Religiously Based Ethical Arguments Favoring Estate Taxes
Susan Pace Hamill
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.
Religiously based ethical arguments can only legitimately be made to those who have chosen that moral compass to guide their life. It is reasonable to assume that individuals belonging to a religious organization or who have publicly revealed their affiliation (such as on a website, which public officials often do) have adopted those ethical principles. Many Americans claim to follow Christianity in some form, and among conservatives, conservative evangelical Christianity often dominates the religious sphere. Although too many conservative evangelicals erroneously argue otherwise, those truly following the moral principles of Judeo-Christian ethics must support some form of estate taxes. This essay summarizes my scholarship backing up this argument, which relied on the finest conservative evangelical commentaries interpreting the Bible.
For conservative evangelicals, the Bible is the only ethical authority relevant to contemporary ethical issues. Proper interpretation and application of the Bible first determines the broad ethical principles established for the original audience, then applies those principles to “genuinely comparable situations” in modern life. This requires much more than merely reading selected English translations of passages. Rather, it is necessary to study the ancient text’s historical and cultural context.
Tax policy, which legally defines the level of tax revenues to be raised and how the burden for paying taxes will be borne among taxpayers enjoying different levels of income and wealth, is a barometer identifying the true moral compass of any community. Striking a balance between the common good and reasonable rights to own private property, a conservative, evangelical, and biblically-based tax policy requires an adequate level of tax revenues in order that all persons enjoy a reasonable opportunity to reach their potential. Charitable giving is also important towards fostering this goal. The Bible commands generosity, while recognizing that, since greed permeates the human condition, charity cannot replace adequate tax revenues.
Tax policy analysts describe tax burden allocation models as regressive, proportional, or progressive. Regressive taxes are inversely proportional to income and wealth and especially punish the poor and lower middle classes. For this reason, the moral principles of Judeo-Christian ethics condemn regressive taxes as a form of biblical oppression. More complicated analysis is required to morally evaluate the proportional models and the numerous variations of progressive income tax models, as well as the estate tax. Proportional income tax models impose roughly the same tax burden as a percentage of income. Progressive tax structures increase the tax burden as the taxpayer’s income and wealth grows.
On the income tax side, the Judeo-Christian teachings on wealth morally condemn proportional models because such models enormously benefit the wealthiest taxpayers — at the significant expense of the middle and upper middle classes. Because mildly progressive income tax structures closely resemble proportional models, these teachings require some form of moderate progressivity. Although Judeo-Christian ethics cannot be invoked to support steeply progressive income taxes that reach confiscatory levels, nevertheless, these moral principles still require some form of estate taxes.
A biblically based defense of estate taxes must start with the book of Genesis, which reveals God as the sole creator and owner of all the earth’s wealth and resources, and as the divine source of every person’s innate talents. Although the ability to garner higher levels of income and wealth varies widely among individuals, those with less innate talent are qualitatively just as important as those with more. Individuals identifying with a Judeo-Christian based moral compass cannot claim exclusive and unlimited ownership of wealth because they earned the wealth, or because they are entitled to the wealth by virtue of their family status. Numerous other biblical references gravitate towards three additional points that broadly establish moral principles that directly support estate taxes.
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.
Finally, Judeo-Christian teachings clearly indicate that some extremes of wealth accumulation are per se unjust under any circumstances. Totally eliminating estate taxes would allow donors, even those with estates reaching billions of dollars, to transfer their wealth to their heirs without limit. This would geometrically and unacceptably compound, favoring those already enjoying the greatest share of God’s resources. Even more troubling, eliminating estate taxes will concentrate gigantic levels of wealth with those who did not earn it and would lead to unchecked accumulations of family dynasty fortunes.
Wealthy individuals who fail to recognize their moral obligation to support progressive taxes — including some form of estate taxes — implicitly assume that their own efforts, rather than God’s grace, produced their wealth. This position reflects objectivist ethics, which state that each individual pursuing their long-term best interest is the path to moral superiority. As a moral compass, objectivist ethics is dead on arrival for any person claiming Christianity. Objectivist ethics, a form of atheism, allows each individual to act as their own god, thereby denying God as the divine owner of all resources and the sole creator of innate talent.
Judeo-Christian moral principles do not pinpoint the exact details defining a morally superior estate tax model. The most important issues establish the exempt amount (including permissible lifetime gifts that the donor can make without counting towards the exempt amount) and the tax rates applicable to estates above that amount after reducing the estate by donations to charity. But Judeo-Christian ethics do offer general guidelines to frame the moral conversation when debating these issues.
First and foremost, all tax policy questions must determine whether the wealthiest are paying their fair share. Although reasonable rights to enjoy private property are recognized, Judeo-Christian principles are still far more suspicious of wealth than they are protective of private property. Moreover, as greed constitutes an inescapable part of the human condition, the wealthiest tend to use their disproportionate power and influence to fight for the smallest tax burden possible.
If the estate tax structure already allows substantial wealth to be freely transferred to heirs, proposed changes that will increase this ability must be heavily scrutinized to determine whether these changes will unethically benefit the wealthiest at the expense of less estate tax being collected, and lead to fewer donations being made to charity. The estate tax exemptions exceeding five million (ten million for married couples) allowed in 2017 were certainly substantial. There is little evidence that any ethical scrutiny was taking place before the Tax Cuts and Jobs Act of 2017 more than doubled these exemptions, starting in 2018. Consequently, a strong argument can be made that the estate tax structure, as it currently stands, violates the moral principles of Judeo-Christian ethics.
The moral principles of Judeo-Christian ethics definitely require some level of estate tax exemptions permitting a reasonable transfer of wealth to heirs without having to pay estate taxes or donate the excess to charity. A decent argument can be made that the exempt amounts in place before the Tax Cuts and Jobs Act of 2017 changes, while generous, still fit within the outer parameters of Judeo-Christian moral principles. Substantially shrinking the exempt amount by cutting it in half or even reducing it to less than one million probably cannot be defended under Judeo-Christian moral principles. Exempt amounts this low deprive middle class families of giving their children the modest savings they accumulated over a lifetime of hard work.
Especially if exempt amounts are reduced, future conversations about estate tax policy might consider a graduated rate structure. Rather than apply a flat forty percent tax on the taxable estate, the rate structure could start with a smaller rate and gradually climb as the taxable estate gets larger, similar to the progressive rate structure of the federal income tax. A strong argument can be made that rates exceeding forty percent should apply to the very largest taxable estates, for example those exceeding one billion dollars. Especially for taxable estates not among the largest (for example those well under 50 million dollars), calculating the ultimate estate tax could factor in the number of heirs, imposing less tax on estates spreading out the wealth among more children and grandchildren and a greater tax on estates concentrating the wealth among fewer. This would address ethical concerns about excess amounts being overly concentrated to those who did not earn it.
Like all tax policy issues under debate, different people adhering to the moral principles of Judeo-Christian ethics will reach different opinions concerning the precise details establishing a morally superior estate tax model. It is important that, when having this conversation, people claiming Christianity — especially those enjoying higher levels of income and wealth — avoid resorting to the kind of unacceptable individualism promoted by objectivist ethics. If the moral conversation during the debate honestly reflects genuine Judeo-Christian values, the details surrounding the resulting estate tax policy ultimately adopted has the greatest chance of falling within a morally acceptable range. ♦
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.
Hamill, Susan Pace. “Religiously Based Ethical Arguments Favoring Estate Taxes.” Canopy Forum, April 13, 2021. https://canopyforum.org/2021/04/13/religiously-based-ethical-arguments-favoring-estate-taxes.