§11. This leads us to the more general question of the incidence of taxes on the acquisition of property by bequest or intestate inheritance; which I have reserved for separate consideration, because of the important peculiarities that they present, when we are considering the theoretical construction of a system of taxation. According to the criterion above laid down, it is plain that the pecuniary loss caused by any such tax falls on the person who inherits, since he would have been richer by the exact amount of the tax, if that had not been imposed; except so far as it is probable that the person from whom he inherits, being aware of the tax, may have left him a larger property in consequence---a probability which, I imagine, is not practically important in the case of most of the property obtained by inheritance.
Nevertheless, the considerations that ordinarily would lead us to limit carefully the burden of taxation falling on any individual or class do not, I conceive, apply in the case of persons taxed as inheritors. For Government, by taking a portion of what would otherwise have come to a man by inheritance, in no way diminishes the motives that prompt him to produce and accumulate wealth---if anything, it tends to increase these motives; nor does it necessarily cause even any disappointment of expectations, except when the tax is first imposed. On the other hand we ought undoubtedly to take into account the diminution in inducements to industry and care which a heavy tax on inheritances may cause, in the view of persons who look forward to leaving them. This bad effect, however, of such taxes is not likely to be at all equal in proportion to the similar effect that would be produced by extra taxes on income; in fact the limits of taxation on inheritances will be practically determined for the financier rather by the danger of evasion through donationes inter vivos, than by the danger of checking industry and thrift: and either danger will generally be much less where there are no children or other direct descendants to inherit. Hence it seems expedient, in the case of these taxes, to give up the ordinary aim at equality of incidence so far as to place a much heavier tax on wealth inherited by persons not in the direct line of descent from the previous owners. But if this course be adopted, it becomes theoretically almost impossible to include these taxes in an adjustment of general taxation on the principles of distribution before proposed: and it seems to me not only convenient but equitable to treat these taxes as a special burden on the class of persons owning capital in considerable amounts---inheritances below a certain value being exempted. For, as was before said, the proportionment of taxation to non-necessary expenditure seems certainly to make the burden of sacrifice imposed on the poor heavier than that of the rich, though the excess does not admit of being definitely estimated; and it seems equitable to balance this excess roughly by the special burden that taxes on inheritance will lay on the rich.[Back to:][PPE, Book III, Chapter 8, Section 10] Public Finance