. The proposal Mill introduced is not simply of historical interest; in fact, it remains one of the most influential suggestions for wealth tax reform. Both John Rawls’ and Anthony Atkinson’s schemes to tax inherited wealth are modeled on Mill’s’ original proposal. ^5,6

However, a number of crucial issues surrounding the scheme have not been sufficiently discussed. We shall focus on three of the most important objections held against it. First, “the nonseparability objection” holds that it is not possible to separate the freedom to give from the freedom to receive. Second, and related to the former, the objection from private property holds that private property includes an unlimited right to dispose of one’s assets and that this right is violated under Mill’s scheme. Third, the objection from incentives holds that Mill’s scheme would have negative effects on people’s willingness to work and save and thus be detrimental to economic growth.

The article proceeds as follows. In the first section, we introduce Mill’s proposal and address one important ambiguity: It is not clear whether Mill wants to put an absolute limit on how much a person can receive from bequest or if he suggests taxing everything above a given limit at progressive rates. Focusing on the latter, we proceed to discuss the main counterarguments. In the second section, we defend Mill against the nonseparability objection based on an argument which says that Mill’s particular understanding of what it means to be free to bequeath is not affected by the objection. The third section takes issue with the objection from private property. We argue that there are good reasons to defend Mill’s version of private property which constrains bequest in order to preserve equality of opportunity for the next generation. Drawing on recent empirical research, the fourth section argues that a tax scheme along Millian lines is likely to have limited negative effects on people’s willingness to work and save. The last section concludes along two lines: First, the Mill scheme can stand up against important criticism and provides justifications for a much needed wealth transfer tax reform. Second, a reformed tax system along the lines suggested by Mill is likely to be both just and more efficient compared to systems that rely less on inheritance taxation. ⁷

The Mill scheme

In Escheat vice Taxation (1795), Jeremy Bentham argued that the law of escheat was to be extended. ⁸ In effect, his proposal held that absent near relatives (which included spouse, descendants, parents, and descendants of parents), ⁹ assets were to escheat to the state if there was no will. Furthermore, all persons had a right, to bequeath, but this right was limited for those without near relatives, who should only be permitted to bequeath half of their property (Bentham, 1952: 284). However, Bentham did not argue in favor of a similar restriction on inheritances in direct lines, for example on transactions from father to son. Such a restriction, Bentham argued, would reduce the donor’s willingness to work and save and could therefore conflict with general utility (Bentham, 1952: 285).

Mill recognized Bentham’s contribution, but extended his proposal first by limiting the opportunity to inherit without a will to direct descendants (Mill, 1965: 220) ¹⁰ , and subsequently – and this is the most important revision – to suggest to limit the right not to bequeath, but to receive bequest (gift by will). ¹¹

Mill’s reasoning in favor of his scheme of wealth transfer taxation emanates from his discussion of private property. ¹² The institution of property includes the right to what one has produced, but also to what is produced by others if it is the result of free transactions:

The institution of property, when limited to its essential elements, consists in the recognition, in each person, of a right to the exclusive disposal of what he or she have produced by their own exertions, or received either by gift or fair agreement, without force or fraud, from those who produced it. The foundation of the whole is the right of producers to what they themselves have produced. (Mill, 1965: 215)

Mill did not believe that parents have any obligations to leave their children rich. ¹³ Instead, the obligation parents do have is to provide for their children an opportunity to a prosperous life where they are given a fair chance to contribute to society. Mill argued that limiting the right to receive bequests is in the best interest of children because it would provide them with stronger motivation to develop and exercise their own individual capacities (Mill, 1965: 221–222). To Mill, the development of individual character can be considered a higher pleasure compared to a life without a constant effort of self-development. Large bequests should therefore be avoided precisely because it could produce idle and unproductive individuals who would ultimately not be able to enjoy one of the higher pleasures in life. ¹⁴

Mill also rejected the view that children simply have a right to their parent’s belongings. In pre-modern time, the family was seen as joint owners of the family property. However, as Mill notes, ‘property is now inherent in individuals, not in families’ (Mill, 1965: 219). We no longer see families as the relevant unit of society. Therefore, it is not sufficient to merely claim that children have a right to their parent’s belongings. ¹⁵

Mill thus recommends setting an upper limit to what each person can receive through bequest:

