"That's because inherited wealth was already taxed when it was earned."
So was the money I pay my barber.
In addition, there is a LOT of money transferred that wasn't yet taxed. For example, If my cost basis of Dell stock, after splits, is 25 cents, and I pass, my heirs' cost basis is what is was worth upon their acquisition. If it's sold that day, they owe ZERO capital gains tax.
"Or should my daughter be obligated to cough up a piece when her grandparents give her $20 for her birthday."
Now you're talking about a different section of the tax code, the Gift Tax area. $20 is fine; $20,000 creates a taxable event.