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Pepijn van IJperenburg – The popular inheritance tax

Most taxes are never loved by citizens, and they would rather pay less than more. Especially, inheritance tax seems remarkably hated. When the discussion about the dividend tax was being held in the Netherlands, the popular argument was made by political party Forum for Democracy to keep that government income in order to abolish inheritance tax. This stance is a popular one, as it is often argued that inheritance tax is unjust because of the repetitive taxation. Yet, I accept the challenge and will argue in this opinion piece that inheritance tax should not be abolished, but should actually be raised.

To start off, inheritance tax is the tax paid on official inheritances that people leave to their children or relatives. In the Netherlands, the average tax rate paid on inheritances was 12% in recent years (Groot, Lever and Möhlmann, 2019). However, these tax rules only apply to official inheritances. Business assets that shift to a new generation are taxed only to a very small extent, 1.1% on average, because in the last two decades the percentage share of dispensation from taxable assets kept being raised. In general, this would make sense, because the continuity of a company is crucial for a flourishing economy. However, the continuity of business is not in danger at all in the current tax system. Even liberal conservative ministers of the Dutch parties VVD and CDA have argued in the past that the current tax rules are too lenient to justify the continuity guarantee only (Frederik, 2019).

Back to inheritance tax. A prima facie reason to raise it is the decline of the principle of equality of opportunity. Liberals from left to right agree on this principle, be it with their own provisos. In an economic sense, politicians have pursued this value mainly by constructing universal public education, which should guarantee that children of poorer families can work their way up independent from their starting position in society: from “rags to riches” as the American dream resonates.

However, exactly this principle is in danger. In Europe and the United States, wealth inequality has been rising, including the Netherlands. A number of rich Dutch ex-entrepreneurs tell they have never paid so little taxes and that they wouldn’t have minded paying more, says Sander Schimmelpenninck, chief editor of Quote (De Correspondent, 2019).

To illustrate the decline of equal opportunity, we can turn to the trend in education. Recently, it became known that the share of private education has risen in the Netherlands (NOS, 2019). This causes a divide in the quality of education that children enjoy. Surprisingly, private education is only available for children with affluent parents. It is therefore a striking example of the deterioration of equal opportunities.

Besides the prima facie case of the imbalance in our society, there is another argument why inheritance taxes should be raised: stimulating value creation. Labor adds value to a society, by creating new things and providing services. Yet, we tend to tax it extensively, while the income in the form of inheritances is channeled down between persons without much interference from the tax authority. As a government, one has to raise its money from somewhere. My suggestion is to stimulate the activities that bring us welfare and joy, and tax the unproductive income. From a moral standpoint, it is namely better to tax the things that people haven’t worked for than taxing effort.

Lastly, economic reasoning supports this shift in taxation. When we tax labor, a so called welfare loss arises (Harberger triangle), because people start to work less when taxes on labor are raised. In this case, people thus react to taxation, because they can change the amount of hours they work. When taxing inheritances, however, there is no welfare loss. Death is inescapable, which means that people wisely don’t change the amount of inheritances they give away.

There are often objections made to raising inheritance tax which argue that taxes already paid over inheritances are too large. I find this argument misplaced. When is something taxed too many times? One cannot avoid taxing flows of money multiple times in a modern economy. Just like income from labor is naturally taxed twice at payout and expenditure (wage and VAT), I don’t see many problems with taxing inheritances which have suffered from taxation during the earning and growing of the stack of money already (income and wealth tax respectively).

Of course, a policy is never perfect and some people will always lose. What I keep finding remarkable, however, is the immutable anger that we often see towards any increase of inheritance tax. This often occurs among groups that would clearly profit from this measure, in the case of the Netherlands the lower middle class that votes Forum for Democracy. I find it hard to believe they would be so economically conservative to value principles which are not in their interest than to value the opportunities of their own children. I believe these resentful feelings are born from a misconception, namely that an increase of inheritance tax would negatively impact their situations. Instead, most proposals for raising inheritance tax target the higher inheritances, which make up for 60% of the total amount of all inheritances in the Netherlands, but account for only 10% of the number of inheritances. The distribution of inheritances is therefore very right-skewed, and it is the right tail of the distribution that causes the social and moral problems.

All in all, I don’t expect everyone to agree with me, but if one adheres to the liberal principle of equality of opportunity, I believe I have made a convincing case. Then, deciding on how much and how the inheritance tax should be raised is beyond the scope of this piece, but as I’ve made clear, measures should look at preserving equal opportunity for all and therefore focus on the larger sums of inheritances. In that case, inheritance tax will hopefully finally become a popular term.


Groot, Stefan, Marcel Lever and Jan Möhlmann, 2019. “Effect van erfenissen en schenkingen op vermogensongelijkheid en de rol van belastingen”. CPB: 6 December 2019.

Frederik, Jesse. 2019. “Hoe een goedbedoelde belastingregel voor de bakker op de hoek een goudmijn voor de allerrijksten werd”. De Correspondent. 26 November, 2019. Retrieved from:

De Correspondent, 2019, “De Rudi & Freddie Show”, Podcast. September 28, 2019.

Kamerstukken, 2004. “29 767: Wijziging van enkele belastingwetten (Belastingplan 2005)”. Date received: November 1, 2004. Retrieved from: https://zoek.officielebekendmakingen.nl/kst-29767-14.html

NOS, 2019. “Meer particuliere basisscholen: kleinere klassen, maar dat kost wel wat.” November 4, 2019. Retrieved from:

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