Over the past few decades, the rate of private wealth accumulation has far outpaced real wages, creating a noticeable disparity for many younger Americans. If your parents can’t assist financially or live long enough to pass on their assets, you face significant economic challenges.

Political leaders are beginning to address the issue. Recently, the president highlighted that many young Americans feel they aren’t getting a “fair shot.” But neither major political party has presented a concrete plan to tackle the tax system’s role in driving inter- and intra-generational wealth inequality. Young workers often face higher effective tax rates than millionaires, property investors, and wealthy retirees due to various tax breaks.

“My economic security shouldn’t be determined by the financial resources of my parents, or in this case, by tragedy.”

The author underscores the inherent injustice in a system where economic security is tied to family wealth, highlighting personal experiences and societal impacts. The discussion often centers on how Baby Boomers enjoyed more opportunities compared to younger generations, who face challenges like rising education and housing costs and the climate crisis.

The current tax system is criticized for favoring private wealth accumulation over workforce contributions, leading to a significant wealth disparity among Americans in different age groups. For example, Baby Boomers will pass on an estimated $224 billion each year in inheritances by 2050. With an OECD average inheritance tax rate of 15 percent, the U.S. could raise around $34 billion annually. This substantial amount could fund crucial programs like free college education, comprehensive parental leave schemes, and affordable housing initiatives to help younger Americans build their lives.

But politically, taxing wealth, including inheritances, remains controversial. Many believe they should be able to pass on their hard-earned assets to their children. However, other voices feel stronger about achieving financial security through personal effort, not inheritance.

“Over 73 percent of younger people we surveyed would back an inheritance tax on estates worth over $1 million.”

This sentiment reflects widespread dissatisfaction among the younger generation, who view inheritance as an unfair advantage. This population is supportive of an inheritance tax to address economic inequalities attributed to inherited wealth. Nonetheless, a considerable portion of the populace holds the opposing stance, demonstrating the complex and contentious notion of inheritance tax.

Arguments for Inheritance Tax:

• Redistribution of wealth: Proponents assert that taxing inheritances can circulate wealth and decrease social inequality by redistributing resources to lower and middle-income families.

• Reducing government deficit: Revenue earned from inheriting tax can be used to finance public loans, infrastructure projects, and various social services, ultimately decreasing the government deficit and strengthening the nation’s financial health.

• Promoting social mobility: By decreasing reliance on inherited wealth, inheritance tax can motivate hard-earned success, meritocracy, and social mobility. It provides incentives for hard work and talent development, encouraging individuals to pursue their dreams and potential without depending on inherited riches.

Arguments Against Inheritance Tax:

• Taxing inheritance might result in lower investment in business, as prospective businesswomen and businessmen may hesitate to invest in expansions or diversifications, receiving lower revenue from currently profitable industries than from those having the potential to produce greater, delayed gains. Knowing future taxes on inheritance may influence entrepreneurs’ investment strategies and business growth.

• Belief in Property rights: Critics argue that people have the right to bequeath their individually acquired wealth to their offspring or descendants without government interference. From this viewpoint, inheritance tax represents an unmerrited violation of personal property rights and a restriction on individual liberty.

Addressing the unfairness of economic inequality caused by wealth disparities is about more than just redistributing wealth; it’s about ensuring fair tax structures that reward hard work and merit over fortune’s hand. In other words, why should a better shot be purely chance or luck of the draw? The assimilation of inheritance tax in the U.S. could be a significant step beyond seeing the United States as the “promised land” where everyone has an equal opportunity for success. We must build a tax system that supports younger generations in building their own financial security, not through inherited millionaire wealth security, but through their effort.