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analyzed. It probably grew out of the fact that at an early period, when inheritance taxation was taking form in an experimentai way, most decedents had all of their property at their domicile. The location of the property and the domicile coincided, and as a matter of course, the tax was imposed at the domicile; and that was assumed to be the only proper place of taxation; and that assumption has come down through the years, and has been more or less a guiding principle in legislation and court decisions to the present time.

But a conflicting principle was soon adopted by the courts, namely, that the transfer of real estate at death was subject to taxation at the situs of the real estate. Following this, it seemed to be accepted at once, pursuant to the principle of taxation only once, that real estate should not be held subject to the tax at the domicile, when located in a foreign jurisdiction.

The rule adopted as to real estate should have been a warning that the alleged principle of taxation at domicile only, was unsound and needed re-examination; for real estate constituted much more than half of all property. If it is sound, as it undoubtedly is, that the transfer of real estate should be taxable only at its situs. no reason can be found why the same rule should not apply to tangible personal property. If a farm or store building, left by decedent in another state, should be taxable there and there only. it is not possible to find a sound reason why the livestock and farm machinery, or the stock of goods in the store building, should not also be taxed at the situs.

Since real estate and tangible personal property constitute the great bulk of our property, we now find that the theory of taxation at domicile is substantially abrogated, and should be cast into the discard. If this had been done long ago, this association would have needed no committee on inheritance taxation-except possibly to discuss uniform rates and exemptions, and the disposition of that small fraction of our property known as intangibles representing tangible property located in more than one state-and possibly to harry Congress in respect to the repeal of the federal estate tax.

Discarding the principle of taxation at domicile, we find at once that we must accept in its place the contrary principle of taxation at the situs of the property. And this, we are convinced, is the true principle that will bring us out of the mess of confusion and contradictions now existing, as indicated by the majority report. To state the present necessity briefly, we must back up and start over. As our foundation for a simple and equitable system of taxation, we must accept two fundamental principles:

1. The transfer of property of a decedent shall be subject to only one inheritance tax.

2. The transfer of property at death shall be taxed at the situs of the property.

As a corollary to the second principle, it is to be understood and accepted that intangible property-the mere paper representatives of the tangible property or evidences of title or interest thereinsuch as bonds, mortgages, land contracts, corporate stocks, bills of sale, bills of lading, warehouse receipts and similar securities, are taxable only at the situs of the tangible property which they rep


When we accept and apply the above principles, we shall find that many of the problems now before us will have disappeared, and many others will have been greatly simplified. Let me indicate the probable results:

(1) Real estate left by decedent will be taxed as at present. This will take care of half the property of the country.

(2) Physical or tangible personal property will be taxed in the same manner as real estate-where located or commonly kept only. This will represent, say, twenty-five per cent of the nation's property.

(3) Intangible property, such as bonds, mortgages, stocks, etc. representing property located within a single state will be taxed in the state where the tangible property so represented is located. This will take care of, let us say, fifteen per cent of the property of the country.

(4) Intangible personal property representing interstate property will be apportioned for the purpose of tax among the states where the property is located. Let us assume this to cover ten per cent of all property, and therefore ten per cent of all inheritance taxes.

Let me remark here by way of parenthesis that the above fractions of the total property are purely hypothetical, and are subject to modification by each reader to suit his taste or his knowledge based upon research. There is still left a small fraction, almost negligible, of so-called property-promissory notes, book accounts. and personal debts-strictly not property at all-usually mere promises to pay money not yet earned. Probably they should be assigned to domicile.

The first three subdivisions above, covering ninety per cent of the property of the country, offer little difficulty. In the very great majority of estates, the domicile of decedent and the situs of his property will coincide in any event. In case of real estate located in another state, the procedure is established, and is relatively simple and inexpensive. In respect to tangible personal property. there is no reason why it should not be equally simple and inexpensive. In respect to securities representing property in a single

state, they should be handled by the tax commission or other centralized state department; and I know from experience that the procedure may be simple, brief, and inexpensive.

We have left, then, only the ten per cent of our total property, being securities representing interstate property. It is in relation to this small proportion of our property, transferred once in a generation, that all the turmoil is about. It is not worth the amount of heat engendered. It may not be easy to devise a simple and inexpensive procedure for that form of property under the system which I have outlined; but it has not been done under the present system. I am of the opinion still that it can be done, and that it can be done more readily under the general theory of taxa; tion at situs than of taxation at domicile. In any event, when we adopt the principle of taxation at situs, this question will be approached from a different angle.

Accepting the principle of taxation at situs, we must go back to our state taxing officials and legislatures, and tell them a few things in plain English. We may remind them that a few years ago the Supreme Court of the United States said:


It may be regretted also that one and the same state should be seen taxing on the one hand according to the fact of power, and on the other, and at the same time, according to the fiction that in succession after death mobilia sequuntur personam and domicile governs the whole." Blackstone v. Miller, 188 U. S. 189.

But it declared that to be the law. This dictum rather encouraged taxation by the strong arm, and "according to the fact of power"; and with this encouragement, we have arrived at the present sad state of affairs for which this conference is so desirous of finding a remedy.

