Final answer:
The federal government imposes an estate tax. In 2022, this tax affected estates over $12.06 million and aimed at limiting the transfer of excessive wealth through inheritance. Estate tax is part of a broader strategy to balance economic equality and productivity.
Step-by-step explanation:
The federal government imposes an estate tax, which is a tax on the value of an inheritance. This reflects a policy intention to limit the transfer of vast wealth through inheritance. The estate tax only affects estates exceeding a certain threshold, which in 2022 was set at more than $12.06 million. As such, it impacts a small percentage of the population with high levels of wealth. Meanwhile, an inheritance tax, which is not imposed at the federal level, is a tax paid by the beneficiaries of an estate rather than the estate itself and is implemented in some states.
The estate tax serves to address issues of economic equality, but if its rates are too high, it can potentially disincentivize productivity and entrepreneurship. The tradeoff between conditions of high economic output and equality is an ongoing policy debate. The estate and gift taxes are component of the federal taxation strategy aimed at managing this balance.