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Subject Area: Law
Topic: The American Revolution and Constitution

§ 137 a.: The right of testamentary alienation and intestate succession—Taxation of inheritances.— - Christopher G. Tiedeman, A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, vol. 2 [1900]

Edition used:

A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint (St. Louis: The F.H. Thomas Law Book Co., 1900). Vol. 2.

Part of: A Treatise on State and Federal Control of Persons and Property in the United States considered from both a Civil and Criminal Standpoint, 2 vols.

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§ 137a.

The right of testamentary alienation and intestate succession—Taxation of inheritances.—

But the vested right of alienation, which the land owner acquires as a natural incident of his property, rests upon the natural power, in the absence of lawful restrictions, to give away or sell what belongs to him. The natural right can only exist as long as his natural dominion over the property lasts, viz.: during his life. His natural dominion over his property terminates with his death. He may sell or give away, as he pleases, as long as he does not violate the rights of creditors, up to the last moment of his life, and his right of alienation inter vivos cannot be taken away by statute; but after death he ceases to exercise a natural dominion over his property, and if he has any power of disposition after death, it must rest upon positive law, and must change or disappear with the modification or repeal of the law. It is therefore held that no one has a vested right to dispose of lands by will, in accordance with the laws in force when he acquired them. His right to devise depends upon the laws in existence at his death. The new statute may be made to apply to future purchasers of lands, and not to present owners, but it will apply to the latter, if they are not expressly excluded from the operation of the statute.1

It has recently been declared by the Supreme Court of Illinois that there is no constitutional limitation of the power of the State to change the law of descent as to alien heirs, except so far as the rights of such heirs to American inheritances have been safe-guarded by treaty between their home governments and the United States.2

If it be an accepted doctrine of American constitutional law that there is no natural and inalienable right in any one, either to dispose of his own property by will, or to take property from another by inheritance, then it matters not how far a legislature may depart from natural instinct in ignoring or restricting the moral claims of near relatives to the inheritance of the property of the deceased owner, the constitution cannot be successfully appealed to for protection. The right of succession to the estate of a dead man, even though he be one’s father, is a privilege resting upon positive law, which cannot be demanded as a constitutional right, and which the legislature may regulate or take away altogether in the exercise of its wise or unwise discretion. Of course, unless public opinion should adopt the principles of communism, which is extremely improbable, there is no likelihood of any fundamental change in the underlying principle of the laws of succession. So far as it is possible for one to see into the future, the total abolition of the right of inheritance will never be seriously proposed to the legislature of a civilized State. There is but one likely method of curtailing or restricting the enjoyment of this privilege; and that is by the heavy increase in the taxation of inheritances.

The effort has been made in a great number of cases to prove the unconstitutionality of these inheritance tax laws, by holding that, being taxation, the tax must be so imposed as to satisfy the constitutional requirement of equality and uniformity. As is well known, all American constitutions contain the requirement that taxation shall be equal and uniform.

Where the taxation of inheritances is based upon a uniform rate per centum of the assessed value of the estate of the decedent; and all estates are taxed at the same rate, whether the estate be large or small, or the beneficiaries be closely or remotely related to the decedent, or not related at all, it does not much matter whether you consider the inheritance or succession tax as a tax in the constitutional sense, which is required to be equal and uniform, or as a regulation of the right or privilege of inheritance. In either case the tax is valid and does not conflict with any constitutional principle. For, as Mr. Justice Earl said in In re McPherson,1 “as long as the tax is equal and uniform the State has the undoubted power to tax anything that has value; property of all kinds, franchises of corporations and individuals, businesses and contracts of all kinds, the right of suffrage, and all other rights and privileges, it matters not what their nature may be; the sole restriction being, that there must be equality and uniformity in the imposition of the particular tax upon all who come within that particular classification.”

