PERSONAL TAXES § 1. Inheritance-tax laws. § 2. Fiscal and social aspects. § 3. In come taxes; general nature. § 4. Income taxation by the states. § 5. Obstacles to federal income taxation. § 6. Federal taxation of individ ual incomes. § 7. Important features. § 8. Development and yield. § 9. Corporate income and excess profits. § 10. Defective theory of corporate income taxation. § 11. A system of taxation.
of the American states had inheritance tax laws in 1921 (all but South Carolina, Florida, Alabama, Mississippi, and New Mexico). These laws apply generally to property passing either by will or under the interstate laws of the state. The tax is for state purposes. These laws differ in many ways, but are nearly all alike in certain respects: I See ch. 18. § 3. note, and § 5. on this distinction. The poll tax also is personal: see cb. 17, § 9.
304 (1) In applying to the separate legacies rather than to the estate as a whole.' (2) In taxing legacies to relatives in the direct line at a lower rate (or even exempting them entirely) than those to collateral relatives.' (3) In exempting legacies below a certain amount.' (4) In having rates progressing with the size of the legacy; (this feature is less general, but is prominent in most of the later laws).
The federal government has until lately made little use of an inheritance tax. The law passed in 1862 in the midst of the Civil War yielded little and was soon repealed. But in
1916 was enacted an "estate tax" (amended and increased in succeeding years) which is imposed upon every estate (as a whole, not on the several shares) on the excess over $50,000, at progressive rates from 1 to 25 per cent, the maxi mum being on estates exceeding ten million dollars.
§ 2. Fiscal and social aspects. The fiscal importance of inheritance taxes in the states has been comparatively not very great, but has rapidly grown. In 1903 the receipts from this source (in twenty-seven states) were more than $7,000,000; in 1913 they were (in thirty-five states) $26, 000,000, and are doubtless now much greater. In New York state alone the receipts range between ten and fifteen million dollars a year. The yield of the federal estates tax by fiscal years has been as follows: 1917 $6,000,000 1918 47,000,000 1919 82,000.000 1920 104,000,000 The spread of inheritance taxes and the higher and progressive rates applied are an expression in part of the In Utah the tax is 5 per cent on all estates over $10,000.
• Exception, Utah.
+ Exceptions are Missouri, New Hampshire, Vermont, Virginia.
need of additional revenues and in part of the growing popu lar concern regarding the concentration of wealth. Yet the actual legislation is something of a compromise between fiscal policy (to get revenues) and social policy (to reduce or to dis tribute the larger fortunes. In New York legacies of more than $1,000,000 are now taxable at 4 per cent to relatives in the direct line and to all others at 8 per cent. In Washing ton the tax to relatives in the direct line is from 1 to 5 per cent, according to the amount of the share, but to others it may go as high as 15 per cent. In Wisconsin, somewhat simi larly, the tax may rise to 15 per cent on the excess above $500,000. These taxes are of considerable importance, not only fiscally, but as the means for reducing large inherited fortunes. For this latter purpose, however, it would be more consistent and effective to make the progressive rates apply to the distributive shares rather than to the estates as wholes.