An inheritance tax will help reduce inequality

The recent projection of inheritance tax as a tool for wealth redistribution has sparked widespread debates, prompting discussions on the rationale behind addressing high inequality through progressive taxation.

Socioeconomic and Political Implications of Inequality: 

• Disproportionate Power Dynamics: High inequality allows a few wealthy individuals to control resources, influencing socioeconomic and political decisions to their advantage.
• Impact on Growth and Rights: Unequal wealth distribution hampers growth, reduces labour income, and diverts resources away from essential rights (education), leading to increased conflict.
• Economic Consequences: Diminished earnings for the poor due to high inequality result in reduced consumption, savings, and increased indebtedness, ultimately limiting production, investments, and future growth rates.

Need for Wealth Redistribution Mechanisms:      

• Reducing Wealth Concentration: Implementing inheritance and wealth taxes reduces wealth concentration, encourages productive investments, and ensures that accumulated wealth is not merely inherited without contributing to society.
• Upholding Constitutional Mandate: Progressive taxation helps address disparities arising from accidents of birth and upholds the constitutional mandate of equality of status and opportunity, fostering a more inclusive society.
• Maximizing Revenue: Despite concerns about tax evasion among the wealthy, recent research suggests that investment in improving tax compliance can yield significant returns, making progressive taxes practical and effective.

Mains question:  

Examine the rationale behind advocating for progressive taxes as a mechanism to address high inequality.