INHERITANCE TAX

levy on the property accruing to each beneficiary of the estate of a deceased person. It is usually calculated by reference to the amount received and the relationship (if any) of the beneficiary to the deceased. In some systems the value of the property already owned by the beneficiary also enters into the calculation. Inheritance tax may be more difficult to administer than estate tax because the value passing to each beneficiary must be fixed, and this often requires complex actuarial calculations. Inheritance taxes are one of the oldest forms of taxation, dating back to the Roman Empire, which levied a one-twentieth-portion tax on inherited property in order to pay pensions of veteran soldiers. The basis of the modern inheritance tax, however, was established during the Middle Ages in the feudal arrangement whereby all land and property was ultimately owned by the sovereign, whose permission was required to transfer any property upon death of the owner. If there were no direct descendants, relatives of the deceased could obtain the property through payment of a relief. In many European countries, including England, The Netherlands, Spain, and Portugal, modern inheritance taxes can be traced back directly to these reliefs. In the United States, inheritance taxes have always been collected by the individual states, while the federal government has imposed an estate tax. The first state inheritance tax was imposed by Pennsylvania in 1826. Since then, state inheritance taxes have grown considerably, although some moves toward reduction have been made in recent years. Opponents of inheritance taxes claim that they hurt business incentives, reduce savings, and are an attachment against the nation's capital. Proponents argue that the tax is small and occurs only once, reduces savings much less than income taxes of equal yield, and is a useful tool for redistributing wealth. Compare estate tax.