CHAPTER IV.

THE INHERITANCE TAX.

The inheritance tax in some form and under various names is now in force in nearly all civilized countries, and in many is an essential part of their system of public finance and taxation.

Within the last fifteen years there has been a marked tendency to the development of the tax in the wealthier and more progressive and conservative of modern nations.

The development is noticeable in those governments in which the supreme power is retained by the people, but is indirectly exercised through their duly elected representatives in legislative bodies.

The tax exists in Great Britain, France, Germany, Switzerland, Holland, Belgium, Sweden, Norway, Italy, Russia and other states on the continent, and in Australia, Canada and the United States.

The origin of inheritance taxes may be of historical interest to the student, but the object of this report will be best subserved by an examination of the extent of the tax in several of the most important countries.

In Rome an inheritance tax was levied at the beginning of the empire, but was repealed before the code of Justinian.

In the middle ages the relief was exacted as a contribution to the lord from the heir of a deceased tenant as a condition of permitting the heir to take possession. The theory was that on the death of the tenant, the estate escheated to the lord, who would admit the heir to the succession on the payment of money or other aids. This fiction of feudal tenure in England was succeeded in the reign of Edward I. by a law securing the property of the subject by abolishing all arbitrary taxes and talliages levied without consent of the national council.

The mediaeval method of the lord requiring tribute to himself as a condition of the heir succeeding to property has been obsolete for generations in England. The mediaeval idea that the tenant could only enter into possession of property with consent of the crown or his immediate overlord upon paying for the privilege, was abandoned in the Fifteenth century.

The feudal charges on land developed into the general property tax in England, and the latter tax in turn became greatly modified long before the American revolution.

The general property tax in force in the United States is a relic of the middle ages, being directly traceable to the system at one time in vogue throughout all Europe, and has all the defects recorded of the subterfuges and evasions of the tax on personal property in England and on the continent after the economic changes from agriculture to manufacture, trade and comThe inadequacy of the property tax as the sole revenue for the support of government has led in those countries to the adoption of other forms of taxation as supplemental thereto, and deemed essential to secure justice.

merce.

The American colonists adopted the property tax for the reason that their conditions corresponded closely with those of the middle ages in the old countries when mainly agricultural, and the mass of property was of a similar character. At the beginning of our Revolution inheritance taxes were unknown in England, although stamp duties on probate and letters of administration on certain estates prevailed, and it was not until 1780 that a tax was introduced on receipts from legacies and distributive shares of personal property. The separation and independence of the colonists was not demanded on account of the special forms of taxation then existing, but "for imposing taxes on us without our consent."

While the general property tax is a survival of the mediaeval customs, "the inheritance tax as now understood in most countries, is essentially the product of modern democracy."1

Dr. Seligman says, "The inheritance tax is to-day found primarily in democracies like those of England, Switzerland, Aus

1 E. R. A. Seligman, Essays in Taxation, 121.

tralia and America, and in other countries its development has gone hand in hand with the spread of democratic ideas.'

The old order of things in taxation must inevitably change and yield to the new to keep pace with the rapid social and industrial advances in order to produce equality and justice by the taxation of every individual according to his ability to pay, whether measured by property, earnings or other standards.

The term inheritance tax according to the usual interpretation is here used to mean any tax on the transmission or receipt of property, real or personal, under intestate laws or by will or by grant, conveyance or gift intended to take effect after death.

INHERITANCE TAXATION IN THE UNITED STATES.

As early as 1797 congress imposed a legacy tax, by stamp duties laid on the receipts evidencing payment,1 but the act was repealed in 1802.2

The war revenue act of July 1st, 1862, laid a legacy tax from three-fourths of one per cent. to five per cent. according to relationship, on the devolution of personal property exceeding $1,000 in value, and stamp duties on probate of wills and letters of administration.3

The act of June 30, 1864, increased these taxes and levied a tax on successions to real estate.

The rate was from one to six per cent. with no exemption of small estates from the succession tax, or in favor of husband or wife. In 1865 the act was amended to exempt wives, but not husbands. The legacy and succession taxes were repealed in 1870, and the stamp duty on probate and administration two years later.

The history and development of the inheritance tax in the states would form an interesting and valuable chapter, but would

11 U. S. Stat. at Large, 527.

22 U. S. Stat. at Large, 148.

312 U. S. Stat. at Large, 483, 485.

413 U. S. Stat. at Large, 285, 287.

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occupy more space than can be given to the subject. The following table from the report of the United States Industrial Commission, changed and enlarged to bring it down to the present timp with reference to year, chapter, or page of the state law, and the law of congress, will give a concise history of the taxation of inheritances in the United States, with amount of exemption and rate of the tax on property transferred to direct and collateral heirs.

19 Industrial Report, 1057.

Inheritance Taxes.

Rates and exemptions prescribed by inheritance tax laws in the United States.

+ From 1897 to 1899, 11⁄2 per cent. for collateral and % of 1 per cent for direct heirs.

5 Until 1894, 3% per cent. with an exemption of $10,000.

Repealed in 1902.

Later New York Acts: Ch. 908, 1896; Ch 281, 1897; Ch 88, 1898;Ch 289, 1898; Ch. 76, 1899; Ch. 672, 1899; Ch. 173, 1901; Ch. 458, 1901; Ch. 493, 1901; Ch. 101, 1902.

Alabama has a section (219) in her new constitution permitting a collateral inheri tance tax.