LAW OF COLLATERAL INHERITANCE, LEGACY AND SUCCESSION TAXES. CHAPTER I. HISTORY OF COLLATERAL INHERITANCE, LEGACY, AND SUCCESSION TAXES. § 1. Reason for such taxes. 2. The tax defined. 3. The Roman law. 4. In England. 5. The American statutes. (a) Pennsylvania. (b) Louisiana. (c) Maryland. (d) Virginia. (e) North Carolina. (ƒ) Delaware. (g) Connecticut. (h) West Virginia. 1. Reasons for such taxes.-The system or policy of taxing collateral inheritances, legacies and successions is not of modern origin. Laws relating to these taxes were in force among the Romans. In modern times, such laws will be found in full operation in many European countries, and they have existed in England for over a century, with uniform success. Their utility as a successful means of revenue has been strongly approved by writers on politi 1 cal economy and by jurists. In view of these facts, it would appear to be somewhat remarkable that this tax was not suggested or applied in the State of New York, by the Legislature, as a method of taxation, until the year 1885, more than 60 years after its successful adoption in Pennsylvania and other States. Some eminent writers have favored these laws in their utmost severity, because they are said to tend to distribute wealth from the hands of the few to the many, and, for the additional reason, that they tend to compel individuals to rely more upon their own exertions. This, at least, is the demonstrated economical effect of such laws. As the theories of leading economists have been treated with great consideration by legal writers on general taxation, it would seem that their views are equally entitled to respect upon this subject. In England, where landed property has always been more or less locked up by a complicated system of tenures and entails, and under the rule of primogeniture is confined to the hands of the few, and where personal property is hoarded by the nobility and large corporations, and the general tendency is to centralize wealth, these reasons apply, perhaps, with superadded force. In this country, however, where land is widely distributed, and unquestionably bears the brunt and burden of taxation (generally to an excessive degree 1 Smith's Wealth of Nations, pp. 683, 684; Mills' Polit. Econ., Book V, ch. II, sec. 3. 2 But see Cooley on Taxation, 2d ed. 30. 3 Mills, supra. 4 Cooley on Taxation, 2d ed. 8-12. in proportion to what is collected from personal property), the same reasons would seem to fail of application. Personal property, however, in proportion to its immense value, generally escapes the hands of the collector, and in some localities-especially in large cities to an alarming extent.1 However minute and comprehensive the law applicable to the collection of this tax, a consensus of opinion seems to prevail that the hiding of such property, and the adopting of any dishonorable method to evade the duty, are matters for congratulation on the part of the citizen. For this reason, in particular, and owing not so much to the faulty condition of the law, a large percentage of personal property annually escapes taxation in the United States, and any system that effectually reaches any portion of this property deserves. commendation and study. A collateral inheritance or succession tax, it seems, presents the most complete system for reaching the class of personal property and privileges which it is framed to embrace, because its collection is aided and facilitated by the requirement of the law that a dead man's property, so to speak, shall somewhere and at some time pass through either a Surrogate or Probate Court, as the case may be, for settlement and distri bution. Here it is generally presented to the public view upon the records, there is not so much opportunity for secrecy, and thus it is brought within easy reach. of the taxing State or community. 1 Ely on Taxation in American States and Cities, 177. §2. The tax defined.-Any exact definition of the collateral inheritance or succession tax must necessarily depend upon the language of the particular statute which may be under consideration. It will be observed, however, that so far as this country is concerned, there is a general similarity between the dif ferent enactments defining the tax and those included within and exempt from the operation of its provisions. From the similarity existing between the Pennsylvania and New York laws, the decisions of the courts of the former State, embracing a period of over sixty years, will be found on this account to be of much importance as precedents upon the many questions that may arise. The tax may be defined generally to be a burden imposed by government upon all gifts, legacies, inheritances and successions, whether of real or personal property or both, or any interest therein, passing to certain persons (other than those specially excepted) by will, by intestate law, or by any deed or instrument made inter vivos, intended to take effect at or after the death of the grantor. The theory of the promoters of collateral tax legislation is based both upon logical and legal ground, i.e., that what is generally understood as the right to take by will, or from intestates, is, after all, but a mere privilege of the municipal law, to be changed, modified or repealed in the discretion of the State, and not a natural right,' and that it is only 1 I Blacks. Comm. B. II, 11, 12. See "Forum" for December, 1886; article by Judge Thomas, of Pennsylvania, upon "The Power of the Legislature Over the Subject of Wills, etc." Prof. R. T. Ely, in "Taxation in American States and Cities," just and proper, in consideration of this privilege, that property passing by will to collaterals, remote relatives, strangers to the blood, and corporations, or, through intestate laws, to collaterals and relatives having for the most part no particular claim whatever upon the decedent, should pay to the State conferring this valuable privilege, a fair and reasonable bonus or percentage upon the value of the property thus transmitted and received. Hence these laws have been adjudged by the best authorities to impose not a mere property tax, as claimed by some, but simply a tax or duty upon the devolution or succession of property under inheritance and intestate laws. Upon this ground such taxes have uniformly been held to be constitutionally valid, both under the Federal and State Constitutions, and it has been held that the tax is not like an ordinary tax-it is not exactly a penalty-but is more in the nature of an assessment.2 page 519, gives in full a bill which he approves, and which was presented in the Illinois Legislature in 1887, to reform the Statutes of Descent and Wills. Its object is sweeping. being to restrict the amount any person or corporation may take from the same decedent. Wife or husband, not over.... Remote relatives and others, not over..... .$500,000 500,000 Such legislation would appear impracticable, or, at least, not consistent with the freedom of American institutions where private rights and property are concerned, though it has been endorsed by Mills (Polit. Econ., Book V, ch. IX, sec. 1), who agreed that collateral heirs should be entirely excluded (Id., Book II, ch. II, sec. 3). 1 See Chapter II, secs. 2-15, 17. |