But where the inheritance or succession tax is levied upon estates of a certain value and over, and others of less value are exempted, or where a higher rate per centum is levied upon the same amount of property, when the beneficiaries are collateral heirs or strangers, than when they are direct heirs, it would seem to be an irresistible conclusion that such a tax upon inheritances, if it be properly considered as a tax in the constitutional sense, is unconstitutional, because it does not comply with the constitutional requirement of equality and uniformity, as that constitutional provision is generally construed. And we should not be surprised to learn that such an inheritance tax has been declared to be unconstitutional. With equal or greater force could the constitutional objection be applied to a progressive inheritance tax, the rate per centum varying according to the value of the inheritance. In Curry v. Spencer,1 the New Hampshire inheritance tax law was declared to be unconstitutional, because the tax was imposed upon collateral relatives and not upon direct heirs. The court said: “It is plainly founded upon pure inequality, and is simply extortion in the name of taxation; and it can, therefore, never be maintained in this jurisdiction so long as equality and justice continue to be the basis of constitutional taxation.”

The Ohio statute provided for the exemption of estates under $2,000 and an increase of the per centum of the tax as the value of the estate increased. The act was declared to be in violation of the constitutional requirement of equality, and, therefore, void. Said the court: “This statute fails to protect equally the people who exercise the right and privilege of receiving or succeeding to property. * * * The exemption must be equally for all, and the rate per cent must be the same on all estates. There can be no discrimination in favor of rich or poor. All stand on an equality under the provisions of the constitution, and it is this equality that is the pride and safeguard of us all. * * * The State finds no warrant in its constitution for saying that it will make a greater rate of charge for the privilege of succeeding to large estates than to smaller ones, but on the contrary this is expressly prohibited by the requirement that laws shall be for the equal protection and benefit of the people.”1 But in a later case2 the same court held that discrimination between kindred of different degrees of relationship in the imposition of an inheritance tax was not unconstitutional. The court said: “Since the right to receive property by inheritance is not guaranteed by the constitution, it prescribes no limitation upon the power of the general assembly to designate the persons who may thus receive. The discrimnation is based upon and justified by the fact that there are degrees in collateral kinship.”

In Minnesota, the tax upon inheritances was given the form of progressive probate fees; all estates under $2,000 being exempt, and in other cases the fees were arbitrarily graduated according to the inventoried value of the estate. The act was declared to be unconstitutional, because it imposed an unequal tax and established the principle of a sale of justice, which is not countenanced by the constitution.3

The New Hampshire case is probably the only case which can be properly considered as being squarely in opposition to the constitutionality of a progressive or discriminating inheritance tax. The two Ohio cases neutralize each other and leave the question to be ultimately settled by a third decision. The Minnesota law is clearly unconstitutional, as it provides for the imposition of a tax upon the estate and not upon the right of succession.

The overwhelming judicial opinion in this country does not consider the inheritance tax as a tax in the constitutional sense, which is required to be levied equally upon all persons, whether they are nearly or remotely related to the deceased; and at the same rate per centum, whether the inheritance be large or small. The inheritance tax is held to be only a curtailment of a statutory privilege or franchise; or, as the Supreme Court of Pennsylvania expressed it, “as a bonus, exacted from the collateral kindred and others, as the condition on which they may be admitted to take the estate left by a deceased relative or testator.”1 In the case of In re McPherson2 Mr. Justice Earl in delivering the opinion of the court, held it to be unnecessary to decide whether the tax was a tax upon property or upon the succession or transfer of an inheritance to the heirs and beneficiaries. But in a number of succeeding cases, the New York Court of Appeals have decisively held the tax to be imposed upon the succession or transfer and not upon the property of the decedent’s estate.3 In the Hamilton case, the court said: “The statute does not provide for a tax upon property in the sense that such enactments are generally understood, but upon the right of succession under a will, or in case of intestacy. The right of succession to property upon the death of the owner rests upon some positive law, and it is competent for the law-making power, when conferring the right to annex to it such burdens or conditions as the public interest may require. Hence the statute has provided that certain beneficiaries under a will, and certain of the next of kin in case of intestacy, shall take subject to certain deductions from the bequest or distributive share, which is to be paid into the public treasury for the public use, and for convenience it is called a tax.”

