Halliday, Daniel. The Inheritance of Wealth: Justice, Equality, and the Right to Bequeath. Oxford: Oxford University Press, 2018. Pp. 256. $42.95 (cloth).

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Previous articleNext article FreeBook ReviewsHalliday, Daniel. The Inheritance of Wealth: Justice, Equality, and the Right to Bequeath. Oxford: Oxford University Press, 2018. Pp. 256. $42.95 (cloth).S. Stewart BraunS. Stewart BraunAustralian Catholic University Search for more articles by this author PDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreThe lack of direct attention that has been paid by political philosophers to the moral issue posed by inherited or bequeathed wealth is somewhat striking. While economists and political scientists have written books over the past forty years or so squarely addressing inheritance, I am aware of only one sustained examination of the subject by a philosopher: D. W. Haslett’s Capitalism with Morality (Oxford: Oxford University Press, 1996). In his excellently argued and highly original new book, The Inheritance of Wealth, Daniel Halliday effectively fills that gap.Halliday’s main contention is that it is necessary to effectively tax inheritances or bequests because they are “flows” of unearned wealth, which over time lead to the type of economic segregation or inequality that is corrosive to a fair and equal society. The Rawlsian tone of this argument is unmistakable, and that is something Halliday acknowledges up front—in fact, he claims that one of his main aims is to explain why Rawls was right to call for the taxation of bequest and inheritance (3). If inheritance is a flow of wealth through families, then, when it is not properly taxed, it allows for the dynastic succession of wealth and the creation of a privileged class with the power to undermine the structure of a fair society.A more subtly argued, but no less important, point of the book is Halliday’s claim that when properly taxed, inheritance and bequest can play important roles in upward social mobility and securing a fair capitalist market system. Fundamental to this position is his endorsement of a Rignano tax, which works by taxing inherited wealth progressively according to its age or, more specifically, the number of times it has been passed down. Halliday contends that the implementation of a Rignano tax will prevent dynastic concentrations of wealth while at the same time protecting incentives for productive work and allowing inheritance to serve as a vehicle for the upward social mobility of poor families. Although the Rignano tax seems appropriately sensitive to work and savings incentives, it is rather less clear that it will prove effective in preventing dynastic concentrations of wealth because it appears to allow the process to begin, a point I expand on below.The Inheritance of Wealth begins with two chapters largely devoted to analyzing historical approaches to the issue of inheritance and bequest. Although these chapters are primarily preparatory, they are especially enlightening because, apart from the usual characters such as Smith, Locke, and Mill, the views of other lesser-known figures such as William Godwin, Eugenio Rignano, and Josiah Wedgwood are also canvassed. As evidenced by the fact that Halliday adopts Rignano’s tax proposal, he is appreciative of the advances made by an earlier generation of theorists, even if he rightly criticizes some of the underlying presumptions and motivations of those accounts.A later chapter entitled “Libertarianisms,” though less central to the main argument, is also of considerable value for the manner in which Halliday constructively engages a school of thought that in its right-leaning versions is almost always opposed to the taxation of inheritance or bequest. The central claim of this chapter is that a robust capitalist system in which economic rights and freedoms are secured is best protected when there is real competition and an effective dispersal of wealth and power. The proper taxation of inheritance and bequest, especially if structured along the lines of a Rignano tax, plays an important role in the creation and sustainment of those conditions. Consequently, there is little reason for libertarians to reject inheritance taxation outright. Moreover, a tax on bequest or inheritance seems preferable to other, more intrusive forms of taxation on labor income. In the end, Halliday does a nice job of attempting to bridge the gap between liberal egalitarian and (soft/economic) libertarian approaches to inheritance.However, the heart of the argument occurs in chapters 4, 5, and 6, where Halliday diagnoses the injustice of improperly regulated inheritance as arising from its causal role in the unwarranted creation of economic segregation. Drawing inspiration from Pierre Bourdieu, Halliday claims that wealth attracts valuable nonfinancial capital such as exclusive opportunities, access to influential social networks, knowledge of social systems or institutions, and important cultural or behavioral norms that confer significant advantages on their possessors. When a small group in society substantially controls important forms of nonfinancial capital, pernicious status hierarchies can develop as a result. Inherited or bequeathed wealth plays a fundamental role in this process by serving as a vehicle by which nonfinancial capital is horded and maintained by an elite group through the intergenerational transfer of substantial financial wealth.This argument is a real