We may remind our legislatures and taxing officials that men have died, and before their widows and children could obtain the property left to them, they have had to pay inheritance taxes in several states—at the domicile; again where the property is located; again in the state where the corporation exists that issued their stocks and bonds; again in the state where the corporation kept a transfer office; and again in the state where decedent kept his securities in a safety deposit box. This is taxation "according to the fact of power." It well illustrates the maxim that the power to tax is the power to destroy.

We may tell our taxing officials and legislatures of a case now pending in our courts, where decedent died a resident of Massachusetts, leaving stock in a Maryland corporation, all of the corporate property, real and personal-some $25,000,000-being located in Wisconsin. After paying the three taxes in the three states, and

the costs of litigation, there will be some reduction of what President Roosevelt used to call a swollen fortune". You may tell them of a Wisconsin case where the decedent died a resident of New York, leaving stock in the Northern Pacific Railroad Company, a Wisconsin corporation having 97% of its property located outside of the state, and from which the executor paid to the state of Wisconsin a tax of $355,000. The decedent did not belong to Wisconsin, and the property did not belong to Wisconsin, except 22%; yet under our current theory Wisconsin was entitled to the tax. This was ten years ago. I recall that the state officers heralded this instance to the people of the state and to the legislature then in session as a notable victory for the state. This was taxation" according to the fact of power". To me it seems quite like the case of one burglar bragging to another of his successful exploits. But better ideals prevailed, and in 1913 our laws in this respect were amended. Very recently the estate of a Wisconsin decedent was taxed in both Wisconsin and Minnesota upon a stock of lumber in a yard in Duluth, appraised at $100,000. Do you think the heirs felt that they had received a square deal? They did not.

We need to tell our legislatures and tax officials that in the field of inheritance taxation, taxing "according to the fact of power" is overdone, inequitable and immoral, when a tax is levied by a state upon the transfer of securities, merely because the transfer office of the corporation is located within the state, or because the deceased kept his securities in a safety deposit box in the state, or because the officers of a corporation saw fit to incorporate in a state other than that in which the property of the corporation was located. Why should the owner of two or three million dollars' worth of real estate in Chicago be permitted to move to Florida and take his real estate with him for inheritance tax purposes by incorporating in that state, and keeping his stocks there until his death? Think of the absurdity of saying that the filing of a document with an officer of the state of Maryland, by the officers of a Wisconsin manufacturing corporation, conveys $25,000,000 of Wisconsin property out of the state and removes it to Maryland for inheritance tax purposes. Can the notions and whims of corporation officers be allowed to play hob with our tax laws in this manner?

Even the great state of New York is acquiring a glimpse of the true principles. A few years ago she modified her law so as to require foreign estates to pay a tax upon the stock of New York corporations. This was only groping for the light. Now her law of 1922 requires foreign estates to pay a tax upon stocks of foreign corporations at a proportion of their value equal to the proportion of New York real estate represented in the assets of the corpora

tion. Evidently her vision is clearing. She does not propose to allow her vast city real estate values to be removed to Florida, for inheritance tax purposes.

But the most drastic thing we must tell our legislators is that they must release their domestic estates from the tax so far as these estates consist of securities representing property foreign to the state. At present, in Wisconsin, we tax twenty per cent of the value of Chicago, Milwaukee & St. Paul stocks and bonds, left by non-resident decedents. We must treat the estates of our domestic decedents in the same way. We have domestic land and lumber companies, having all their property in the south or west. We do not tax the stocks and bonds of these companies, when left by nonresidents. We must also exempt them to resident decedents, thus leaving the tax to the southern or western states where the property has its situs. A little tax may be lost, but we shall have taken the essential step toward justice and simplicity in inheritance


It may be assumed that every state has suitable statutory provisions prescribing the conditions under which foreign corporations may own property and transact business within the state. We find relatively little difficulty in dealing with corporations and arranging with them in relation to the proper authority for the transfer of stocks and bonds of decedents.

At present there are many difficult questions of residence or domicile, involving lengthy and expensive litigations, as illustrated by the Harkness case, and Chambers v. Hathaway, in California. In the latter case, decedent was found to be a resident in both Wisconsin and California, and the estate paid inheritance taxes accordingly. Under the principles which we advocate, you will see at once that questions of domicile become of little or no importance, and much expensive and troublesome litigation will be avoided.

We are entirely familiar with the argument and the theory upon which it is based-that the tax is upon the transfer. and not upon the property. This fiction was necessary to sustain progressive rates and to escape the rule of uniformity. But every dealer in securities, and every economist knows that a heavy inheritance tax, to which securities may be subject, makes them less desirable as an investment, and reduces their market value. This is only another way of saying that as an economic fact the burden of the tax falls on the property, notwithstanding the legal fiction. The law provides that the tax shall remain a lien upon the property until paid. and that the property may be sold to pay the tax. A chief argument in support of the inheritance tax is that it is adopted as a means of reducing the burden of the general property tax. If there is anything to this argument, it follows that the inheritance

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