Sir, Prashant Agrawal claims that some version of the estate tax would help level the playing field for the poorest and increase charitable giving in India (“India needs an equality tax”, April 1). He uses the example of the US estate tax to bolster his argument, but research on the US estate tax shows that the opposite is true.

Rather than spreading wealth and decreasing inequality, the U.S. estate tax has reduced the number of small businesses and increased the market share of large corporations, further concentrating wealth in the hands of the powerful and wealthy.

Research by Antony Davies and Pavel Yakovlev, professors of economics at Duquesne University in Pennsylvania, for instance, found that increases in estate taxes have reduced the number of small businesses in America, causing as many as 6,000 a year to be liquidated or “absorbed” by large firms.

With regards to spurring charitable giving, a report by the Center on Philanthropy at Indiana University found that nearly half of all high net worth individuals in the U.S. (43 percent) would give more to charity if the estate tax were repealed.  The other half (47.5 percent) would continue giving the same amount they give currently.

If India wants to learn from the U.S. example, it should avoid any tax on inheritances.  In fact, bipartisan legislation – the Death Tax Repeal Permanency Act – was introduced just last week in the U.S. House of Representatives.  America is finally rethinking this foolish tax policy and will hopefully soon repeal it.

Dick Patten is the President of the American Family Business Institute.

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