Were I framing a code of laws according to what seems to me best in itself, without regard to existing opinions and sentiments, I should prefer to restrict, not what any one might bequeath, but what any one should be permitted to acquire, by bequest or inheritance. Each person should have power to dispose by will of her whole property; but not to lavish it in enriching some one individual, beyond a certain minimum, which should be fixed sufficiently high to afford the means of comfortable independence. (Mill, 1965: 224–225) ¹⁶

According to Mill,

bequest is one of the attributes of property: the ownership of a thing cannot be looked upon as complete without the power of bestowing it, at death or during life, at the owner’s pleasure: and all the reasons, which recommend that private property should exist, recommend pro tanto, this extension of it’. (Mill, 1965: 223)

Mill provides a number of different justifications for this limitation to receive bequest. These range from pragmatic justifications to ‘the first principle of morals’. Starting with the former, taxing bequests would provide income that could be used for public purposes. In addition to this argument, there is also a reference to a kind of unjustified power which follows from extremely concentrated wealth. Mill notes that his scheme would have the positive consequences of limiting ‘those enormous fortunes which no one needs for any personal purpose but ostentation or improper power’ (Mill, 1965: 226). ¹⁷

Moving closer to the more principled arguments, Mill provides a crucial justification for wealth transfer taxation that combines a meritocratic ideal with the ideal of equality of opportunity:

It is not the fortunes which are earned, but those which are unearned that it is for the public good to put under limitation…if all were done which it would be in the power of a good government to do, by instruction and legislation, to diminish this inequality of opportunities, the differences of fortune arising from people’s own earnings could not justly give umbrage. (Mill, 1965: 811)

Finally, taxing transferred wealth would also have positive consequences because it would break up large fortunes and transfer assets from a few rich people to a greater number of persons. As Mill notes,

it must be apparent to everyone, that the difference to the happiness of the possessor between a moderate independence and five times as much, is insignificant when weighed against the enjoyment that might be given, and the permanent benefits diffused, by some other disposal of the four-fifths. (Mill, 1965: 225)

Thus, three principles seem to be important in Mill’s justification for wealth transfer taxation: Equality of opportunity, distribution of wealth according to desert, and finally overall aggregate utility. An important issue is the hierarchical ordering of these principles. A plausible interpretation of Mill is that the ideas of equality of opportunity and desert are subordinate to aggregate utility. In Utilitarianism (1861/1970), Mill distinguishes between first and secondary principles in ethics. The first principle is the greatest happiness principle, and secondary principles are principles such as fair play and honesty that make no direct reference to utility but whose general observance promotes it. If the secondary principles conflict with aggregate utility, they should be set aside; thus, the principle of overall social utility trumps other principles. ¹⁹ In the context of wealth transfer taxation, it is reasonable to interpret Mill as though equal opportunity and desert are secondary principles that are important because they are conducive to the first principle of morals: Utility, or the ‘Greatest-Happiness Principle’ (Mill, 1970: 257). Ultimately, taxing bequeathed wealth is just because it promotes happiness.

Why would principles such as equality of opportunity and desert, and thus wealth transfer taxation, increase aggregate utility? As emphasized, Mill partly grounds his justification for wealth transfer taxation in human behavior and people’s character (Su, 2013). It is more beneficial to the individuals themselves and also the society at large if people inherit moderate sums rather than extensive sums. To illustrate, Mill believes that those who are aware that they will inherit large fortunes are much more likely to become ‘idle, dissipated, and profligate’ (Mill, 1965: 893). A desert-based system, where income and wealth are distributed according to effort, creates more overall utility compared to a system that allows large inequalities due to circumstances beyond personal control. Relatedly, Mill argues that people are much more stimulated by the examples of somebody who has earned a fortune, then by the sight of one who has inherited her fortune. The former is an example of ‘prudence and frugality as well as industry’, while the latter often exemplifies vices (for example, profuse expense) (Mill, 1965: 890). ²⁰

