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large fortune is generally divided among a number of children smaller than the average number per family throughout the country. But even more striking results may occur. Consider, for example, this hypothetical, but not very improbable, case. A father and mother have five children, all of whom reach at least middle age. Two remain unmarried, two marry but have no children, or none who survive till middle age, and the fifth, a son, we will suppose, marries and has children. These children will certainly inherit under the law of legitim, and will very likely inherit under freedom of bequest, the greater part of the property of their paternal grandparents and of any additional property accumulated by their parents and by their paternal aunts and uncles. They may also inherit additional property from their mother's family. This illustration serves to show that a low birth-rate among rich families tends to increase the inequality of inherited property to a much greater extent than might be imagined at first sight, either under freedom of bequest, normally exercised, or under the law of legitim.

One further point may be noted. Under freedom of bequest it is possible for a testator to leave a large part of his property to persons who are not related to him, and it might be supposed at first sight that, if a number of wealthy testators did this, inequality would be perceptibly diminished. But, in fact, such a result is not very likely. For the persons benefiting substantially under such wills, though not relatives of the testator, will often be friends, belonging to the same social class, and often already wealthy. It may be eccentric to leave much of one's property to persons outside one's family, but it is still more eccentric to leave anything beyond trivial amounts to old servants and others who are really poor. No great diminution of inequality, for example, will result from such wills as that of the late Alfred de

Rothschild, which was described in the Press as "a Thackerayan will," and some of the provisions of which were summarised as follows. "The main part of his estate goes to Lord and Lady Carnarvon. Lord Porchester, the son of Lord and Lady Carnarvon, gets £25,000, and so does his sister, Lady Evelyn Herbert. Other great families also benefit under the will. Lady Curzon, who married Lord Curzon last year, is left £10,000 and £25,000 goes to her three children. Among the many familiar names in the list are the Marquis de Soveral, Sir Edward Marshall Hall, Lord Esher, and Sir Carl Meyer. It is seldom that a rich man distributes his money so widely or so generously." It is probable that the adoption of Mill's proposal to limit individual inheritance would only lead, in many cases, to this kind of wide and generous distribution."

1 See The Manchester Guardian of 8/3/18.

1 Somewhat more conducive to equality was the will of Mr. Carnegie, who left annuities of from 5,000 to 10,000 dollars to a number of public figures, including Mr. Lloyd George, Mr. Taft, Lord Morley, Mr. John Burns, the two veteran British miners' leaders, Mr. Burt and Mr. John Wilson, and the widows of ex-Presidents Roosevelt and Cleveland. But on the deaths of these beneficiaries their annuities will go back into the main body of the estate. See The Manchester Guardian of 29/8/19.

CHAPTER IX

THE COMPARATIVE FISCAL LAW OF INHERITANCE AND ITS COMPARATIVE EFFECTS.

§1. A special form of the fiscal law of inheritance is the Law of Escheat, by which, under certain conditions, a dead person's property reverts to the State. This law has a certain historic interest, but at the present time in this country only applies to intestate estates, in cases where there are no relatives, however remote. It has been proposed by Bentham, Mill and others that the present rights of "collaterals" to inherit on intestacy should be abolished, and the field of operation of the Law of Escheat correspondingly extended. But such a provision would stimulate will-making, and its effect is not likely to be great.

It is conceivable that a society might have developed from primitive conditions into modern civilisation with a law of inheritance, under which wills were more or less completely prohibited, and the rights of inheritance of relatives limited to small amounts, the bulk of the property of deceased persons escheating to the sovereign, that is to say, in later stages of development, to public authorities. But the political power and "class consciousness" of the rich have everywhere contributed to prevent any such historical development.

§2 We may now turn to the more practically important question of the taxation of inherited property. Such

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1 Compare Part II., Chapter III., § 5, and Chapter V. § 3 above. Professor Graziani rightly points out (Teorie e Fatti Economics, p. 103) that a tax on inherited property is to be regarded simply as part of the tax system, and defended as such, and not, as Bluntschli and other theorists of the State" have argued, on the "metaphysical" ground that "the State" has rights as coheir with individuals to the property of the dead. Compare also Graziani, Natura Economica Delle Imposte Sulle Successioni and Nitti, Scienza Delle Finanze pp. 677-680.

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taxes may be divided into two classes, according as they are imposed on property actually changing hands at death, or on inherited property at other times. It will be convenient to begin by considering the first class, to which the term " inheritance tax" is usually confined.

Nearly all modern communities have inheritance taxes in this sense, but this part of the fiscal law of inheritance differs from other parts and from the non-fiscal law, in that it changes much more rapidly and much more markedly from year to year. The law of legitim in its various forms, and the various legal restrictions imposed on freedom of bequest in the English-speaking countries, have remained substantially unchanged during the past half-century, but inheritance taxes during this period have everywhere been changing and developing.1

§3. Three principles of graduation are found, singly or in combination, in most of the inheritance taxes actually in force. The first is graduation according to the total amount of property left by the dead person, larger amounts paying a higher proportionate tax than smaller amounts. This principle is applied, for example, in the British Estate Duty. The second is graduation according to the total amount received by individual inheritors, larger amounts again paying a higher proportionate tax than smaller amounts. The third is graduation according to the relationship of the inheritor to the dead person, a near relative paying a lower proportionate tax than a distant relative, and the latter a lower proportionate tax than a stranger, on an inheritance of given amount. Both the second and third principles are applied in the

1 The best general account of inheritance taxes is that given by Dr. Max West in his book, The Inheritance Tax, first published in Columbia University Studies, Vol. IV. A second edition appeared in 1908. The premature death of Dr. West in 1909 is a serious loss to students of this subject who were looking forward to a new edition of bis book.

British Legacy Duty, and all three principles are applied in State inheritance taxes in the United States.1

The first principle differentiates against large estates, but not between different methods of distribution among inheritors. The second principle differentiates in favour of a fairly equal distribution among a large number of inheritors, as against a more unequal distribution among the same number, or as against concentration among a smaller number. The third principle differentiates in favour of a distribution among near relatives, and against inheritance by strangers. Such differentiation, in all three cases, operates both through the actual operation of the taxes, in which these principles are applied, and also, though probably to a much smaller extent, in the effect produced upon the minds of testators by the knowledge that the taxes will so operate. Mill's proposal to limit the amount which any individual may inherit might be enforced as a particular case of the second principle, the tax being so graduated as to take 100% of all inheritances in excess of the limit laid down. The first principle is the easiest to apply administratively, and it is chiefly for this reason that it figures more prominently than the second or third in the British system of death duties. Randolph Churchill, when Chancellor of the Exchequer in 1886, was anxious to reform the death duties by getting rid of both the first and third principles and relying entirely on the second, but the Treasury officials raised administrative difficulties, which resulted, in combination with Churchill's ill-calculated resignation, in the dropping of the scheme." Harcourt, in his reform of the death duties in 1894,

1 Compare Bancroft. Inheritance Taxes for Investors, Read, Abolition of Inheritance, pp. xiii., 293-4, Ely, Property and Contract, I.. pp. 417 ff. The first principle is applied in the United States Federal Inheritance Tax.

* See Mr. Winston Churchill's Lord Randolph Churchill, II., Chapter

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