It would depend on the circumstances. AFAIK the estate tax is used in place of an income tax, along with some trickery regarding capital gains. Even with an estate tax heirs of a really wealthy deceased will end up with a lot of wealth (perhaps smaller) which they can spend in ways unrelated to the presumed good sense of whoever built the fortune. (Which was my original point.)
Of course, even the most sensible investor could have a few bats in the belfry. Once the wealth has been liquefied, it could be taxed as income unless it is re-invested.
Income taxes in general are a difficult point. One big problem is that few, if any, economists actually pay attention to the distinction between productive wealth and the other kind. Same goes for income spent on indulgence rather than invested.
Somebody who inherits corporate bonds worth a few billion dollars can’t really do anything with them without selling them, and if the money is re-invested, or they’re left unsold, they continue to benefit society, as well as the owner. Once sold…
IIRC I actually read through Piketty’s The Economics of Inequality looking for any serious discussion of the distinction between these two types of wealth/income. Don’t remember finding any.
The point is that for invested capital it doesn’t matter who owns it, only what’s done with it. OTOH, for income spent on indulgence (rather than investment), and rent sources treated as “wealth” at their market value, this is the sort of value that should properly be considered for analyses of Gini Coefficient and other measures of “inequality”.
I would say that any “inheritance tax” ought to be assessed against sources of rent (perhaps including corporate bonds and non-voting stock) but not against voting common stock or other investment vehicles that include significant control.
(Granted, the heir might not be very capable, but there’s a good chance they were picked for their abilities, as well as likely having learned a lot from the deceased. So on balance I’d guess it’d be better than a forced sale.)