There is, however, an important ambiguity in Mill’s proposal in need of further elaboration. As we have seen, Mill’s proposal is to set an absolute upper limit to how much it should be possible to receive. The amount received should allow the donee a ‘moderate independence’ (Mill, 1965: 887). ^21,22 As Bain notes, Mill realized that his scheme was extremely radical and that if carried out, would ‘pull down all large fortunes in two generations’ (Bain, 1882: 89; Hollander, 1985: 879). However, there is a crucial difference between confiscating everything above the fixed level and taxing everything above it at high rates. In Principles, Mill notes that inheritance taxation should be progressive: ‘The principle of graduation…of levying a larger percentage on a larger sum, though its application to general taxation would be in my opinion objectionable, seems to me, both just and expedient as applied to legacy and inheritance duties’ (Mill, 1965: 811–812). And much later, in 1871, Mill wrote that he would ‘lay a heavy graduated succession duty on all inheritances exceeding that moderate amount, which is sufficient to aid but not to supersede personal exertion’ (Mill quoted from Ekelund and Walker, 1996: 578). ^23,24

This is of course a much more modest proposal (which still seems radical to most people today – an interesting point in itself). Mill seems to have been in two minds about this important issue. To see the difference, consider first the radical scheme. Suppose the upper threshold is fixed at $1 million. If a person bequeaths a fortune of $10 million to his only daughter, she will receive the $1 million, and the rest will be confiscated by the state. To illustrate the moderate scheme, suppose yet again that the limit is set at $1 million and that everything above is to be taxed at progressive rates. We would then operate with graduated rates with a top marginal rate at, say, 65 percent. We tax the first million above the limit at, say, 30 percent, the next 2 million at, say, 50 percent, and the last 6 million at 65 percent. ²⁵ Following this scheme, the donee will receive a total of $4.8 million upon her father’s death.

The moderate Mill scheme is similar to a tax proposal often defended within the contemporary tax law policy literature. For example, Fleischer (2016, 2017), Duff (2016), and Repetti (2001) all argue in favor of what they call a cumulative (lifetime) accession tax. ²⁶ A cumulative accessions tax imposes a tax on the receiver based on the total amount of bestowed receipts during her lifetime. The mentioned authors provide related but somewhat different justifications of this tax. Repetti justifies it by noting that wealth concentration is detrimental to economic growth and that it harms the democratic process. Fleischer argues that the tax is necessary because wealth transfers can bestow upon the recipient unearned political and economic power, which contravenes the democratic ideal that power should be earned and not inherited. Finally, Duff argues that the tax reduces unearned concentrations of wealth and power and promotes fair equality of opportunity.

In what follows we focus on the moderate Mill scheme and discuss some objections that have been raised against it. We choose to concentrate on the moderate scheme partly due to feasibility concerns and partly because the radical proposal has been discussed and defended elsewhere (Haslett, 1997). ²⁷

The objection of nonseparability

Discussing Mill’s proposal, Duff claims that it is not

reasonable to adopt John Stuart Mill’s proposed distinction between the right to give or bequeath and the right to inherit, as if the inescapably bilateral act of donative transferal could be separated into two discrete moments of donation and receipt, and subject to distinct treatment on that basis. On the contrary, as Stephen Muntzer observes, if a society restricts inheritance, it indirectly restricts bequest to some extent. If private property contains the right of unlimited disposition, it necessarily includes the right of unrestricted receipt. (Duff, 1993: 42) ²⁸

Duff’s argument has the potential to undermine Mill’s most important claim, namely that we must restrict what anyone should be permitted to acquire by way of bequest, but not what anyone might give away. Duff’s point is that this assertion is inconsistent. If freedom is restricted at the one end, it is equally restricted at the other.

Prima facie, Duff’s objection is plausible. In order to address this question properly, we need to interpret accurately what Mill meant by postulating that people should have freedom to bequeath. For Mill, this freedom was not unrestricted. He explicitly emphasized that ‘each person should have the power to dispose by will of her whole property; but not to lavish it in enriching some one individual’. In other words, the freedom to bequeath comes with clear restrictions, which we shall discuss more carefully in the next section. The central issue for now, however, is whether this freedom – the essential one for Mill – is circumscribed if the freedom to receive is restricted. We shall argue: not by Mill’s proposal. According to Mill, each donee should be levied a graduated tax above a specified threshold of bequest. Thus, his scheme imposes a clear restriction in the freedom to receive. However, people are still free to bequeath (no taxation), assuming the bequest is dispersed. The limitation on the donor side consist in how much the donor can give to any one individual, not in how much can be donated overall. If the donor disperses her fortune such that no donee receives above the specified threshold, she avoids taxation altogether, despite the proposed tax on receivers. ²⁹ In that sense, people are free to dispose of their (whole) property.

