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Collateral and Direct Inheritance, Legacy

and Succession Taxes




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Late Assistant District Attorney New York County, N. Y.


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Since the publication of the first edition of this work, in September, 1890, the views which I then expressed in the preface and body of the book as to the efficacy of the inheritance tax have been most strongly confirmed.

The apparently direct effect of the publication of the statutes and decisions upon this subject has been to introduce this system of taxation, for the first time, in the states of Maine, Massachusetts, Ohio, Illinois, California, Connecticut, and New Jersey; and the system has also recently been inaugurated in some of the Canadian provinces and in the Australian colonies. In addition to the states just referred to, today there are in force, in the following states, statutes directing and enforcing the collection of the collateral or direct inheritance tax, viz.: New York, Pennsylvania, Maryland, Virginia, West Virginia, North Carolina, Delaware, and Tennessee.

In Minnesota, so anxious were the people to have this system that, when the law enacted by the legislature was declared unconstitutional, the constitution was immediately amended by a provision providing for the passage of a proper law on the subject. It requires nothing more than ordinary perception to foretell the near adoption of these laws in all those states of the Union where they do not now exist.

The successful application of the system has been strongly illustrated in the state of New York, where, until 1890, there existed only a collateral inheritance tax. I then called attention to the importance of a small tax on property passing to lineal or direct heirs, and in 1892 the then existing law was repealed, and a system adopted imposing a small tax of one per cent, upon lineal heirs and others, and five per cent. upon collaterals. From a financial standpoint, the success of the system of collateral and direct inheritance taxation is most powerfully enforced. In nine years (1885 to 1894) the state of New York has collected, at a very small cost, over $11,000,000 from this system alone. Of this amount over fifty per cent., or $6,683,571, was collected in the city of New York, and $996,272.77 in the county of Kings. The state received from this tax, for the year just closed (September 30, 1895), $2,126,875, an increase over 1894 of $437,940.41. The largest amount of transfer taxes was received by the state in 1893, when four estates paid $1,096,036.97, and fifteen estates paid more than half of the entire amount collected that year. The largest amount received from any single estate in the state of New York, since the law went into effect, is the sum of $500,000, or thereabouts, which was paid by the estate of Jay Gould.

Much, if not all, of the credit for this condition of the system is due to the Honorable James A. Roberts, state comptroller, and to his deputy, Col. William J. Morgan. Not only has the state comptroller been successful with this tax, but he has also made great progress with the corporation tax, and has thus put the balance on the right side of the "people's ledger."

If we cross the main to Great Britain, we find that the system there is one of the most important in the kingdom. It is also a tax of importance among the other nations of Europe. A large proportion of English revenue is collected from what are commonly called “death duties,” consisting of taxes on probates, legacies, successions, and estate duties; and by the "finance act,” the latter being a new tax, enacted

1 Report of James A. Roberts, State Comptroller, Albany, 1893, p.

in 1894, a further duty of one per cent has been imposed upon real estate and personal property of the value of £10,000 and upwards. This revenue has always been large. It is now said to amount to over £11,000,000 annually. But the tax is evidently a great burden, as it falls principally upon land; whereas, under the American statutes, with some exceptions, the tax generally falls upon personalty, which as a rule escapes general taxation. Protest against the English system has recently been made by many prominent Englishmen, notably by the Earl of Winchelsea and Nottingham.3

One great fault with the law in New York and some other states is that too many so-called charitable institutions, including religious corporations and many others, are exempted from this tax, especially in New York under an act passed in 1890.4 By a brief examination of this statute and of the text under the chapter on "Exemptions,” this fact will be readily ascertained. These exemptions should be limited to well-defined public charities, and the revenue of the state would largely increase.

Another suggestion occurs in connection with the inheritance tax which may lead to the repeal of the frequently abused personal property tax. This could be accomplished by a small increase in the rate of the inheritance tax. In consideration of this repeal, the state would be justified in dividing some equitable proportion of the inheritance tax among the different counties in proportion to their respective contributions thereto. If this rule were to prevail, the city of New York should have, on certain occasions, a handsome return from the state treasury, and, with this compensation, no regret would be expressed for the repeal of the odious tax on personal property. In the appendix I have included

2 Chapter 1, $ 4, p. 11, note 12. 3 See North Am. Rev. Jan., 1895, p. 95. 4 Chapter 553, p. 83.

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