Dr. Seligman in his Essays in Taxation says:

"The logical defence for the inheritance tax is thus the accidental-income argument. It is in harmony with the general basis of taxation--the faculty or ability of the individual to pay; it rounds out the existing system, whether based on property or on income; and it is not open to the objections which may be urged in one form or another against each of the other theories.

"Granting the desirability of the tax, we are at once confronted by the problem of graduated or progressive taxation. Graduation of the tax according to relationship has met with well-nigh universal acceptance; graduation of the tax according to amount has given rise to more controversy. This question has been fully discussed in another place, with the concluson that the theory of progression is more applicable to the inheritance tax than to any other part of the fiscal system; and that, whether we base our demand on the limitation-of-inheritance theory, the faculty theory, or the compensatory theory, some scale of progression is both desirable and practicable.

"The inheritance tax today scarcely needs defence. It is found in almost every country; and the more democratic the country, the more developed is the tax. In some of the Canathe`tax. dian provinces, in the Australian colonies, in the Swiss cantons, in England itself, the rates are not only progressive, but highly progressive. In the United States also there is now a decided movement toward the progressive inheritance tax."1

Unsound Objections.

The objections sometimes urged that an inheritance tax is a tax on capital or unequal or double taxation are unsound. The objection that the taxation is a discouragement to industry and thrift, and tends to drive capital away applies with far less force to the inheritance tax than to the general property tax. It sinks into comparative insignificance with the heavy burden of municipal taxes levied annually; whereas the inheritance tax is paid at long intervals, or once in a life time.

Dr. Robert H. Whitten, in his address before the National Conference on Taxation, at Buffalo in May, 1901, well says:

"One of the strongest arguments in favor of the inheritance tax arises from the recognized right and duty of the State to

Seligman, Essays in Taxation, 132–133.

regulate inheritance to such an extent as the public welfare may require. The right of bequest and inheritance is a natural right only to the extent that it is socially useful; that it furnishes an incentive to the creation of wealth or furthers its preservation and judicious management. Although we uphold devise and descent as the best known method of securing this end, yet we must admit that it is open to very serious objection and very often fails completely. While the man who acquires wealth by that act gives evidence of his ability to manage it properly, it is by no means so certain that his heirs will possess that qualification. It is most fitting, therefore, that the State in apportioning the burden of taxation should take cognizance of this condition and obtain a portion of its revenue from estates at the time of their transfer to hands that have given no evidence of ability to manage them economically. Such a tax, if the rate be moderate, can only further the true social function of devise and descent, i. e., the furtherance of the creation and the judicious management of wealth. The tax is an incentive rather than a hindrance to the creation of wealth and insures that after its transfer at death a certain portion, at least, will serve a socially useful purpose.

"As a result of the fact that the inheritance tax does not tax industry and can in no way be shifted, its imposition or alteration results in no disturbance of business or industrial relations. This is a most notable advantage, for the restrictive and prohibitive effects of some taxes and the severe disturbance of industrial conditions resulting from the introduction of other taxes, are extremely important, and are the causes that most often prevent the adoption of legislative reforms. It is the very great hardship and injustice resulting from the sudden imposition of a tax or from a change in its rate that effectually blocks 99 out of 100 of the proposed reforms. The inheritance tax can be imposed and its rate altered from time to time in response to the demands of justice or to the needs of the State without producing industrial disturbance or hardship."1

When the provisions of existing laws and the one proposed are examined, the cry that the inheritance tax is "a tax upon widows and orphans" will be seen to be utterly absurd. When the tax applies to widows and children the possibility of hardship is provided against by generous exemptions amply sufficient for their support. Even where all direct inheritances are taxed, the objection is less real than it at first appears, and would ap

2 National Conference on Taxation, 80-81.

1

ply in a comparatively small number of cases; for in the natural order of things death comes at an advanced age after the children are grown up and able to take care of themselves.1 Dr. Richard T. Ely in a late article on "Reforms in Taxation," concludes his review of the situation as follows:

"Finally, attention may be called to the growing use throughout the civilized world of taxes upon inheritances and successions. If a proper minimum is exempted from taxation, a minimum sufficient to yield a livelihood in case of succession within the family, say, twelve thousand dollars, and a much smaller minimum for collateral inheritances and if the tax is slightly progressive in two directions, namely, as the relationship of those succeeding to the property becomes more distant, and as the property increases in size, such taxation accords with the generally recognized principles of justice, and is capable of yielding large revenues."