Mill’s ambition was to propose a tax scheme that gives people the freedom to dispose of their whole fortune as long as it is dispersed, but not the freedom to receive large bequests or inheritances. As we have argued, this proposal is not inconsistent, and the nonseparability objection does not provide a well-founded argument against Mill’s important distinction between the right to bequeath and the right to receive.

Obviously, in many cases of wealth transfers, the donor’s interest is to leave assets to one or a few individuals, typically her children. This freedom will be restricted by Mill’s tax scheme. Mill agrees to this and notes that he cannot

conceive that the degree of limitation which this will impose on the right of bequest, would be felt as a burthensome restraint by any testator who estimated a large fortune at its true value, that of the pleasures and advantages that can be purchased with it. (Mill, 1965: 225)

The objection from private property

Duff also alludes to an important discussion about what follows from private property. A general objection to wealth transfer taxes holds that private property includes an unlimited right to dispose of ones means as one sees fit, including the full and unlimited right to give inter vivo gifts or to bequeath. Libertarians typically claim that donors have full right to dispose of earned property, which includes the right to give or bequeath irrespective of the consequences of such dispositions. ³¹ Mill took issue with such ideas of private property. His ex ante view of equality led him to see the existing laws of private property – which favored unlimited disposition – as in deep conflict with equality of opportunity (which again promotes overall utility). Thus, for Mill it was necessary to reform the institution of private property. It is worth quoting Mill at length here:

The laws of property have never yet conformed to the principles on which the justification of private property rests. They have made property of things which never ought to be property, and absolute property where only a qualified property ought to exist. They have not held the balance fairly between human beings, but have heaped impediments upon some, to give advantages to others; they have purposely fostered inequalities, and prevented all from starting fair in the race. That all should indeed start on perfectly equal terms, is inconsistent with any law of private property: but if as much pains as has been taken to aggravate the inequality of chances arising from the natural working of the principle, had been taken to temper that inequality by every means not subversive of the principle itself; if the tendency of legislation had been to favour the diffusion, instead of the concentration of wealth – to encourage the subdivision of the large masses, instead of striving to keep them together; the principle of individual property would have been found to have no necessary connexion with the physical and social evils which almost all socialist writers assume to be inseparable from it (Mill, 1965: 207–208).

An obvious objection to this defense is that it exemplifies how utilitarian theories often fail to ensure essential individual rights. ³² However, that objection can be set aside. Private property should not be seen as including the right to unlimited disposition. An individual should be free to do what he wants with his knife, but not to leave it in the back of his neighbor. By analogy, I should be free to do what I want with my property, except for creating unjust inequalities through gifts and bequests. Or, to put the Millian insight in contemporary egalitarian terms: Property rights (and self-ownership rights) have limits, and these limits typically involve concern for equality.

Furthermore, Mill would reject that property rights work as trumps and should be considered independently from the tax system. Property rights are defined by justice, and justice involves concern for equality. As Murphy and Nagel argues:

Private property is a legal convention, defined in part by the tax system; therefore, the tax system cannot be evaluated by looking at its impact on private property, conceived as something that has independent existence and validity. Taxes must be evaluated as part of the overall system of property rights that they help to create (Murphy and Nagel, 2002: 8).

In our view, Mill’s scheme is compatible with the best interpretation of private property. It holds that the institution should guarantee everyone some property necessary to achieve independence and self-respect. This idea, which can be described as broadly Rawlsian (or Hegelian), ascribes to everyone a right to a social minimum and other rights necessary for individual liberty. However, it does not support the general presumption against state interference with private property normally associated with the Lockean perspective, nor an unlimited right to give or bequeath (cf. Murphy and Nagel, 2002: 45). ³³

The objection from incentives

Mill’s proposal has also been criticized for the negative effect it could have on the economy. Eugenio Rignano argued that the Mill scheme would reduce people’s motivation to work and save (Rignano, 1905: 39). If this were to be true, it would be detrimental for Mill whose consequentialism demands a special awareness to the consequences of policy proposals. To Mill, it was important to examine the practical results of those rules which were to regulate distribution in society (Mill, 1965: 200).

