The Estate Tax and Universal Basic Income: Who Deserves What?

I just spent a couple of days in Vienna, Austria at a conference. The upcoming Austrian elections were the talk of the town. One of the major parties is campaigning in part on the promise of introducing an estate tax for all estates about 1 million Euros. Austria has a wealth distribution that is also highly concentrated with the top 1% of the population controlling 40% of total wealth.

Also during the last couple of days the new tax proposal by the Trump administration includes an elimination of the estate tax, despite the current exemption being already more than $5 million. Put differently, only estates above $5 million pay estate tax. The argument that this forces millions of farms and small businesses to be sold has been thoroughly debunked as most of them fall below this threshold.

To me the most fascinating aspect of the estate tax debate is how it relates to the justification for a universal basic income (UBI). One of the objection to a UBI is: what have people done to deserve it? The answer of course is that people don’t need to have done anything to deserve it. We can afford UBI because we collectively have inherited the technological, social and economic progress made by the generations that came before us.

Often the very people who want to eliminate the estate tax are the ones bringing up the “but they don’t deserve it” objection to UBI, seemingly oblivious to the complete logical contradiction this entails. So: if you believe that anyone deserves to inherit significant money from their parents, then you have no standing question whether people deserve a UBI.