strength of the book because it responds to an oft-repeated objection that bequests and inheritances are typically received too late in life to have any appreciable impact on people’s opportunity set or social standing. Once inheritance is conceptualized as a flow of wealth over time, that objection no longer has any force. A future inheritor need not actually possess the wealth to benefit from the nonfinancial capital that the family has accumulated as a result of holding the wealth over time. In other words, if substantial wealth has existed in the family for a couple of generations or more, then nonfinancial capital will have accrued to the family so that the eventual beneficiary will already have reaped significant social advantages before the bequeathed wealth even arrives.Another point in favor of this account is the way that it insightfully combines luck and social egalitarian justifications of taxation. What makes inheritance unjust is not simply that it is contingent, à la luck egalitarianism, or that, per social egalitarianism, it may be a cause of social distinctions, but rather that it is an arbitrary cause of privilege that ultimately ends up grounding unacceptable status hierarchies. So basically, the problem with untaxed inheritance or bequest is that it generates inequality that has no good justification. This argument grants Halliday the space to claim that inheritance is acceptable when it is properly taxed since, instead of generating objectionable inequality, it could serve as a vehicle for upward mobility among poor families by enabling them to gain the wealth and nonfinancial capital they need for increased opportunity. As Halliday states, “first-generation inheritance may be a valuable means of promoting upward mobility … there is nothing wrong with wealth attracting valuable nonfinancial capital if this is what enables people to get out of poverty” (154).Although Halliday’s argument is convincing, his position could be further bolstered by appealing to the idea of social solidarity. Since Halliday is worried about the way that economic segregation can lead to the poor being “demonized” as lazy or somehow deserving of their situation (113), an appeal to solidarity would appear to usefully complement Halliday’s approach. Severe economic segregation and the demonization narratives that accompany it clearly run against social solidarity and a supportive community ethos because they treat a segment of the population as unworthy of social concern. So, unregulated bequest or inheritance not only allows “certain groups … to monopolize superior life prospects for their members” (101; emphasis mine), as Halliday claims, but also hinders the development of a community ethos and a sense of mutual concern. In contrast, an effective tax on large bequests or inheritances would display a commitment to solidarity since the tax would allow unearned wealth to be invested back into the community through various educational and social programs. Therefore, the inclusion of solidarity within the justificatory framework of Halliday’s argument would provide an alternative (broadly moral, but nonjuridical) source of warrant for the taxation of bequest that is consistent with his concerns about the social mobility of the poor.The largest quibble I have with the book, however, is the more practical claim that a Rignano tax will effectively prevent the dynastic concentration of wealth and the inequality that accompanies such an occurrence. Halliday’s support for a Rignano scheme is primarily motivated by two concerns: (1) the existence of economic segregation and (2) a concern not to disincentivize entrepreneurial activity or investment saving. A Rignano scheme purportedly addresses both concerns because it chips away at an original inheritance as it is passed down through the generations, thus purportedly preventing the dynastic accumulation of financial and nonfinancial capital. However, since any newly created wealth can initially be passed on free from taxation or at a significantly lower rate, the Rignano scheme does not disincentivize wealth creation or entrepreneurial activity.To illustrate using Halliday’s example (62), imagine an individual G1 who leaves $100 to her offspring G2 with a Rignano tax scheme in place with rates that increase from 0 percent to 50 percent and then to 100 percent per iteration. Because G1 generated the $100, she can pass it on tax free to G2. However, when G2 wants to bequeath the $100, it will incur a 50 percent tax. Hence, unless G2 creates additional wealth beyond the original $100, G3 will only receive $50. Assuming that G3 creates no additional wealth, her bequest will be taxed at 100 percent and G4 will receive nothing. According to Halliday, this prevents the dynastic succession of wealth and helps to limit economic segregation because families will not be able to use inherited wealth to ensure the maintenance of their nonfinancial capital.But I worry that in contrast to a more traditional tax that is strongly financially progressive, a Rignano scheme allows economic segregation to start. This concern is borne out even in the extreme example of the Rignano scheme just discussed, and it is likely to be even more pronounced in real-world examples where the step-up would be expected to be less severe. The problem is that G1 can pass on all of her estate (or G2 can inherit all of G1’s bequest) tax free, or at least at a substantially reduced rate. This means that both G2 and G3 are likely to gain