The federal estate tax imposes a tax on the wealth that individuals leave their heirs. This tax only applies to the very richest — well under half a percent — of all persons in the United States. Generous exemptions allow millions to be inherited without any estate tax. Moreover, the donor can mitigate the tax by making lifetime gifts and by transferring their wealth to charities. In 2017, for the estate tax to even apply, estates had to exceed $5.49 million ($10.98 million for married couples). In 2018, these exemptions more than doubled. Now, for 2021, the exemptions are $11.7 million ($23.4 million for married couples). Estates exceeding the exempt amount, after being reduced by donations to charity, are currently taxed at forty percent. A highly progressive tax, the estate tax helps the super rich in bolstering shortcomings in the progressive income tax structure.
Especially in recent times, estate taxes have attracted heated debate. Those who favor increasing estate tax exemptions, or eliminating the estate tax entirely, argue that estate taxes unfairly punish hard work and savings while encroaching on individual autonomy. Those who support estate taxes argue that these taxes mitigate the amassing of vast fortunes, properly tax privileged individuals, and encourage significant donations to charity.
Evaluating estate tax policy, like evaluating the fairness of tax policy generally, is ultimately a justice-based ethical issue for every voting citizen — especially for those holding public office. Ethical arguments favoring the estate tax mirror ethical arguments supporting progressive taxes in general. A person’s ethical framework, sometimes called their moral compass, is strictly a matter of individual choice. I often tell my students that only they can define their moral compass. Indeed, in establishing the separation of church and state, the First Amendment of the United States Constitution guarantees this freedom of choice.
First, the fundamental moral principle of Judeo-Christian ethics, summed up in the book of Luke — “to whom much is given much more is required” — means that those enjoying greater levels of income and wealth must bear greater shares of the tax burden. In his book Theology of the New Testament, Dr. Frank Thielman of the Beeson Divinity School has described this significant, sacrificial discipleship as holding on to one’s wealth with a “light grip.” In addition to generous charitable giving, holding on to one’s wealth with a “light grip” also requires those who have accumulated significant fortunes to bear estate taxes on a portion of that wealth transferred to heirs.
Second, numerous biblical references issue strong warnings that those who enjoy an abundance of wealth will be tempted to put their trust in and center their lives around wealth rather than God. Estate taxes help combat this temptation by providing an unlimited ability to shrink the taxable estate by donating the excess above the exempt amount to charity. This encourages individuals with large estates to make charitable donations consistent with the biblical commands that those with excess wealth should donate generously. In many cases, these charitable donations significantly reduce the taxable estate and in some even reduce it to zero. At the same time, estate taxes cannot be condemned as confiscatory, nor do estate taxes violate reasonable rights to enjoy private property. This is because donors are free to transfer the exempt amount to their heirs without paying any estate tax.
Susan Pace Hamill is a professor of law at the University of Alabama School of Law and a professor at the University of Alabama Honors College. Her scholarship evaluating tax policy under the moral principles of Judeo-Christian ethics has received national and international press coverage including a front page story in the Wall Street Journal, as well as feature stories in the New York Times, Washington Post and the London Times.
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