Although I agree with your point overall this point specific point is flawed unless someone is literally storing physical cash in large volumes.
If I have a big bag of assets that is passed from generation to generation it is not sitting in one place or in any way out of circulation. Businesses do their thing regardless of whether a family member or someone else owns them. Real estate portfolios are similarly unaffected by who happens to own it. Even money sitting in a bank account is not actually just sitting there.
Yet a lot of countries with low inequity don't have them. Canada, Sweden, etc.
Sweden only very recently (2005) repealed its inheritance tax after centuries of having one. So the current inequity levels in sweden occurred under inheritance tax. Prior to 2005 the inheritance tax rate in sweden was 60%, higher than the estate tax in the US. And vastly more people hit the tax in sweden as the exemption was a mere $8600 USD.
So if anything Sweden is evidence that a stiff estate/inheritance tax helps prevent inequity. We'll see if that changes.
I know this is not contradicting what you said, it's complementing.
Hell, if your forty year old son hasn't been able to mooch at least a couple million off of you tax free, you're just not doing it right.
If you decided to give it to your children or whatever, it'll get taxed just like if you tried to give them that much money before you died. If in your will you decide to give it to a non-profit charity instead, it's not taxed.
You aren't taxed for dying. The person who died isn't taxed at all. It's the people that are still alive that are now receiving money that are taxed.
How is any of this unfair? Your children didn't do anything to earn that money. Why should they get it at all?
Your children still did not earn income, you did. And you got a tax break for that as well in the form of dependents. You are asking to double-dip here, which is unfair.
The purpose is to prevent a class of non-working super rich that live for generations off of the estate.
So you can be rich and have lots of fancy toys and swim in pools of money while you're alive, but once you die that's it. Your children benefit by starting with a (very large) head start relative to their peers, but they shouldn't necessarily be set-for-life. It's economically bad to have a vast pile of money sitting in one place for a long time, you want to get that back into circulation. And success should be earned, not granted at birth.
The only alternative would be something like actively taxing net worths that exceed some amount, which is less palpable.