A somewhat detailed study of the theory, advantages, and defects of the inheritance tax is warranted, because so much importance has been attached to it in recent years, and because this form of revenue is likely to be of importance in the future. To the uninitiated, who come upon its extended discussion in comparatively recent years, this principle appears as a modern development in fiscal policy. The great increase in the need for revenue has led fiscal authorities to attach more importance to taxing inheritances, while the piling up and bequeathing of enormous fortunes has led many to look upon the principle as a valuable social weapon. Principally because it can be used to encourage a social equality, and because it acts as a means for a fairer distribution of tax burdens, the inheritance tax has found its most extensive development in the more democratic countries, such as Great Britain, Switzerland, and the United States.
Tax in Ancient States. - It is an error, however, to consider the taxation of inheritances as belonging exclusively to modern fiscal systems. As a matter of fact, some form of levy upon the transfer of property at death dates back as far as authentic records can be obtained. Some traces of the use of the principle can be found as early as 2000 B.C. It appears that a well-defined system of levies on property
1 The material in this chapter is much the same as that contained in an article by the author in The Annals of the American Academy of Political and Social Science for May, 1921.
successions existed in Egypt for a number of years before the Christian era. The Emperor Augustus, moreover, used a tax on property transfers very early after the birth of Christ. He desired to provide a fund for the pensioning of old soldiers and proposed a tax of one twentieth upon inheritances, which he secured by the consent of the Senate only after he threatened to use the direct land tax. No distinction was made between bequests to relatives and strangers, and only a low exemption was allowed. Some of the later rulers somewhat alleviated the stringency of the law by the recognition of family ties and dependency, exempting in consequence some of the more direct bequests, such as between mother, father, and children. Still later these exemptions were removed, and the law was made even more stringent than it had been at first, but was again modified before the tax was given up, probably somewhere near the beginning of the fourth century.
Tax in Middle Ages. - A semblance of the modern inheritance tax is found in the system of reliefs which existed in the Middle Ages. At the death of a tenant, the right of the tenancy to pass to his heir was recognized, yet some exaction was made by the landlord. As long as the amount could be voluntarily determined by the landlord, extortionate demands were often made, which practice led to the establishment of uniform rates by legislation. These duties were found in a number of countries, as well as another class of duties which was levied upon the transfer of property other than land. After the breakdown of the feudal system these duties of course went out of existence. Sporadic attempts were made, however, to use some form of succession levy, especially in the countries on the Continent, which finally resulted in the formulation of permanent inheritance tax laws. It is readily comprehended, therefore, that inheritance taxes are not products of modern minds, but hare had a long course of develop-ment.