ticular reform, and they made a good start with it. Massachusetts, New York, and a number of the states adopted it, but we could not get enough of them to adopt it, and as the Western states started in by levying the tax on all the other bases, the Eastern states gradually drifted back to the same proposition.

That leaves us with the fifth plan, which is the plan we suggested last year. That is, abolition of the federal estate tax; keeping of the domicile tax, as at present, and the Matthews' flat-rate plan on securities of non-residents.

I suppose most of you are familiar with the Matthews' flat-rate plan. It simply means that instead of taking the whole of an estate into each state and figuring out the relationships and the shares of each person under the will and apportioning the whole thing, just as though you were probating the entire will in each state, you simply consider the property to be transferred stock in some cotton factory in New Hampshire, for instance and levy a 2% tax on it, without any deductions, without any exemptions, or anything else; the people pay that one tax and go on home and don't have the tremendous labor of finding out what the tax is; and you end up with just about the same tax in the long run.

The Matthews' flat-rate plan, with the tax at domicile, is what we have been backing, and we are hoping that you will help us fight for it. It has the great advantage that we don't have to put it through in every state of the Union in order to profit by it. That is, every state that adopts this flat-rate tax means just one more state in which you won't have to write a dozen letters to get the tax settled-to find out what it is-for non-resident estates. Practically all the other plans have to be carried out in toto or they are of no real service.

As to Professor Adams' plan of the federal government taking over all the collection of the tax, all I will say is, that most of you men here know that the state legislatures are going to be very slow to agree to anything of that kind, even though the states have money returned to them on some particular basis. Furthermore, any of you who have had experience with the collection of the federal estate tax know that there is great delay. I don't know what it is right now; a few months ago it took from three to five years to get an estate settled. That delay occurs even though they are dealing with only a few of the larger estates, because the limitation of $50,000 relieves them of small estates. Furthermore. they are helped tremendously by the work done by the state taxing bodies. I hesitate to think what would happen if the weight of taxation of all estates in the United States were thrown upon the central taxing authorities at Washington. I am not saying this in any spirit of criticism of them, but simply because I believe the job is too big for human solution, short of twenty-five or thirty years' experience.

Now, to get down to Mr. Harrington's plan, I think from the point of view of pure logic, Mr. Harrington has the best of all the plans. That is, if you can get a location for property and tax it in that one place and that is all you can tax, there is not going to be squabbling between states, or any question of duplicate or triplicate or quadruplicate or quintuplicate taxation. That is a very attractive proposition. I remember the first time Mr. Harrington and I talked over these things in his office in Wisconsin; he pointed out to me how thoroughly logical it was, in which I agreed with him, and finally I said, "You say that the Wisconsin idea is the only logical idea, and that you would only tax an estate once, but I notice that your law also calls for you to tax every one who dies a resident of Wisconsin on all of his personal property in other states." Mr. Harrington agreed that the law read that way and said he wished it did not. He tells me he proposes to put it up to the legislature of Wisconsin to change that. If the legislature of Wisconsin changes it, I shall be surprised. If all the legislatures of this country changed their laws likewise, I should call it a miracle; that is the political objection to Mr. Harrington's plan. Historically, death duties in this country arose as taxes on the estates of people dying residents of the state only, and the other taxes have come later, so that we have a long historical development, and the general ingrained theory throughout the country that the real inheritance tax should be at the place of domicile. I believe it is going to be practically impossible, certainly in the Eastern states, and in all probability in the Western states, to get even a very small proportion of the states to change their bases; and unless all of the states change their bases, or a very large part of them, there would be little chance to get away from the duplication and complication we have at the present time.

Now, as to administration, I am only going to point out one or two things about the difficulty in the administration of such a tax. Take American Telephone & Telegraph Company stock; a big corporation, the stock of which is held all over the country, with property in every state of the Union; and furthermore, owning shares of stock in other companies, which have property in several states: Now, under a plan where you are going to tax only where the property is, and divide up the stock according to the property it represents, what are you going to do with a share? A widow dies, leaving one share of American Telephone & Telegraph Company's stock to her son, worth $120 or something like that. It would cost you at least $500 if you are going to have to get waivers from forty-eight states to get that stock transferred. Mr. Harrington always comes back at me by saying there are only a few of those companies. There is the Postal Telegraph Company, Western Union, Woolworth, the Winchester Company, and the tire and

rubber companies, automobile companies, like General Motors, and Ford-I just give you a few of them-railroads and gasoline companies-well, you can think of them yourself. I disagree with Mr. Harrington very decidedly on the number of those and on the amount of securities outstanding, and on the real problem of administration involved.

On the legal end of it, I have been fortunate enough to secure some notes made by Mr. Handy of the Prentice-Hall people, which will be printed with these notes, and then he goes on to say:

(Reading Mr. Handy's notes)

So much for the various plans. I think that I have covered what the committee has found out about the various plans. There are one or two remarks I want to make. Professor Adams, in talking with me this afternoon, said that he felt that it would be a great pity to admit that duplicate taxation of inheritances was legitimate, and in favoring the Matthews' flat-rate plan we were doing that. It may be too bad to admit it-I would rather see single taxation of inherited estates than duplicate but duplicate taxation would look mighty good to one who had suffered quintuple or even worse taxation, and he would think duplicate taxation was pretty easy. As it runs now, there are almost always three taxes; and we have had all sorts of fool things. I think of one case in the last year where two states collected on the domicile principle. That is a thing this committee has not solved. I have looked in vain to find a solution.

