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Taxation of Estates and Inheritances

January 16, 1926

Report Outline
Revenue Yield of Death Taxes
State Inheritance and Succession Taxes
Federal Taxation of Estates

The principal issue presented to the Senate in dealing with estate taxes in the 1926 revenue bill is whether (1) the federal estate tax shall be retained in such form as to promote uniformity in state laws, while yielding the chief revenues from this source to the states, or (2) shall be immediately repealed, leaving this field of taxation at once to the states, without regard to the present lack of uniformity in their estate and inheritance tax laws.

The estate tax title of revenue bill, as framed by the Ways and Means Committee and passed by the House, is in conformity with the first proposition. By reducing the federal estate tax rates and largely increasing the credit to be allowed for taxes paid to the states, it would hold out an incentive to the states to expand their use of this source of revenue under a uniform system, and would leave the question of a complete repeal of the federal tax for later consideration - after substantial uniformity had been achieved.

Arguments for Estate Tax Repeal

Secretary of the Treasury Mellon, in arguing before the House Ways and Means Committee and the Senate Finance Committee for an immediate repeal of the federal tax, gave the following reasons for his position: (1) there is no logical basis for collection of the tax by the Federal Government, since the right of inheritance is controlled by the states; (2) estate taxes should be used by the Federal Government only in an emergency and there is no emergency existing at the present time; (3) excessive federal taxes contributed to excessive state taxes and a repeal would somewhat relieve this situation, and (4) the Federal Government does not need the revenue.

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