substantial benefits from G1. G2 is likely to benefit from the general wealth of her parent(s) and the economic cushion that an inheritance will provide, while G3 is likely to be in a position to also benefit from nonfinancial capital that would have had two generations of time to develop. Importantly, as Halliday notes, sociologists have shown that the wealth of a person’s grandparents is a better predictor of the person’s lifetime income than the wealth of her parents. This “grandparent effect” (123) is likely to enhance the position of G4 as well since, even though she will inherit nothing, her grandparent was G2, who did inherit a substantial sum. It could even be surmised that G5 will remain in a privileged socioeconomic position given that his grandparents were G3, who still inherited something of substance. Furthermore, all of the foregoing still assumes that the generations following the initial bequest/inheritance did not use that inheritance to further grow their wealth. If a significant inheritance provides socioeconomic advantages, then it is likely that some of the later generations will have used those advantages to grow their wealth. So, I am not convinced that a Rignano scheme will effectively prevent the type of dynastic succession and economic segregation that Halliday is worried about.In contrast to a robust Rignano scheme, a strong, financially progressive inheritance tax prevents G1 from transferring a large portion of her wealth to G2 in the first place. It therefore prevents the chain of transmission from getting started. Hence, it would likely prove more effective in limiting the development of economic segregation. Moreover, even though the tax is financially progressive, that fact does not mean that G2 cannot inherit enough to help her or her progeny escape poverty, if they were poor. Certainly, a progressive tax could be calibrated to allow persons to inherit moderate amounts of wealth.Of course, a strongly financially progressive tax could potentially damage incentives for savings and work activity. For example, if G1 is aware that any substantial bequest will be heavily taxed, then she may lack the motivation to work and save as diligently as she would have otherwise. However, this worry is likely to be overstated. There is some good evidence suggesting that the possibility of bequeathing wealth has very little impact on people’s work, savings, and consumption behavior (see, e.g., Christopher D. Carroll, “Why Do the Rich Save So Much?,” in Does Atlas Shrug? The Economic Consequences of Taxing the Rich, ed. Joel B. Slemrod [New York: Russell Sage Foundation, 2000], 465–84). And Halliday himself is critical of the idea that an inheritance tax will lead to appreciable declines in savings (178–83). But even if it is assumed that a robust inheritance tax damages the incentive for work and savings, that would not yield a particularly strong argument against instituting a robust tax. If the overriding normative concern is to prevent economic segregation and the best way to do that is through a progressive tax structure, then it is probably worthwhile to accept a small diminution in savings or work in return for greater material and social equality.To be fair to Halliday, he never directly argues against the principle of financial progressivity, and he is open to the possibility of combining financial progressivity with the Rignano principle of progressivity through time (8, 65). His argument is directed more toward the idea of reducing the power and influence of “old money,” to which a Rignano tax is uniquely sensitive. Nevertheless, I would still emphasize the importance of financial progressivity in preventing the start of any possible dynastic succession of wealth and nonfinancial capital. A Rignano scheme seems a weaker, second-best option on that matter.If there is a tangible benefit of a Rignano scheme, it would seem to lie in the realm of political messaging. In many English-speaking countries, inheritance taxes have been eliminated or rendered defunct. For instance, in the United States individual testators are granted an exemption of up to $11.4 million, and there are currently no federal or state taxes in Australia. A common explanation for this situation is that voters simply think that it is unfair that their hard-earned life savings are taxed. Since in a Rignano scheme tax is paid only on previously inherited wealth, what an individual earns and saves him- or herself could be passed on to the person’s offspring or friends tax free. This would seemingly render the institution of the tax more palatable to everyday citizens, and it would enable some meaningful form of taxation to start again.Overall, The Inheritance of Wealth presents a robust justification for the taxation of inheritance or bequest, one that easily overcomes the myriad objections that have been leveled at that form of taxation. In that vein, it provides philosophers, policy makers, and the general public with a clear prescription for a fairer, more effective system of taxation and, indeed, a more just society. And although I am less sympathetic to a Rignano tax scheme than Halliday, he deserves credit for bringing renewed attention to it and demonstrating how the scheme could serve as an important tool for liberal egalitarian theorists. Ultimately, there is little doubt that the book will serve as the foundation for much further normative theorizing on the topic of inherited wealth. 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