My posting precipitated an interesting debate in the comments about the ethical, political, and economic issues presented by inequality of wealth, which has become very great in twenty-first century America. These issues are important, but estate taxation is only peripherally related to them. Without unforeseeable increases in estate tax rates, coupled with extremely stiff gift taxes, estate taxation will continue to have negligible effects on wealth inequality. I agree with Becker, moreover, that even without explicit gifts wealthy people can transfer substantial wealth to their children by investing in the children's human capital (earning capacity)--not to mention the genetic endowment that high-IQ parents transfer to their children. I believe that these transfers are increasingly important, for two reasons. First, with the decline in the importance of strength and stamina as factors of production, the economic return to intelligence has risen. And second, with the breakdown of traditional barriers, such as religion and ethnicity, to assortative mating (likes with likes), there is more matching of IQs in marriage and so a greater production of highly intelligent people.
I do not think there would be an ethical objection to efforts to reduce the inequality of wealth. Even if one does not regard one's genetic endowment as a form of unearned luck (as I do not--"luck" to me refers to purely adventitious factors in one's success or failure in life), luck plays an enormous role in wealth; stated differently, the variance in wealth is much greater than the variance in intelligence, character, effort, or all these things combined. And if wealth could be equalized costlessly, there would be a net gain in economic welfare because of the phenomenon of declining marginal utility of income--that last dollar is worth more to a poor person than to a rich, so transferring a dollar from the rich to the poor will increase aggregate utility, and this effect could continue until incomes were equalized.
The objection to efforts to equalize wealth, including by drastic changes in estate and gift taxation, is that they are very costly. The have adverse incentive effects on both rich and poor, and a variety of other negative consequences as well. Paradoxically, equalizing wealth can increase envy, because one is more likely to envy someone who is slightly better off than one is than someone who is unimaginably better off. Few people envy Bill Gates, because they cannot imagine what they would do with so much money; but they know very well what they would do with the additional income of their slightly wealthier next-door neighbor.
It is important to recognize, moreover (a point that Oliver Wendell Holmes, Jr. stressed repeatedly), that personal wealth, no matter how great, is a part, and a constructive part, of aggregate social wealth. The rich do not burn their money, or put in boxes under their beds. If saved, the money is invested; if consumed, it provides incomes to the people who produce the goods that the rich buy; if given to charity or to politicians, it affects, not necessarily for the worse, the social, cultural, and political character of the society. The opportunity to amass wealth also channels the ambitions of aggressive people into relatively harmless channels, even if Samuel Johnson exaggerated when he said that people are rarely as innocently engaged as when they are making money.