b This applies to each person. f Aliens 20 per cent or minor child $5000. alien brothers and sisters 10 per cent. j Husband or wife exempt from any tax. Graded and Progressive. Tax Lim., Grd. and Progressive. Graded and Progressive. Tax Lim., Grd. and Progressive. Tax Lim., Grd. and Progressive. Graded and Progressive. Tax Lim., Grd. and Progressive. a Alabama had an inheritance tax law in 1848. Constitution of 1901 says 2 per cent may be imposed, but legislature never has c Varies with portion of estate in Connecticut owned by nonresident. passed statute. h Exemption to father, mother, widow g Applied to aliens only. k Increasing rs of 1 per cent for every $100 in excess of $5000. m Increasing too of 1 per cent for every $100 in excess of $100 and $500 respectively. This statute literally applied results in confiscation of all in excess of certain amounts in large estates. n Estates of less than $10,000 are exempt. p To certain lineals an exemption of $20,000. q Exemption to widow $15,000, and each other lineal $10,000. r Foreign collaterals 25 per cent. (Supreme Court of Washington has declared this unconstitutional.) s Ordinances passed by Northwest Territory. u To persons residing out of Province rate is doubled. w To persons residing out of the British Empire an additional 5 per cent. DISCUSSION ON INHERITANCE TAX MR. WILLIAM H. CORBIN (Connecticut), in presenting the report of the Committee on Model Inheritance Tax Law, said: In the wisdom of the Conference last year certain committees were appointed. As I understand, nearly all the committees were appointed to investigate conditions and to report. This Committee, which was appointed two years ago, was given a specific duty to perform. It was not a case of investigating conditions; it was not a case of reporting as to inequalities and lack of uniformity. It was their duty to draw a model law. The main purpose of the Committee is to submit the draft of the bill, the text of which has been printed and distributed to you so as to facilitate discussion. We offer this as the result of our deliberations, being the best we can suggest at this time, with the understanding that rates and certain other details and also the kind of exemptions, etc., may be modified to suit the conditions of the particular State in which it is to be adopted. I think it should be said also that the Committee feel it would be presumptuous to ask the tax officials here, who represent States that now have an inheritance tax law, to say immediately that this is the law they want, and to ask them to try at once. to have it adopted. We simply have tried to present what we think is a law that embodies the principles for which this Association stands, so that the different States may have it before them for examination, and modify their laws if they so desire, so that these principles will be introduced eventually. Mr. J. J. Thomas (Utah) moved that the report be accepted. Motion seconded and adopted unanimously. [A resolution relating to this report is printed, page 26.] REPORT OF COMMITTEE ON UNIFORM INSURANCE TAX This Committee was appointed pursuant to a resolution adopted at the Third Annual Conference at Louisville in September, 1909. The resolution reads as follows: Whereas, The taxation of the business of insurance is a problem different from that presented by the taxation of other corporations; Resolved, That the laws of the several States relating to the taxation of insurance companies should be uniform so far as permissible by state constitutions, and that all retaliatory legislation be abandoned as contrary to interstate comity, and that this Conference recommends that the executive committee of the International Tax Association appoint a committee of three to investigate the question of insurance taxation and report to the next annual Conference. It is not the purpose of this Committee to discuss fundamental principles, but to confine consideration to the relationship between taxation and life insurance. Your Committee is of the opinion that life insurance companies should contribute the expenses incident to their supervision by the State. There is not, and should not be, any mystery about life insurance. Every insurable human life has a productive value. Death stops that productivity, and life insurance steps in to pay the loss. That this may be done systematically, the State grants charters to life insurance companies, authorizing them to receive, hold, and disburse moneys and to transact business with the citizens of the State. Your Committee has carefully considered many good reasons why life insurance should be exempt from taxation entirely except on the real estate owned by the insurance companies, especially because life insurance enjoys no special privilege and is primarily a means of coöperating to distribute the cost of providing for dependent widows and children, and secondarily of saving a fund for old age. Nevertheless, the Committee believes that the States will for the present demand considerable revenue from life insurance companies. Owing to the varied character of their business, there can be no one theoretically correct method of taxing them, but a common ground should be found upon which both the state and insurance companies can harmoniously stand. For purposes of taxation, a classification of corporations is necessary, based on their character and manner of conducting business, in which classification life insurance companies should occupy a distinct and separate class, subject to a separate and distinct method of taxation. The popular classification of corporations is into municipal, public utility, and private. Municipal corporations embrace counties, towns, cities, and villages. Public utility or public service corporations hold special powers with reference to public interests, and the courts have declared that legislatures may tax them after a method peculiar to such corporations. Life insurance companies do not belong to this class. They are given no exclusive franchises, and do not exercise any governmental function. They should not, therefore, be subject to the same rules of taxation as public utility corporations. Life insurance companies occupy a unique position in the business world. While properly classified as private corporations, they are not among the productive or industrial corporations, nor, with a few exceptions, those organized for profit. They act merely as receivers, investors, and distributors of funds placed in their hands for administration. Their assets, which consist mainly of credits, are held solely to pay policy holders, and their contracts of insurance are not instrumentalities of commerce. In their connection with the State they are subject to more supervision than individuals and less than public service cor porations. They may naturally be placed in a separate and distinct class, and are entitled to a method of taxation adapted to the character and extent of their operations. Your Committee has considered many theories in connection. with the subject, including plans for the taxation of income, reserve, assets, surplus, and so-called "investment features," but finds them all more or less subject to grave objections. It thinks the most convenient and practicable tax for the present is in the nature of a license fee for the privilege of doing business. A reasonable tax would be one just sufficient to cover the necessary cost of supervision, but your Committee reluctantly yields to the practical demands of the State that life insurance companies should contribute a larger amount to its revenue. Life insurance companies operate in the several States of the Union by courtesy, since they are not engaged in interstate commerce. They contribute to the revenue according to legislative enactments, the amount of their contribution being measured by the amount of business done with the policy holders in each State. This amount is represented by annual domestic premium receipts. That this plan has met with favor is shown by the fact that of all States of the Union taxing domestic life insurance companies (twelve practically do not tax them at all) twentyseven base their license fee or "tax" on a percentage of domestic premium receipts, while forty-one adopt the domestic premium receipt basis in "taxing" foreign life insurance companies operating within their borders. Your Committee approves of this prevailing method as the most convenient means now practicable for the adjustment of existing tax inequalities and discriminations. There has heretofore been too much technicality involved in the consideration of the subject. Legislators have not understood the technic of the life insurance business and have been bewildered by actuarial phraseology. Neither has there been entire uniformity of opinion on the part of representatives of insurance companies. It must be admitted that there is no one scientific system of taxing life insurance companies; whatever is adopted must |