Mr. Justice Brewer, of the United States Supreme Court, said in a letter to the author of a legal work on taxation (1 Dos Passos Inheritance Tax Laws, 2):

"I was not aware until such examination of the extent to which in this country the matter of taxation on successions has advanced. I have often urged that as one of the most just taxes, and, if it were graduated in proportion to the amount of property passing, I think it would be most beneficial. It would tend largely to prevent the accumulation of property in a family line, and to work that distribution which is for the interest of all."

CONSTITUTIONALITY OF INHERITANCE TAX LAWS.

The validity of the underlying principles of the inheritance tax has been affirmed with substantial unanimity by all the courts of this country, federal and state. The law in a few cases has been declared void on account of peculiar provisions at variance with state constitutions. The fundamental ideas for the tax have been approved as in harmony with the constitutional requirements of the various states, and as being consistent with sound public policy.

1 Dr. Max West, supra. 121.

2 Cosmopolitan, January 1901.

The decisions beginning with the earliest case of Mager v. Grima,1 decided by the Supreme Court of the United States in 1858, are too numerous to cite in this report, and it is unnecessary to refer to the authorities elsewhere, as the Supreme Court of our state has definitely settled the important questions governing the constitutionality of inheritance tax laws, and clearly stated the grounds upon which they may rest.

The legislature of 1899 enacted Chap. 355, entitled, "An act for a tax on gifts, inheritances, bequests and legacies in certain cases;" and the same remained in force and taxes were collected thereunder until February, 1902, when an opinion of the Supreme Court in Black v. State2 held that certain provisions in the act produced arbitrary and unlawful discriminations between persons in the same class, which rendered the law void.

The Wisconsin act is in all essential respects a copy of the New York law, with the exception that under the New York law the transfers of real and personal property to collateral heirs of the value of $500 and over and personal property of the value of $10,000 and over transmitted to the direct heirs are taxed, while in Wisconsin the tax is imposed only on personal property of the value of $10,000. or over, transferred to direct and collateral heirs. The administrative methods are the same in both laws. At the time of the passage of the inheritance act in this state, the New York statute from which it was borrowed had received judicial interpretation in the courts of that state, as well as the federal courts, sustaining it on every important point on which it had been assailed.

The law having thus received judicial sanction, which seemed to firmly establish its validity, undoubtedly induced the legislature to believe that it could be safely followed in this state. The precise point presented in the Black case had not been raised against the New York act or passed on by the courts of that

state.

The objection held fatal to our act arises from the definition of the words "estate" and "property" in sec. 19, Chap. 355,

18 Howard, 490.

2113 Wis., 205; 89 N. W. Rep., 522,

Laws 1899, identical with sec. 22, in Chap. 399, Laws of New York, 1887, as amended, which are declared to mean the whole estate of the testator, intestate, or grantor, and not the separate shares of property passing to the individual beneficiaries. The tax is imposed on the transfer of property of the value of $10,000 or over. There is but one exemption of that amount from the whole body of the estate, so that one beneficiary who is entitled to a legacy of a specified sum from an estate in excess of $10,000 will be taxed and receive less than another in the same relation to a decedent, entitled to a like amount from an estate under $10,000, exempt from taxation. It was upon the ground of an unreasonable classification of persons in the same relation for taxation and inequality and injustice resulting from this provision of Chap. 355 that the act was declared unconstitutional.

The Legal Status of the Inheritance Tax in Wisconsin.

The enactment of Chap. 355 of 1899 and the amendment of 1901 indicate that the legislative policy will be in favor of a law for the taxation of inheritances modeled after the best systems prevailing in other states and based upon sound legal, economic and fiscal principles.

It will, therefore, be useful to examine the defects in the present law to the end that the objectionable and discriminatory features may be avoided and the proper classification, exemption and progression observed in framing a bill for consideration of the legislature to become a law with their approval. At the outset the grounds upon which the existing law was pronounced invalid should be stated.

The reasons are set forth in the following extracts from the opinion of the court delivered by Mr. Justice Winslow in Black vs. State above referred to.

"The tax which this law authorized is what is generally known as an 'inheritance' or 'succession' tax. Such taxes are very ancient in origin, and have been long in use, especially in European states. The states of the Union have been singularly slow in adopting such laws, but the number of states to adopt and enforce them is increasing year by year. To review the history of such legislation would be a mere affectation of