I have been thinking about inheritance tax and the way some governments impose rates of 40 or even 50 per cent on wealth that passes from one generation to another. The more I think about it, the less economic sense it makes, particularly when the people affected are founders, investors and business owners who spent decades building productive assets.
If a family has to sell part of a business or another productive asset merely to pay the tax due after its owner dies, the loss is not limited to the amount paid to the government. The family also loses the future value that the asset could have produced, while the country may weaken a company that employs people, pays taxes, supports suppliers and creates opportunities for smaller businesses.
That is the part of the conversation that governments often appear to ignore. An asset that has to be sold today cannot continue multiplying indefinitely for the family that built it, and if the buyer does not have the same commitment to the company or the country, the wider economy may also lose something that cannot easily be calculated.
People who build substantial wealth do not usually begin thinking about it only when they become wealthy. Unless someone becomes a billionaire accidentally, the person has probably spent years thinking about ownership, succession, investment, risk and where to locate assets. When a country makes the transfer of those assets unnecessarily punitive, the person can plan around the country entirely.
Capital is mobile, and wealthy people are increasingly mobile too. A person may leave, establish tax residence elsewhere and continue buying assets in the original country from outside it. The asset remains in the country, but the owner no longer has the same personal or tax relationship with the country. If the person later transfers the ownership to children or grandchildren, the outcome may be completely different from what it would have been if the family had remained resident.
How does that arrangement reward the citizen who wanted to stay, build and maintain an emotional connection to the country? How does it make sense to impose the heavier burden on the person whose life, family and business remain rooted there, while someone who owns comparable assets from outside the country may have considerably more freedom?
Tax residence is also an emotional decision
Being tax resident somewhere is more than completing forms and counting days. For many people, it reflects a decision to build a life in that country, raise a family there, contribute to its economy and allow their identity to become connected to its future.
That emotional connection matters. A founder who feels rooted in a country is more likely to build lasting institutions there, mentor younger entrepreneurs, reinvest capital locally and continue supporting the economy even when short-term opportunities appear elsewhere. A multinational company can enter a market, earn revenue and leave when the conditions become unattractive because its deepest relationships are somewhere else. A citizen or long-term resident with genuine emotional ties behaves differently.
Governments should therefore be careful not to treat the wealthy as though their presence is guaranteed. The people capable of building billion-dollar companies are not available in unlimited numbers. Relatively few people possess the combination of ambition, endurance, judgment, appetite for risk and ability to organize other talented people that is required to build a company of that scale.
When a country finds such people, it should create reasons for them to stay, build and reinvest. This does not mean that wealthy people should pay nothing or live outside the law. It means that governments must understand that the competition for founders, investors and highly productive people is now global. These people can choose where to live, where to establish their companies and where to plan the futures of their families.
There are well-known examples of technology founders who changed residence or citizenship before major liquidity events because of the taxes they expected to pay. Whether one agrees with those choices or not, the lesson for governments is that people respond to incentives. A government can declare that a tax is fair, but if the result is that productive people leave, future companies are built elsewhere and the tax base becomes smaller, the policy may have achieved the opposite of what was intended.
How many times should the same value be taxed?
Consider the life of a company. The company pays corporation tax on its profits. It may collect or pay consumption taxes, withhold taxes on qualifying transactions, remit payroll taxes and make pension or other statutory contributions for employees. Its owners and employees may also pay personal taxes on the income they receive.
After the founder has spent decades building the company, creating employment and meeting these obligations, the government may demand a substantial percentage of the accumulated estate when the founder dies. If most of the estate consists of shares in the company rather than cash, the family may have to sell part of the business to pay the bill.
I struggle to understand how that supports long-term economic growth. If the objective is to create a wealthy society, public policy should encourage productive assets to survive across generations, provided that the companies continue obeying the law, paying appropriate taxes and creating value. Destroying continuity does not automatically create equality.
Ownership itself may ultimately be temporary. None of us will remain here forever, and in that sense our claim to own anything is limited. However, society is organized around the idea that people can acquire property, control productive assets and decide how those assets should move. As long as that understanding remains part of our economic system, people will naturally care about preserving what they have built and determining how it passes to the next generation.
A government that ignores this basic motivation should not be surprised when people reorganize their lives to protect that control.
Redistribution cannot replace production
The argument for high inheritance taxes usually begins with inequality. Some people believe that concentrating wealth across generations is unfair and that government should use taxation to narrow the gap between the rich and the poor. I understand the concern, but I do not believe that repeatedly taxing accumulated wealth is the most effective way to produce a prosperous and fair society.
Government cannot distribute what the economy has not produced. A society may temporarily finance extensive programmes through heavy taxation, but if its policies discourage investment, enterprise and productive risk, economic growth will eventually slow. When that happens, there is less wealth to distribute, fewer good jobs and increasing pressure on the same public services the taxes were intended to fund.
Government must be responsible and should not see itself as the saviour of every person. A society that does not demand responsibility from its citizens, institutions and business leaders will eventually struggle, regardless of how generous its welfare promises appear. Support should exist for people who genuinely cannot care for themselves, but the primary ambition of public policy should be to expand people’s ability to become productive, independent and prosperous.
Businesses have repeatedly demonstrated their capacity to solve problems, build infrastructure, employ people and distribute useful products at scale. Government has an essential role, but it should concentrate on creating fair rules, maintaining law and order, protecting rights, enforcing accountability and establishing guardrails against exploitation. Prosperity and growth should remain central policies of government rather than accidental outcomes it hopes will survive an increasingly hostile environment.