Now, the paper of Mr. Harrington is a good one; he is an astute lawyer; he is also a real orator; he is a learned tax official; he is a gentleman, and he is a good sport. After telling us what he thought about our plan and saying that he preferred his plan, which, as I told you, is one for which I have every respect, he said that he would stand with the committee in their report, and help us to fight for what seems to be the only reform immediately possible.

I don't know that there is any use in saying very much more. All of you are familiar with the tax situation. If it were a popular audience, I could go on and tell how bad the inheritance tax situation is; but you all know it. There is nobody in this audience who does not realize how mixed up and thoroughly evil our present tax situation is; so I am simply going to say that the committee submits to you as a plan of battle, first and foremost; to turn all of our guns on the abolition of the federal estates tax; that is a thing which, if it is going to be done at all, must be done at once. The federal government is getting its tentacles more and more firmly fixed on its position all the time. If we are going to abolish the federal estates tax, it must be done in the next couple of years, or we shall never abolish it. If we do abolish it, it will leave the

states enough additional revenue to draw on so they won't have to be scrapping with each other about every different kind of a tax. Secondly; we believe that we ought to try, as far as possible, to get the tax on estates, other than real estate, limited to the state of domicile; third, where that is not possible, to get the Matthews' flat-rate plan in, so as to cut down the cost of administering estates; fourth, we ought to get as far as possible uniformity of both substance and procedure of the law in various states. Of course, you cannot get absolute uniformity of procedure or anything even approaching absolute uniformity in a country where you have fortyeight states with different probate courts and different governmental organizations.

We have drawn up a model inheritance tax law, and when we say "model", we don't mean a perfect inheritance tax law. This model inheritance tax law has been distributed. I don't know whether all of you have it or not; there are a number of copies here.

This law will take a good deal of study; you won't find it particularly exciting. I don't think it will keep you awake tonight it you start reading it, for I have slept over it a good deal myself. It is something you can take home, and there will be plenty of them here tomorrow if you want to send souvenirs to your friends. We submit this and have already submitted some resolutions.

There is very little left to say, then, except to call attention to one or two points. First; this law confines itself to a tax on all real estate and on the personalty of resident decedents. Second; it taxes joint interests only at the rate on the proportional part of the joint interest. Third; it exempts all religious and charitable institutions within a state, and taxes those outside of the state in class B, that is, at a fairly moderate rate instead of at the higher rates. That, for instance, in the Frick case, worked a great hardship on a number of institutions that had to pay duplicate and triplicate taxation on very large sums of money left to them, because they were in the lowest class with the highest rate. It is perfectly easy under present conditions for the tax to take 50%, 60%, or 70% of a bequest to a religious or an educational institution.

Really, the work of this committee has centered around its model inheritance tax law. It does not look so exciting, as I say. What I hope we can fight for is some sort of an approximation to the general ideas of fairness in this law. One thing we put in is that the tax shall not be levied again within three years on people in class A. If a man dies and leaves a fortune to his wife, and she dies anywhere from one-half hour to three years after him, and the property is passed on to his children, they shall not again have to pay the inheritance tax on it. That seems a fair provision. You, of course, will want time to read it over, if you read it at all, and

I hope some of you will find it of sufficient interest to do so. As I say, it has been of sufficient interest for a good deal of hard work on it. I have greatly enjoyed the work of this committee, and I certainly have enjoyed my association with the men who have worked so faithfully on the committee. Thank you.

(The model inheritance tax act referred to is as follows.-Ed.)

MODEL INHERITANCE TAX LAW

PRESENTED BY A COMMITTEE OF THE NATIONAL TAX ASSOCIATION

SECTION 1

TRANSFERS TO BE TAXED

Tax on Transfer of Property-1. A tax shall be and is hereby imposed upon any transfer by a resident of this state of any real property within the state, or any tangible or intangible personal property, or interest therein, and by a non-resident of this state of any real estate located within this state, or any interest therein to any person or persons, in trust or otherwise, in the following cases: Under Will or Statute-2. When the transfer is under a will or by the statute of descent and distribution of this state.

In Contemplation of Death-3. When the transfer is of personal property made by a resident, or of real estate located within the state made by any person whether a resident or non-resident, by deed, grant, bargain, sale, or gift, made in contemplation of the death of the grantor, vendor, or donor, or intended to take effect in possession or enjoyment at or after such death. Every transfer made within three years prior to the death of the grantor, vendor or donor, of a material part of his estate, or in the nature of a final disposition or distribution thereof, and without an adequate valuable consideration, shall be construed to have been made in contemplation of death within the meaning of this section.

By Power of Appointment-4. Whenever any person shall exercise a power of appointment derived from any disposition of property made, whether before or after the passage of this act, such appointment when made shall be deemed a transfer taxable under the provisions of this act in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and has been bequeathed or devised by such donee by will; and whenever any person possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided there for in whole or in part, a transfer taxable under the provisions of this act shall be deemed to take place to the extent of such omission or failure, in the same manner as though the person thereby becoming entitled to the possession. or enjoyment of the property to which such power related had