What type of tax is the estate tax?

The estate tax is classified as a wealth tax because it is levied on the total value of a deceased person's assets before they are distributed to their heirs. This type of tax focuses on the wealth accumulated by an individual, rather than on the individual’s income or consumption patterns. The estate tax considers the net worth of the estate at the time of death, assessing the value of all assets, including property, investments, and cash, minus any debts or liabilities.

Wealth taxes, like the estate tax, are designed to tax individuals based on their accumulation of wealth, which distinguishes them from consumption taxes, income taxes, and property taxes. Consumption taxes are levied on the purchase of goods and services, income taxes are based on the earnings generated by individuals or entities, and property taxes are assessed on real estate and typically fund local public services. The estate tax specifically targets the transfer of wealth, making it an essential tool for regulating wealth distribution and addressing inequalities in wealth accumulation within society.