Ever since Pennsylvania adopted the principle of the inheritance tax in 1826, it has been embodied in the fiscal system of one or more of the American states. Its importance has greatly increased, however, during the last twenty-five years, until in 1920 forty-five of the forty-eight states were using some form of the tax. As the needs for revenue become more pressing, as the legislators become educated to the merits of the tax, and as more cooperation can be developed among different states, a much more thorough use of this form of taxes can be expected as a source of state revenues.

Examples of State Taxes. - The inheritance tax laws in our states have taken on nearly every conceivable form. The early Pennsylvania tax was 21/2 per cent placed upon the transfer of property to collateral heirs. An exemption of $250 was allowed. Two years later Louisiana placed a tax on property going to foreign heirs. Gradually other states were added to the list, and as the years went by amendment was placed upon amendment, the courts became more favorable, until the system as it is found at present resulted. Space does not permit a survey of the laws found in the various states, nor, because of the changes which are imminent in many states, would any survey, which might be made now, be of any particular value in a few years. The outstanding features of only a few laws will be noted.

The state of New York, through the amendment adopted in 1911, is considered to have one of the most model inheritance tax laws. An exemption of $5,000 is made to direct heirs, and $1,000 to collateral heirs. The rates are as follows:

Above exemption, up

to

$ 50,000,

1%

for direct,

5%

for collateral

From $ 50,000 "

"

250,000,

2%

" "

6%

" "

" 250,000 "

"

1,000,000,

3%

" "

7%

" "

All above $1,000,000,

   

4%

" "

8%

" "

The law also seeks to avoid double and multiple taxation, such as was described above. The estates of residents are taxed upon tangible property within the state and intangible property wherever it may be situated. No tax is placed upon the intangible property in the estates of non-residents, and only their tangible property within the state is taxed. The intangible property includes such items as money, bank deposits, shares of stock, bonds, notes, credits, etc. Bequests to religious, educational, and charitable institutions, whether within or without the state, are exempt from the tax. Recent legislators, however, have shown some disposition to recede from this tolerant attitude, and some of the former exemptions have been removed, as, for example, the shares of stock of domestic corporations and New York national banks in the hands of nonresident decedents.

Some of the other states have modified their laws so as to conform more nearly to justice. No doubt the unselfish influence of New York has had its effect. California was one of the first states to follow the example, yet went much farther in the steepness of rates. The rate on bequests to direct heirs is progressive from 1 to 5 per cent, while to collateral heirs it ranges from 2 to 25 per cent. The fact that most states have introduced the tax by placing it first upon collateral inheritances and then gradually extending it to include direct inheritances, is still evident. A few years ago many states used the collateral tax, with no tax upon the direct transfers of property, and this is still true in a few cases. Gradually, however, direct inheritances are being included in the tax, although with higher exemptions and lower rates than for collateral inheritances, until it is likely that the time is not far distant when direct inheritance taxes will be used in all the states where the tax on collateral transfers is now found.

The abundance of revenue from other sources has made the American states somewhat slow in seizing upon the inheritance tax as a part of their fiscal systems. The tax is one, however, that appeals to public sentiment, and without doubt it has come to stay. As years go on it will be found to occupy a place of increasing importance in our sources of revenue.