In California in a recent case1 where certain small estates, and the property which goes to certain near relatives mentioned in the statute, are exempted from the payment of the tax, the court held the tax to be a burden or condition imposed upon the right of succession, and only a regulation of the descent of property. It, therefore, did not come within the constitutional requirement that property shall be taxed according to its value. The same conclusion was reached by the Supreme Courts of Colorado, Montana and Illinois, in which States the statutes provided for the progressive taxation of inheritances, as well as for the discrimination in the rate against collateral kindred and stranger beneficiaries.2 The Illinois court said: “The laws of descent and devise being the creation of the statute law, the power which creates may regulate and may impose conditions or burdens upon a right of succession to the ownership of property to which there has ceased to be an owner because of death, and the ownership of which the State then provides for by the law of descent or devise. The imposition of such a condition or burden is not a tax upon the property itself, but on the right of succession thereto.” The court further stated that the only constitutional requirement which need be observed in the levying of a tax upon inheritance is that it must be levied uniformly and equally upon all individuals who come within a particular class of heirs and beneficiaries, whether the classification be according to the value of the inheritance or according to degrees of relationship, or according to both. The constitutionality of the Illinois statute was attacked in the Supreme Court of the United States on the ground that it violated the Federal constitutional requirement of the equal protection of the laws. The court sustained the statute, and held the progressive features to be reasonable classifications of the right of succession, although Mr. Justice McKenna intimated that some classification might be made in the imposition of the inheritance tax, which might be unreasonable and deny to persons the equal protection of the laws.1 Mr. Justice McKenna quoted with approval from an opinion of Chief Justice Taney, in Mager v. Grimes,2 sustaining the constitutionality of a statute in Louisiana, which imposed a tax of ten per cent upon legacies, when the legatee was neither a citizen nor a resident of the United States. Chief Justice Taney said: “Now the law in question is nothing more than an exercise of the power, which every State and sovereignty possesses, of regulating the manner and terms upon which property, real and personal, within its dominion may be transmitted by last will and testament or by inheritance; and of prescribing who shall, and who shall not be capable of taking it. Every State or nation may unquestionably refuse to allow an alien to take either real or personal property situated within its limits, either as heir or legatee, and may, if it thinks proper, direct that property so descending or bequeathed shall belong to the State. In many of the States of this Union at this day, real property devised to an alien is liable to escheat. And if a State may deny the privilege altogether, it follows that, when it grants it, it may annex to the grant any conditions which it supposes to be required by its interest or policy.”

The judicial expression, which best confirms the practical soundness of this philosophical exposition of the limitations of the natural right of property, is to be found in the opinion of Mr. Justice Brown, in United States v. Perkins,1 in which the New York Inheritance Tax Law was sustained. Mr. Justice Brown said: “While the laws of all civilized States recognize in every citizen the absolute right to his own earnings and to the enjoyment of his own property, and the increase thereof, during his life, except so far as the State may require him to contribute his share for public expenses, the right to dispose of property by will has always been considered purely a creature of statute and within legislative control. * * * Though the general consent of the most enlightened nations has, from the earliest historical period, recognized a natural right in children to inherit the property of their parents, we know of no legal principle to prevent the legislature from taking away or limiting the right of testamentary disposition, or imposing such conditions upon its exercise as it may deem conducive to the public good.”

The conclusion, therefore, is that all State laws, providing for the taxation of the right of succession to the estate of a decedent, are constitutional, it matters not how wide a departure there may be in the imposition of the tax from the constitutional requirement of uniformity and equality in the levy of taxes in general. But it seems to me very clear that, in order that the inheritance tax may be treated as a tax upon the succession instead of an ordinary tax upon the property of the decedent, the law imposing it should make such intention plain by directly imposing the tax upon the beneficiaries instead of upon the decedent’s estate. Two courts, the Supreme Courts of Wisconsin and Missouri, have held the inheritance tax laws of their respective States to be unconstitutional, because, being laid upon the estate of the decedent in the aggregate, it could be construed only as an ordinary tax upon the property of the decedent, and must accordingly be so imposed as not to offend the constitutional requirements that taxation must be equal and uniform, and must be levied only for public purposes.1 In the Missouri case the court said: “The controlling question is, upon what did it authorize that tax to be levied—upon the property of the deceased person, or upon the right or privilege of his beneficiaries to receive his estate by inheritance or devise? If upon the latter it is settled by the great weight of authority that it does not fall within the regular ordinary taxation upon property which our constitution requires shall be in proportion to value. * * * When it is clear that the tax is upon the succession, it is computed, not upon the aggregate valuation of the whole estate of the decedent considered as the unit for taxation, but on the value of the separate interests into which it is divided by the will, or by the statute laws of the State, and is a charge against each share or interest according to its value, and against the person entitled thereto.” Mr. Justice Finch accentuates the necessity of observing this distinction in the phraseology of the statute, in matter of Hoffman.2

