To the extent that an estate tax reduces saving, it may actually increase inequality.
If there is less saving, then there is less capital investment.With less capital with which to work, the real wages of workers decrease and under certain circumstances, the share of
income going to labor falls. To the extent that capital income is more unequally
distributed than labor income, the effect is to increase inequality. This scenario is
hypothetical. It simply emphasizes a point made above in a variety of different contexts--
to understand the impact of a tax, one must take into account how taxpayers respond to it.