Build equality of opportunity through education
If we genuinely want to narrow the gap between rich and poor, the first priority should be the quality of education. A society should provide every child with the intellectual foundation required to compete, create and participate in a modern economy.
This means investing substantially in science, technology, business, economics and financial literacy from early childhood through university and advanced study. Education should brighten the minds of children, develop their capacity to reason and give them the tools to understand how value is created. A highly competitive educational system will solve more long-term problems than welfare programmes that manage poverty without expanding capability.
The strongest public education should be available regardless of a child’s family income. If education from the earliest years through university, master’s and doctoral study can be made broadly accessible, society gives people a genuine platform from which to compete. Some people will still build more wealth than others because people have different ambitions, gifts, appetites for risk and life choices, but poverty will no longer be reinforced by the absence of basic opportunity.
Education should also avoid becoming a battleground for every religious, political or social ideology. Its core purpose should be to develop knowledge, judgment, productive skills and a shared understanding of the limited civic responsibilities on which the society has genuinely agreed, including respect for law, responsibility to the community and the defence and preservation of the nation.
A wealthy society is not necessarily one in which everybody possesses the same amount. It is one in which basic opportunities are widely available, people can move through life with dignity, and those who are unable to work are cared for without requiring productive citizens to abandon ambition.
Build a justice system people can trust
The second requirement is a justice system that is transparent, efficient and fair. Justice should not depend entirely on whether someone can afford the most expensive lawyer, and people should not lose legitimate cases merely because of avoidable technicalities that have nothing to do with the truth of the dispute.
Businesses invest where contracts can be enforced, property is protected and disputes can be resolved within a reasonable period. Citizens also thrive where they know that wealth, status and political connections do not place someone beyond accountability.
Serious offences, particularly violent and sexual offences, require serious consequences because they invade another person’s safety and dignity without consent. Repeat offences should not be treated casually. At the same time, justice should leave room for rehabilitation where the evidence supports it, especially when young offenders demonstrate genuine remorse and sustained change.
Some of the most effective correctional systems combine accountability with education, humane treatment and preparation for life after release. Their success should remind us that facts matter more than the emotional satisfaction of punishment. If a contrarian approach reduces reoffending and makes society safer, we should be humble enough to study why it works.
The act of mercy and the act of forgiveness should also be taught as civic virtues, but mercy must not become permission for repeated harm. A just society should know how to hold people accountable while still believing that human beings can change.
Business owners must accept responsibility too
Rejecting punitive inheritance taxes does not mean business owners have no responsibility to the societies in which they prosper. In fact, I believe their responsibility should become clearer as their businesses and personal wealth grow.
Instead of simply imposing another tax, society can establish transparent expectations for the measurable contribution of large businesses. As a company reaches significant valuations, it should demonstrate how it is creating employment, developing suppliers, educating people, supporting entrepreneurship or helping households move out of poverty. The measure should not merely be how much money the owner donates, but how much sustainable prosperity the business creates around itself.
A company worth hundreds of millions or billions should be able to show the number of people whose economic lives have improved because it exists. Government can create reporting standards and guardrails around these commitments without attempting to operate the businesses itself. The capital market, citizens, customers and shareholders can then evaluate whether powerful companies are contributing fairly to the societies that enabled them to grow.
This is different from assuming that government can close the wealth gap simply by taking assets from one group and distributing the proceeds to another. The more durable objective is to multiply the number of people who can create value, own assets and build companies of their own.
Government should create the conditions for prosperity
The proper work of government is to maintain fairness, law and order while creating conditions in which people can prosper. It should set guardrails, prevent abuse, enforce contracts, protect citizens and ensure that markets remain genuinely competitive. It should not try to make every commercial decision or treat successful people as an unlimited source of money for policies that have not produced sustainable growth.
There are countries that have built enormous national wealth by thinking across generations, investing resource income through sovereign funds and using the returns to support long-term public prosperity. The lesson is not that every country must copy one national model exactly. The lesson is that governments can build shared wealth without becoming hostile to private ambition.
The best system will require responsibility from everyone. Citizens must pursue education and productive work where they are able. Business owners must create value, treat people fairly and contribute measurably to the development of society. Wealthy families must understand that their companies exist within communities whose stability made their success possible. Government must provide credible institutions and resist the temptation to consume tomorrow’s prosperity for today’s political approval.
Inheritance tax should therefore be evaluated by more than the amount it collects in a particular year. Governments should ask how it changes behaviour. Does it encourage founders to stay? Does it preserve productive businesses? Does it attract long-term investment? Does it deepen people’s emotional commitment to the country, or does it teach them to arrange their assets and residence elsewhere?
The wealthy will plan. They will seek advice, restructure ownership, change residence or move capital when the cost of remaining becomes irrational. The people who cannot move will be left to bear the consequences of an economy that has lost some of its most productive builders.
A country should not confuse taxing wealth with creating prosperity. Prosperity comes from education, enterprise, trustworthy institutions, personal responsibility and a culture that allows productive people to build at extraordinary scale while requiring them to contribute fairly to the society around them.
If a government wants people to build for generations, it must create a country in which they also want their families to remain for generations. That emotional commitment cannot be commanded, and it cannot be taxed into existence. It must be earned.
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