During the past year, Congress, as a part of its war revenue bill, has levied a progressive tax upon inheritances. If a progressive tax upon property in general would offend the constitutional requirement of equality and uniformity,—and such would seem to be the invariable ruling of the courts wherever the attempt has been made to impose different rates of taxation upon different kinds of property—the Federal inheritance tax law is beyond all doubt unconstitutional. It certainly cannot be sustained as a condition to the acquisition of the title to property by inheritance or by will. For, in the division of governmental powers between the United States and the respective States, the regulation of the titles to property is reserved to the respective State governments, and consequently cannot be interfered with by the United States government. The Federal inheritance tax, unlike the State inheritance tax, cannot be described, as the retention by the Federal government of a part of what that government may appropriate entirely for public use, but which it gives by positive laws to the heirs and legatees of the deceased owner. The Federal inheritance tax is a tax, in the constitutional sense, whether it be in terms imposed upon the property of the deceased owner, or upon the right of succession thereto; and, in the levy of the tax, the ordinary constitutional requirements of taxation must be observed, whatever those requirements are construed to be. It is possible that the United States may tax the transfer of inheritances, as it does the transfers of property inter vivos, by requiring revenue stamps to be attached to bills of sale and deeds of conveyance. But the failure of the individual to affix the stamp, or to pay the tax, does not affect his title to the property.

Another probable constitutional objection to the Federal inheritance tax is that it is a direct tax, which is prohibited by the Constitution of the United States, unless it be apportioned among the States according to population. It is true that a similar tax, which was imposed by the Federal government during the Civil War, was held by the Supreme Court of the United States not to be “a direct tax” in the constitutional sense.1 But the same court, about the same time, held also that a Federal income tax was not a direct tax.2 In the light of the recent decisions in the Income Tax cases,3 it is quite reasonable to expect the Supreme Court of the United States to pronounce the present Federal inheritance tax to be unconstitutional, because it is a direct tax; unless the patriotic motive of the tax may unconsciously control the minds of the court and reveal to them a good ground for distinguishing between an income tax and a tax upon inheritances in their classification of direct and indirect taxes.

While this book is going through the press, the Supreme Court of the United States has sustained the constitutionality of the national inheritance tax law.1 The two points, which were made against the validity of the law in the preceding paragraph, were met and disposed of in the following manner: The court held that a tax upon inheritances was not a direct tax in the constitutional sense, sustaining the prior decision in Scholey v. Rew (supra), and ignoring the analogies to be drawn from their recent decision in the income tax cases. Indeed, the fact that Mr. Justice White, who delivers the opinion in the case, had filed a strong dissenting opinion in the income tax case, might justify the inference that the decision in the inheritance tax case shows some changes of judicial opinion as to what are properly held to be direct taxes.

The more important part of the opinion is that in which the justice declares that, although the tax upon inheritances is a tax in the constitutional sense,—as was contended in the preceding paragraph to be necessarily the case when such a law was enacted by Congress,—it need not be equal in rate as to all, to secure uniformity, as the requirement of uniformity in the national constitution had reference only to geographical uniformity; the clause of the constitution declaring that all duties, imposts and excises shall be “uniform throughout the United States.”

“Considering the text,” he continued, “it is apparent that if the word ‘uniform’ means ‘equal and uniform’ in the sense now asserted by the opponents of the tax, the words ‘throughout the United States’ are deprived of all real significance, and sustaining the contention must hence lead to a disregard of the elementary canon of construction, which requires that effect be given to each word of the constitution.

“One of the most satisfactory answers to the argument that the uniformity required by the constitution is the same as the equal and uniform clause which has since been embodied in so many of the State constitutions, results from a review of the practice under the constitution from the beginning. From the very first Congress down to the present date, in laying duties, imposts, and excises, the rule of inherent uniformity, or, in other words, intrinsically equal and uniform taxes, has been disregarded, and the principle of geographical uniformity consistently enforced.”

On another point of uniformity he said: “It is yet further asserted that the tax does not fulfill the requirements of geographical uniformity for the following reason: As the primary rate of taxation depends upon the degree of relationship or want of relationship to a deceased person, it is argued that it cannot operate with geographical uniformity, inasmuch as testamentary and intestacy laws may differ in every State.