In order to study the impact that wealth transfer taxes can have on work effort and savings, the literature distinguishes between the impact on donors and donees. Focusing on the latter, a study by Holtz-Eakin et al. (1993) found support for Andrew Carnagie’s claim that large inheritances would ‘decrease a person’s labor force participation. For example, a single person who receives an inheritance of over $150,000 (by 1992) is roughly four times more likely to leave the labor force than a person with an inheritance below $25,000’ (Holtz-Eakin et al., 1993: 413). Furthermore, in a recent review of the literature, Joulfaian concludes that ‘large inheritances speed up retirement’ (Joulfaian, 2013: 7–5). ³⁴ In other words, wealth transfer taxes can have positive incentive effects for donees, for example, they can induce them to work more compared to a situation without transfer taxes.

Perhaps the most vital incentive worries relate to the donors, since those are the ones that initially accumulate wealth. Murphy and Nagel conclude, after a careful review of the literature, that ‘the consensus seems to be that a tax on gifts and bequests has little or no proven impact on donors’ decisions whether to work or save’ (Murphy and Nagel, 2002: 152). In a more recent review, Alstott notes that ‘the existing empirical studies, limited as they are, suggests that inheritance taxation would have modest negative effects on work, savings and capital accumulation, but there is still significant uncertainty’ (Alstott, 2007: 497).

An often quoted study adds some nuance to this picture. In 2001, Kopczuk and Slemrod found that the tax could have an impact. They concluded that ‘an estate tax rate of 50 percent would reduce the reported net worth of the richest part of the population by 10.5 percent’ (Kopczuk and Slamrod, 2001: 339). However, they were unable to determine whether this was due to tax avoidance strategies or if it was actually due to reduced work and savings. Thus, there is considerable uncertainty about the effect that wealth transfer taxes can have on the donors’ willingness to work and save. However, as Kopczuk and Slemrod note, ‘almost no empirical evidence supports claims of a large effect or of a negligible effect’ (Kopczuk and Slemrod, 2001: 300).

Therefore, it is unlikely that wealth transfer taxes will yield considerable negative effect on work effort and savings, independent of whether the taxes are considered from the perspective of the donor or the donee. This is good news for Mill’s tax scheme as well as for those who believe it fair that bequests should be taxed. What, then, can explain why wealth transfer taxes only create modest disincentive effects? A number of studies examine what motivates people to accumulate wealth. Wealth transfers can be attributable to different wealth accumulation motives, some of which relate to bequeathing, some of which do not. And those that do not relate to bequeathing are not affected by wealth transfer taxes (Batchelder, 2009; Kopczuk, 2010).

Wealth accumulation related to bequeathing: Often people accumulate wealth precisely (or partly) in order to transfer their wealth. So-called altruistic bequests are the result of donors bequeathing in order to increase the well-being of the donee (the donors’ level of utility is positively correlated with the donees post-transfer utility increase). A wealth transfer tax would weaken this motive. So-called Exchange motivated bequests are payments for a service provided by the donee (for example, a kind nephew helps his elderly uncle who in response includes the nephew in his will). Again a transfer tax could potentially decrease savings induced by this exchange motivation. Lastly, in bequests motivated by the joy of giving, it is the act of giving itself that motivates the donor. And yet again, a transfer tax would – prima facie – decrease the welfare people receives from giving, assuming that donors’ welfare is positively correlated to the post-tax transfer. ³⁵

Wealth accumulation not related to bequeathing: First, often people accumulate wealth in order to insure against future risk such as old age and uncovered health care costs. If a person dies with some of this wealth unspent, it will constitute a bequest that occurs without the donor receiving any benefit from it, since it is an ‘accident’ due to, for example, premature death. Kopczuk and Batchelder call this ‘accidental bequests’. Second, often people accumulate wealth according to a capitalistic spirit motive, that is, the accumulating wealth itself provides the benefit for the donor (for example, they enjoy working or like to be perceived of as rich). In both of these cases, there are no bequest motive behind the wealth accumulation, and they should therefore be unaffected by transfer taxes.

To summarize, one class of motives behind wealth accumulation seems to be unrelated to the system of transfer taxes (and are thus inelastic), another class of motives has the potential to create disincentives because it is based on wealth accumulation motivated by how much the donees receive after taxes (these are thus elastic).

According to the empirical literature, a majority of aggregate accumulated wealth seems to be motivated by reasons unrelated to transfer taxes. Summing up the literature, Batchelder (2009: 38) finds that as much as 50 percent of wealth transfers are accidental, while 20 percent is related to altruistic motivations. The remaining 30 percent she attributes to the three final motives: joy of giving, exchange motivated bequests, and capitalist spirit motivated bequests. She refers to these as ‘egoistic’ motives. According to these estimates provided by Batchelder, we would not expect transfer taxes to create huge disincentives.

