Estate Tax Proposal: Treating Earned Wealth & Inherited Wealth Differently

The New York Times recently featured an op-ed piece by Ray D. Madoff (professor of law, Boston College), which essentially proposes that the federal estate tax be reformed as follows:

• Earned Wealth: Provide a large estate tax exemption, as much as $10 million, for the transfer of family farms and businesses that constitute a significant portion of the estate and that both generations have been involved in running for several years.
• Inherited Wealth: Provide a small estate tax exemption amount, suggesting that a $1 million or $2 million exemption and a 55% estate tax would be reasonable. 

See Ray D. Madoff, Protect the Farm, Tax the Manor, NY Times, Nov. 21, 2009.  

For a detailed review of this estate tax proposal, see Hani Sarji, Ray D. Madoff's opinion on fixing the federal estate tax: an unbalanced proposal, Future of the Federal Estate Tax, Nov. 21, 2009, which begins as follows:

On one hand, Madoff's proposal comes off as balanced. She would lower the estate tax for its most vocal opponents -- farms, ranchers, and small business owners -- but she would raise the tax for others, including those with "manors."

On the other hand, imposing a higher estate tax on everyone other than farmers and small business owners leans to the left.