“It is certain that the same degree of relationship or want of relationship to the deceased, wherever existing, is levied on at the same rate throughout the United States. The tax is hence uniform throughout the United States, despite the fact that different conditions among the States may obtain as to the objects upon which the tax is levied.”

On the general effect of holding that a progressive tax is not unconstitutional, the justice said:—

“As the whole amount of such personal property, as aforesaid, relates to the sum of each legacy or distributive share considered separately, it follows that all legacies below $10,000 are not taxed and that those above that amount are taxed primarily by the degree of relationship or absence thereof specified in the five classifications contained in the statute and that the rate of tax is progressively increased by the amount of each separate legacy or distributive share. This being the correct interpretation of the statute, it follows that the court below erroneously maintained a contrary construction, and, therefore, the tax assessed and collected was for a larger amount than the sum actually due by law.

“The review which we have made exhibits the fact that taxes imposed with reference to the ability of the person upon whom the burden is placed to bear the same have been levied from the foundation of the government. So also some authoritative thinkers and a number of economic writers contend that a progressive tax is more just and equal than a proportional one. In the absence of constitutional limitation the question whether it is or is not is legislative and not judicial.

“The grave consequences which it is asserted must arise in the future if the right to levy a progressive tax be recognized involves in its ultimate aspect the mere assertion that free and representative government is a failure, and that the grossest abuses of power are foreshadowed unless the courts usurp a purely legislative function. If a case should ever arise where an arbitrary and confiscatory exaction is imposed bearing the guise of a progressive or any other form of tax, it will be time enough to consider whether the judicial power can afford a remedy by applying inherent and fundamental principles for the protection of the individual, even though there be no express authority in the constitution to do so. That the law which we have construed affords no ground for the contention that the tax imposed is arbitrary and confiscatory is obvious.”

Mr. Justice Brewer dissented from the opinion of the court, holding that the constitutional requirement of uniformity was violated by the progressive feature of the tax.

[1]“A party who acquires property does not acquire with it the right to devise such property according to the law as it exists at the time he acquires it. Wills and testaments, rights of inheritance and succession, are all of them creatures of the civil or municipal law, and the law relating to or regulating any of them may be changed at the will of the legislature. But no change in the law made after the death of the testator or intestate will affect rights which became vested in the devisee, heir or representative by such death.” Sturgis v. Ewing, 18 Ill. 176. See Emmert v. Hays, 89 Ill. 11. Hughes v. Murdock, 45 La. Ann. 935; Vna Aken v. Clark, 82 Iowa, 256. See post, § 165, where the subject is again mentioned in connection with the discussion of the police regulation of personal property.

[2]Wunderle v. Wunderle, 144 Ill. 40.

[1]104 N. Y. 318.

[1]61 N. H. 624.

[1]State v. Ferris, 53 Ohio St. 314, 336.

[2]Hagerty v. State, 55 Ohio St. 613.

[3]State v. Gorman, 40 Minn. 232.

[1]Strode v. Commonwealth, 52 Pa. St. 182.

[2]104 N. Y. 318.

[3]Matter of Swift, 137 N. Y. 77; Matter of Merriam, 141 N. Y. 479, 485; Matter of Curtis, 142 N. Y. 219, 223; Matter of Hoffman, 143 N. Y. 327, 330; Matter of Hamilton, 148 N. Y. 313; Matter of Bronson, 150 N. Y. 1, 6, 16.

[1]In re Wilmerding’s Estate, 117 Cal. 281.

[2]In re House Bill No. 122, 23 Colo. 492; Gelsthorpe v. Furnell, 20 Mont. 299; Kochersperger v. Drake, 167 Ill. 122.

[1]Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283.

[2]8 How. 490, 493.

[1]163 U. S. 625, 627.

[1]State v. Mann, 76 Wis. 469; State v. Switzler, 143 Mo. 287; State v. Rassieur, id.

[2]143 N. Y. 327, 329.

[1]Scholey v. Rew, 23 Wall. 331.

[2]Springer v. United States, 102 U. S. 587.

[3]Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 427; s. c. 158 U. S. 608.

[1]See Knowlton and Buffum, Executors v. Moore, Internal Revenue Collector (1900).