232. The Inheritance Tax

The Wisconsin Tax Commission in a recent report made this statement of the case in favor of the tax on inheritances.

The economic theories for the inheritance tax are several, such as the limitation of inheritance, the diffusion of wealth, co-heirship of the state, cost of administration, the special privileges accruing to the recipient of property, the accidental or fortuitous income, the receipt of property without toil or service, and the back tax theory. The enumeration does not include all the arguments advanced in justification of the tax, nor is it to be understood that agreement exists upon the validity of the theories just stated.

Economic

theories for

the tax.

socialistic?

The view that the power of taxation should be employed to Is the tax limit the amount of inheritance or bequest and thus prevent the accumulation of large fortunes, although not necessarily socialistic, is generally so regarded, and does not have the approval of conservative men as a sound basis for taxation. This theory rests on the proposal that property above a specified large amount like $500,000, or $1,000,000, or the major part thereof, shall escheat to the state or be taken by the way of taxation. The doctrine of escheat or the diffusion of wealth is generally regarded as unsound and fails to satisfy the best writers on economics, although supported by eminent authors with great plausibility.

The back tax theory has more popular support than any other, Back tax and in some states has been the most potent argument for the argument. enactment of inheritance tax laws. The claim is that as the general property tax is largely evaded during life, it is no more than just that the state should recover the equivalent from the recipient of property by a tax that cannot be evaded. The impossibility of framing a law on a scientific basis to accurately reach the exact amount of the tax evaded during life will be recognized by the most casual observer.

in this argument.

The difficulty of following the changes in the form, character, or Weakness value of property, throughout the life of a decedent, so as to show the true condition of the estate to the satisfaction of the court

Reaching intangible property.

Professor

Ely's argument.

administering it is unsurmountable, and such investigation is possible only for a very short period immediately preceding death. The logical application of the back tax argument would demand the enactment of a law for levying an inheritance tax equal to the tax which should have been but was not assessed against the property in the lifetime of the owner. The burden would be cast on the state of establishing by proof the assessment of the entire property from year to year with the taxes paid thereon, and the various kinds and value of property during the same periods, to ascertain the sum of taxes actually paid, and the amount which ought to have been paid. The difference would be the inheritance tax in each particular case if the validity of the argument is to find expression in the law.

In this country taxes on real estate are levied and paid. The instances where land escapes are exceedingly rare, generally due to the inadvertence of assessors, and in this state efficient provisions exist for placing all real and personal property on the tax roll whenever omitted in the three prior years. It is persona! property of the intangible kind that escapes taxation. Visible property is generally found and taxed with as much certainty as real estate. Therefore to be logical only intangibles such as money, notes, stocks, bonds, mortgages and other credits should be subject to the inheritance tax. The loss of revenue legally due the state by the concealment or omission of this class of property is a strong inducement to the enactment of inheritance tax laws, and the argument is not to be wholly brushed aside when the policy of this legislation is considered. It must, however, be conceded that the theory of exacting from the heir the tax evaded by his ancestor cannot be sustained on equitable principles. It would be a penalty on the heir for the sins of his ancestor, which is ..ct a good basis upon which to rest a just system of taxation.

In the opinion of Dr. Richard T. Ely, an eminent authority on economics, the inheritance tax can best be sustained on the theory that it falls on property which comes to the recipient without effort or labor. "Property," he says, "which comes by inheritance is

an income received without toil. It is for the one receiving it an unearned increment of property, and on this account may properly be taxed. The most satisfactory basis upon which property can rest is personal toil and service of some kind and when property comes otherwise than as a return for social service, a special tax finds a good solid basis in justice." The accidental or fortuitous receipt of property on the occasion of the death of the owner is advocated by Dr. E. R. A. Seligman and Dr. Max West as a sound economic theory for the support of an inheritance tax.

The objections sometimes urged that an inheritance tax is a Other objections tax on capital or unequal or double taxation are unsound. The considered. 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 lifetime.

The trust born of rapacity; maintained

CHAPTER XXXII

SOCIAL AND ECONOMIC LEGISLATION

233. The Spirit of Opposition to Corporations

THE spirit which has led to much anti-trust legislation is revealed in this speech delivered by Mr. Burr in the last New York constitutional convention:

The trust has come determined to stay. It has determined to accomplish its ends, no matter what the cost. It controls the great staples of the country. It is born of rapacity and maintained by by tyranny. tyranny. It stretches out its tentacles, quietly and stealthily, until whole industries are in its grasp. It creates a monopoly by throttling all competitors. It grinds down those who furnish the raw material and supply the labor, and exacts the highest possible price from the consumer. It has become an impregnable citadel of capital. It employs the highest legal and business capacity to perfect and maintain its organization. It laughs at public opinion, rides roughshod over railroad enactments, and baffles the law courts. It bridles newspapers with subsidies, and sends members to the Legislature and to Congress. It has agents in every Legislature, and legislative bodies become as pliable as wax in the hands of the modellor under its powerful manipulation. It tampers with judges. It makes alliances with political leaders and hires professors of political economy to defend its formation and its objects. We have seen it within the past month stalk into the Senate of the United States and prevent the passage of laws needed by the people, until it forced the highest legislative body in the land to yield to its imperative demands. It is no longer an interference with trade. It is a menace to political liberty. It is no wonder, then, as President Cleveland stated to Mr. Wilson in his now

famous letter of July 2, on the tariff: "There is a natural democratic animosity to the methods of trusts and combinations."

Trust and

What a disgraceful state of affairs is revealed by the sugar campaign inquiry report, recently submitted to the Senate in which it is contribustted: "It is a matter of complete indifference to the Trust what tions. duties are levied on sugar, so long as the form is ad valorem, and a sufficient differential is given in favor of refined sugar. The Sugar Trust, by the evidence of its president and treasurer, has contributed freely to the city and state campaign finds of both parties and its contributions have been made in years when national elections were held. This is a thoroughly corrupt form of campaign contributions, for such contributions, being given to two opposing parties, are not for the purpose of promoting certain political principles, but to establish an obligation to the giver on the part of whichever party comes into power. The Trust does not give to political parties for the promotion of political principles in which it believes but for the protection of its own interests as appears by the same testimony. The fact that it gives to both political parties is sufficient proof of the purposes of its contributions and of their dangerous nature. For these reasons, the undersigned have felt it important to lay before the Senate and the country the fact that the sugar schedule as it now stands is, according to the testimony, in the form desired by the Trust, and to point out, also, the methods by which the Sugar Trust reached what it desired and obtained, a substantial victory."

Combinations of capital, in the form of trusts or otherwise, have been repeatedly condemned by the best legal minds and the ablest thinkers in the country. It may be well to hear what some of them have said. In the opinion rendered by Judge Gibbons in the case of the Whiskey Trust, April, 1894, he said: "Trusts and combines should not exist. They and our Republican institutions cannot in their true force and virtue co-exist because the excellence of our institutions depends upon the opportunity, influence, and prosperity of the individual citizens, and the more widespread these opportunities and influences, and the more general

Combinacapital condemned by lawyers and publicists.

tions of