2.4.8 The justification of less pain

It was argued that death taxes might be justified on the ground that they satisfy Adam Smith’s requirements for a “good” tax. One of these requirements is that, “[e]very tax ought to be levied at the time or in the manner, in which it is most likely to be convenient for the contributor to pay it.”1 In Smith’s view, taxation should be imposed when it does not inconvenience the taxpayer (“the justification of less pain”). Although Adam Smith was referring to “rents, profit and wages”, one could argue that the levying of death tax on the inherited property results in the beneficiary being less resistant to the taxation of his inherited property than taxpayers with regular or recurring receipts.2 This is because i) he receives property from which the inheritance tax will be ultimately paid, and ii) he does not yet own the wealth (so taking some of it in taxes seems to be convenient).

One must nevertheless acknowledge that the justification of less pain, under which a beneficiary is less likely to be vexed by a death tax than other taxpayers, seems to be a “weak” justification of death taxation. It requires a comparison between the beneficiaries and other taxpayers (so that in such a case, it overlaps the tax equality justification) without explaining why a separate death tax needs to be levied on mortis causa transfers of property. Furthermore, in my view, the emotionally charged moment of death may not be perceived by all taxpayers as the most suitable moment for taxation. Moreover, Adam Smith’s requirements build on the premise that taxes produce meaningful revenue, something that is not the case with death taxes as mentioned in section 2.3. Finally, Donaldson argues that “this revenue, comparatively insignificant, comes at the expense of a ‘bad’ tax system, one that lacks fairness, efficiency, and neutrality.”3