Yes, even Americans broadly accept the government is entitled to levy a tax on vast sums of inherited wealth. An heir left a $5 million estate, who has not lifted a finger to earn it, can hardly complain at receiving $4.3 million after the estate tax is levied. Well, they can complain, but too bad. Someone so fortunate to have ended up with the right father or grandfather or great-aunty is hard pressed to justify paying no tax on money inherited from these enterprising relatives while income earned through teaching or nursing, or through building up a successful business and selling it, is taxed. Yet in Australia the topic of an inheritance tax is taboo. The Henry tax review reported favourably on what it called a bequest tax. It recommended consideration be given to imposing a low tax on what the top 10 per cent of wealthy Australians leave behind after they die. Barely was the ink dry on Henry's report than the government erased the words from public consciousness. The issue is regarded as political suicide. Anyone 55 or older - namely baby boomers on the cusp of inheritance - vividly remembers the policy blunders of the 1970s that allowed middle-income estates to come within the grasp of inheritance taxes. While other countries facing the era's rampant inflation adjusted inheritance tax schedules so they applied only to the rich, Australia's failure to do so fuelled a middle-class revolt. Queensland premier Joh Bjelke-Petersen led the race to abolish inheritance taxes in 1977, and federal inheritance taxes ended in 1979.

Yet an inheritance tax - as former treasury secretary Ken Henry and a tribe of economists acknowledge - is an equitable and efficient way to raise revenue. It is consistent with Australia's egalitarian values. Australia should avoid spawning a generation of work-averse, bequest-dependent rich young things with waterfront mansions and fast cars they did nothing to deserve. Such a life is another form of welfare dependency. A modest inheritance tax may make it harder to acquire baubles such as the $1.2 million Rolls-Royce 25-year-old Ginia Rinehart reputedly has enjoyed - still leave heirs plenty to splurge on the good life. These past 25 years of free markets and globalisation have spawned unprecedented wealth for some. As the Henry review points out, vast fortunes will be transferred tax-free to the next generation in coming decades. The amount of bequests is estimated to rise from $22 billion in 2010 to $85 billion in 2030, much of it going, because of longer life spans, to middle-age people already well established in life. It is possible to devise an inheritance tax that overcomes the fears of ordinary people being caught in the net, as they were in the 1970s, and ensures farmers and small business people will not be ruined.

It is also possible to avoid tax minimisation by capturing gifts, including those in trusts, given during an extended period before death (except gifts for charity). Other countries have managed it. With the follies of the mega-wealthy in the news, it's time to start the conversation. An eloquent argument for bringing back the inheritance tax was put a few years ago by Andrew Leigh before he gave up his job as an economics professor and became a federal Labor MP. An inheritance tax would boost philanthropic giving in a nation of tight-fisted rich, he argues. "Australia's silvertails are more likely to leave behind rich children than well endowed foundations," Leigh wrote. "Few seem inspired by John D. Rockefeller's belief that 'anybody who dies rich dies disgraced'." Leigh estimated at the time that Microsoft's Bill Gates had given away a third of his income to charity while Kerry Packer at his death in 2005 had given away less than a 20th. The wealthy have little incentive to give to charity when they can pass their riches on to their children untaxed and leave the decisions up to the next generation.

An inheritance tax would spur them to reduce their tax bill through philanthropy instead of a forced contribution to Treasury's coffers after death. In the popular movie The Descendants, the George Clooney character utters some instructive lines about inheritance: "You give your children enough money to do something but not enough to do nothing." Some heirs handle money well with a sense of social responsibility; they don't let wealth sap their work ethic or ruin their lives. But there is wisdom in the Clooney line. An inheritance tax, targeted at the wealthy, is good for them and good for the rest of us. Follow the National Times on Twitter: @NationalTimesAU