The inheritance tax has found a place in the fiscal system of the Federal government at several different times. Generally this has been in times of emergency, when the primary object was to secure more revenue. As early as 1794 recommendations were made for a tax upon the succession of property at death. The first law which placed a tax of this nature was passed in 1797, and remained in force until 1802. Direct heirs were exempt from the tax, while others were taxed only on the excess above $50. The rate was twenty-five cents when the amount was not more than $100; from $100 to $500 it was fifty cents; the tax on $500 was one dollar, with an additional dollar for each increase of $500. While this was perhaps more the nature of a fee, we find, early in the levy of a rate upon legacies, the recognition of the principles of progressive rates, and a differentiation on the basis of relationship.

Tax of 1862. - Other recommendations were made after the repeal of this law, but Congress enacted no similar legislation until 1862. This levy was of two kinds - one known as a legacy tax, and the other as a succession tax. The rates were progressive, ranging from 1 per cent to 6 per cent, with an exemption of $1,000 allowed. They were repealed in 1870, the revenue having increased from about a half million dollars the first year of use to nearly three million dollars the last year. This last represented a little less than 2 per cent of the total internal revenue receipts.

Tax of 1898. - Taxes upon inheritances and gifts were included in the ill-fated income tax law of 1894. In 1898, however, they were again introduced as a means for securing additional revenue. The law, which was repealed in 1902, differentiated between degrees of relationship, and used progressive rates which went as high as 15 per cent for collateral heirs. The act was productive of revenue; in 1902-03 it supplied more than 2 per cent of the internal revenue receipts. As an aid to secure revenue to finance the Great War, inheritance taxes were again called into use. These will be discussed in the chapter dealing with emergency financiering.

There is much disagreement as to the use the Federal government should make of the inheritance tax. Many authorities hold that this field of revenue should be left entirely to the exploitation of the states, the expenditures of which are continually on the increase, while their sources of income are more or less limited. On the other hand, the needs of the Federal government have increased greatly, and these must be met from revenue. The larger the percentage that can be collected from inheritance taxes, the less there will be to be collected from some more burdensome source. There is no good reason why both the Federal government and states should not use the tax, nor why they should not cooperate in making the tax uniform and just.