> the government decides it gets to tax that money AGAIN?
This is what happens pretty much every other time money changes hands. I get taxed on my salary. I get taxed on my purchases made with the remaining money. I get taxed on the capital gains I make by investing the remaining money. The people I pay bills to get taxed on that income, and so on and so forth.
> This is what happens pretty much every other time money changes hands.
Money is usually taxed when there is an exchange. You buy a sandwich, you pay sales tax and the seller pays income tax.
Inheritance isn't an exchange. It's effectively a gift. Gifts normally aren't taxed. Or they are, but not separately -- if you earn a dollar you pay income tax, if you buy a thing you pay sales tax, if you give the thing to someone else it "isn't taxed" except of course for all the taxes that were already paid in acquiring it. Adding a further tax is in fact taxing the same purchase again.
Notice how abnormal "gift tax" is -- it isn't something people ordinarily pay. We have specific exemptions for moderate amounts and for charities because we don't really want it. The only reason it exists above a threshold is that everybody was using it to avoid inheritance tax. Neither should exist.
> We exempt moderate amounts because no one wants to track down the $100 in allowance they gave their kids when it comes time to file taxes.
I don't want to track down the $100 I paid a landscaper to mow my lawn, can I get the same exemption for sales and income tax?
> Charitable deductions are to incentivize donations to charitable causes
That's why they're deductible from income tax. The reason they're not subject to gift tax is that gift tax only exists because of inheritance tax.
Notice also the context here. Gifts are inherently charitable. That's what charity is. Should it really be different to give $30,000 to a scholarship fund compared to choosing a specific person and paying their tuition? Why should it be taxed differently when the scholarship fund decides who gets it instead of the donor?
This is what happens pretty much every other time money changes hands. I get taxed on my salary. I get taxed on my purchases made with the remaining money. I get taxed on the capital gains I make by investing the remaining money. The people I pay bills to get taxed on that income, and so on and so forth.