It is also imperative to consider whether transfer taxes create more disincentives than other taxes. Without entering into the broader debate about what constitutes the most efficient tax base, we briefly note that there seems to be substantial evidence that taxing inheritance is more efficient than taxing income. To illustrate, the income tax reduces the return from effort and is therefore commonly held to impact work effort negatively, even if there is uncertainty about how much negative impact it creates (Caron and Repetti, 2012: 1280). This is confirmed by the Organization for Economic Co-operation and Development's (OECD) ‘tax and growth ranking’ which concluded that the ‘corporate income tax is the most harmful type of tax for economic growth, followed by personal income taxes’ (OECD, 2010: 3). Inheritance taxation is in comparison much less distortionary partly because ‘a large part of inheritances is unplanned’ (OECD, 2010: 119).

A final and possible harmful consequence of transfer taxes should be considered. Fleischer (2017) argues that a problem with such taxes is that they can increase spending (due to tax sensitivity), and within the upper-middle class that increased spending is likely to include a variety of programs likely to increase their children’s human capital, such as private schooling and music lessons. An unintended consequence of the transfer tax is therefore that it can exacerbate inequality of opportunity (ibid: 35–36).

Clearly, with extremely high marginal tax rates, Fleischer’s argument is plausible. However, with falling rates the argument becomes less convincing. Importantly, parents are most likely to invest in their children’s human capital when they are in their 40s and 50s. And, as argued by Caron and Repetti, it is unlikely that people would care much about wealth transfer taxes that will only affect them in the distant future (Caron and Repetti, 2012: 1285–1286; Repetti, 2001: 863–865).

Conclusion

Mill’s suggestion to limit bequest by fixing an upper limit on how much the donee can receive provides an interesting contribution to the debate on wealth transfer taxation. The scheme holds that the tax should be levied on the receiving end, and the argument given here demonstrates that it can withstand the nonseparability objection, the objection from private property, and the objection from incentives.

The Mill-scheme is particularly relevant as a reform proposal in a country such as the US, where the current tax system taxes inherited wealth at one fourth of the rate of earned income. ³⁶ Thus, it is reasonable to hold that the tax system is less efficient than it could be if wealth transfer taxes had been used to carry more of the total tax burden.

It should also be stressed that the US estate tax is a tax on the giver whereas Mill’s proposal is to tax the receiver. A number of commentators have recently argued that a shift toward taxing the receiver could in fact increase the legitimacy of the tax (Batchelder, 2009: 3; Bird-Pollan, 2016: 879; Nagel, 2009: 119). Such a reform would make it easier for the public to see that the tax in practice is on the receiver, and thus help to deflate the double taxation argument which is one of the most persistent arguments against the tax. ³⁷ Furthermore, a tax on the receiver would encourage donors to distribute bequests more widely, assuming they are tax sensitive, and thus curbing the concentration of transferred wealth (Duff, 2016: 911; Fleischer, 2017: 31; Repetti, 2001: 858). In addition to this incentive-oriented argument, Fleischer appeals to fairness considerations when she argues that from an equal opportunity perspective, the focus should be on the receiver rather than on the donor. The tax burden should depend on what a person receives rather than what she gives. With an estate tax, a person can receive bequest from many donors without paying taxes (since the tax is levied on the estate), while with a cumulative accession tax that includes increasing marginal rates, the tax burden would be much higher, and thus help realize the ideal of equal opportunity (Fleischer, 2017: 31). Both these arguments were, as previously emphasized, among Mill’s primary arguments for taxing the recipients.

Finally, we would like to note that the relevance of Mill’s scheme is not limited to the US. Dependent upon context, a tax reform along the lines suggested by Mill can take two forms: If the inequality in the country is higher than it should be (according to the electoral majority), and the wealth transfer tax is low, the wealth transfer tax can be utilized to increase the progressivity of the tax system and reduce inequality. If, on the other hand, the country does not have too high inequality (according to the electoral majority), and the inheritance tax is low, the tax system can be made more efficient by increasing the inheritance tax and lowering the income tax. In both cases, the argument provided in this article maintains that it is likely that such reform could make the system more just without producing substantial negative incentive effects.