The estate tax written about by Dr. Mankiw in the NY Times this morning catches us between two ethical intuitions. On the one hand, we think, in general, that Dr. Mankiw can use his money as he desires, including passing it on to his offspring. On the other hand, we are less than certain that his children deserve to receive it. This is not a judgment of his children, I have no idea what they are like, but rather of our general skepticism about how much advantage one should derive simply from being born to the right parents. However, the use of the tax code to encourage certain uses of money is not unique to the estate tax.
If Dr. Mankiw were to buy something he would pay a sales tax. If, on the other hand, he were to give his money to fight malaria he would not only not be taxed, but actually receive a tax break. There are also tax breaks that encourage not only charity but also home ownership and health insurance. They are large tax breaks, the government spends four times as much subsidizing the homes of the wealthiest 20 percent of the government as they do subsidizing housing for the poorest 20 percent. (This is often overlooked because subsidies to the wealthy are through tax breaks while those to the poor appear in the budget as direct spending, see: Hidden Government Spending in the Tax Code).
Although the tax code is partially structured around the power of lobbying, it also reflects a general ethical belief that certain uses of money are actually better than others. The estate tax reflects the belief that passing on income to ones offspring is a generally undesirable use of money; not forbidden, but taxed heavily.
To an economist, the way money is employed is a neutral question of individual preference. To a philosopher, however, some uses of money are ethically superior to others, and different taxation rates are one way a society can choose to reflect that. You may, of course, disagree, but democracy allows us to settle that disagreement through the process of law. Philosophers like Michael Sandel have long argued that there is no way to dodge the hard questions of living together as a community and seeking the common good.
P.S. If you read the Mankiw article you’ll note that he talks about taxes and incentives more generally, not just the estate tax. I will be posting about that shortly.