Last year’s estate tax debate was compelling on many levels.  One interesting aspect of the debate was that it forced those on both sides of the issue to consider — and articulate — their fundamental philosophical beliefs with respect to property rights, inheritance rights, and the role of taxation in our society.

Which is why I found an excellent research paper published by the IRS entitled "Federal Taxation of Inheritance and Wealth Transfers" especially thought provoking.  It contains the best summary I’ve read to date of the historical bases for the divergent philosophical world-views playing themselves out in the current estate-tax repeal debate.  The following is an extended excerpt that is well-worth reading for anyone remotely interested in the issue:

American ideas concerning the rights of individuals .  .  .  can be traced to the writings of English philosopher John Locke. Writing in the last half of the 17th century, he suggested that each citizen was born with certain natural, or God-given, rights; chief among those rights was property ownership. Citizens had a right to own as much property as they could employ their labor upon, but not to own excessive amounts at the expense of the rest of society. Further, he argued that the right to bequeath accumulated property to children was divinely ensured. “Nature appoints the descent of their [parent’s] property to their children who then come to have a title and natural right of inheritance to their father’s goods, which the rest of mankind cannot pretend to” (Locke, 1988:207). Likewise, Locke felt that a father should inherit a child’s property if the child died without issue. If, however, a person died without any kindred, the property should be returned to society. Government was established at the will of the people and was charged with protecting these rights, according to Locke. However, government had an even higher responsibility–to ensure the benefit of all society. When societal and individual rights clashed, suggested Locke, it was the civil government’s duty to exercise its prerogative in order to ensure the common good.

The idea that inheritance was a “natural right” was refuted nearly a century later by English jurist William Blackstone. In his 1769 Commentaries on the Law of England, Blackstone wrote that possession of property ended with the death of its owner and, thus, there was no natural right to bequeath property to successive generations. Therefore, any right to control the disposition of property after death was granted by civil law–not by natural law–primarily to prevent undue economic disturbances. Thus, Blackstone concluded that the government had the right to regulate transfers of property from the dead to the living. His interpretation of law “has served as the legal foundations upon which death taxes in Anglo-American tax systems rest” (Fiekowsky, 1959:22).

The belief that government was responsible for the protection of the general good, espoused by John Locke and others, laid the foundation for the Utilitarian movement in English social philosophy. Jeremy Bentham, one of the greatest proponents of Utilitarian philosophy, rejected the idea of natural rights. Instead, he stressed the higher goal of ensuring the general welfare. He and his followers believed in a government that played an active role in moving society toward that goal. Bentham, therefore, advocated strong regulation of inheritances “in order to prevent too great an accumulation of wealth in the hands of an individual” (Chester, 1982:18).

Yet, the idea of government actively engaged in promoting the general welfare was rejected by economist Adam Smith, a contemporary of both Blackstone and Bentham and the father of classical economics. Smith believed that an unregulated economy, driven by the natural interplay of selfish individual desires, would produce the greatest good for society. While he seemed to accept the government’s right to tax inheritances, he argued against it. He called all taxes on property at death “more or less unthrifty taxes, that increase the revenue of the sovereign, which seldom maintains any but unproductive labor, at the expense of the capital of the people, which maintains none but productive” (Smith, 1913:684). Later, economist David Ricardo, writing in the early 19th century, reinforced the idea. He suggested that English probate taxes, legacy duties, and transfer taxes “prevent the national capital from being distributed in the way most beneficial to the community” (Ricardo, 1819:192).

These, then, are the somewhat divergent philosophies from which Thomas Jefferson, in drafting the Declaration of Independence, developed his idea of Godgiven, or natural, rights that emphasize personal and political freedoms. Jefferson argued that the use of property was a natural right, but that the right was limited by the needs of the rest of society. Furthermore, he also argued that property ownership ended at death. While he did not call for abolishing the institution of inheritance, he did advocate a strong role for government in its regulation. As in other areas of American life, Jefferson heavily influenced later thinking about property rights, inheritance, and taxation by governmental bodies.