History of Death Taxes & Tales of Some Weird Wills

‘Our new Constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes‘. —Benjamin Franklin (1705-1790), letter to Jean-Baptiste Leroy, 1789.

It is frequently repeated quote from Benjamin Franklin, an able administrator, going satirical and holding taxation perhaps worse than death. Richard Murphy, a British political economist, in his book, ‘The Joy of Tax’ has countered this statement by his forceful logic- “Death has indeed been inevitable from the moment that life was first known on earth. Life has, apparently, existed for about 3.5 billion years. However, since as far as we know taxation is a relatively recent human invention, for approximately 3,493,000,000 years death might have been inevitable but taxation was not, because humans have been around for at most 7 million years.

However, even that is too generous, because written records have existed for a mere 4,500 years and it is only from those records that we know about tax. Thus, taxation may have existed for a lot less time than humans have been around. After all, there’s a fair chance that tax was not the first idea we humans hit upon. So, Benjamin Franklin’s famous comment about tax is incorrect: for most of human existence taxation has not been inevitable. In truth most things that are said about taxation are just wrong”.

The above quote from Benjamin Franklin stops short of saying that the death and taxes are inevitable, but death doesn’t repeat itself, while taxation can. It’s true. While some taxes are payable occasionally, there are taxes, which must be paid periodically. Unpaid taxes are classified as a liability, traditionally collected from the assets of the tax-defaulter. Property is the first thing that attracts the tax collector for such purposes.

PROPERTY TAX VERSUS INHERITANCE TAX

Property tax is charged by the local government for funding essential services on the properties owned. It is charged on the real estate during the lifetime of owner. Similar sounding ‘Estate tax’ may include all types of properties. Incident of death tax may be either in the form of an ‘Estate duty’ or an ‘Inheritance tax’. Unlike an inheritance tax, estate taxes are charged against the estate regardless of who inherits the deceased’s assets. Estate tax is calculated on the total value of a deceased’s assets before any distribution is made among the beneficiaries.

PROPERTY TAXES IN ANCIENT STATES

Most of the ancient states charged taxes on the value of land, buildings, livestock, trees, and other personal property. Such taxes were applicable in ancient India, Egypt, Babylon, Persia, and China. The earliest known tax records, dating from approximately six thousand years B.C. are in the form of clay tablets found in the ancient city-state of Lagash in modern day Iraq. The king used a tax system called ‘Bala’, which meant “rotation.” The assessors would focus on one area of the state, assessing and taxing one area each month, thereby breaking down the arduous task in manageable components. The primary focus of early property taxation was land and its production value.

PROPERTY TAXES IN ANCIET EGYPT

Ancient Egypt was a progressive state that began around 5,000 B.C. and lasted thousands of years. Taxes were levied against the value of grain, cattle, oil, beer, and land. Approximately one in a hundred people was literate; called scribes[1]. Some of the scribes were tax assessors. They kept records about ownership with the size of their fields. At times they collected data by counting cattle and crop yields. The common taxpayers were farmers, brought before courts for their failure to pay. Courts immediately dispensed justice. A typical tax rate was ten percent of all production.

Tax assessors were highly valued because of their skills with hieroglyphics[2]and their ability to collect revenue. Often after king’s death, the assessor was the only person not buried along with him, so valued was his services. There were tombs and monuments for assessors in Egypt and Syria that rivaled those of some kings. In Egypt, the famous ‘Rosetta stone’ is a tax document granting exemption to priests.Near the Acropolis heritage site in Athens there is a monument to the honest tax assessor.

A papyrus, kept in British Museum has been studied extensively and was found to be an assessor’s record of assessments of individuals for some purpose of taxation, arranged according to streets or districts. Partly incomplete, it shows the remains of some ten column; but there is evidence that the entire papyrus[3] contained forty columns or more. The arrangement of each entry is in general outline the same throughout. It falls into four divisions: (a) the name of the individual; (d) the statement of the nature and extent of the property in virtue of which he is taxed; (c) the statement of the sums paid by him or still due from him; (d) the total of the sums thus paid or due. Present day’s tax collector’s diary may have similar or less data. The taxpayers mentioned are mostly Egyptian, but some Roman and a few Greek names are also found.

PROPERTY TAXES IN GREECE

General Aristides (530–468 B.C.) reformed the property tax assessment system of Athens while serving as treasurer.Famous as the most impartial person in Athens, he acted in the interests of the city. He was known as ‘Aristides the Just’. The good and fair tax system established by Aristides fell apart during the Peloponnesian War (Sparta vs. Athens, 431–404 B.C.). This war dragged on; the Athenians increased the tribute to the breaking point. Athens ran out of money and lost the war.

Alexander the Great (356–323 B.C.) was a military genius as wellas an able administrator. He moved through Persia, India, Egypt, and other parts of his world, issued explicit instructions on how to implement property taxes. Prior to his conquest, the people were very heavily taxed. Alexander reduced taxes and half of the raised funds were used for public facilities. Citizens received more benefits for their taxes and administrators earned their goodwill.

ROME- TAXES ARE THE CHIEF BUSINESS OF A CONQUEROR OF THE WORLD

Julius Caesar was preparing for the Gaulic campaign; one of his generals told him there was not enough money to pay for the needed materials. Caesar’s response was, “Send out the assessors!”Pothinus once asked Julius Caesar “Is it possible that Caesar, the conqueror of the world, has time to occupy himself with such a trifle as our taxes?” Caesar responded- “My friend, taxes are the chief business of a conqueror of the world.”

Rome spent on the public benefits also. Julius Caesar (100 BC-44 BC), saw that a very large number of people received free food from the state. He cut the number of recipients of public welfare to half. The result was that expenditures went down, and with more people plowing fields, the tax revenue increased. Julius Caesar was stabbed to death in the Senate house by conspirators led by Marcus Junius Brutus in 44 BC.

PROPERTY TAX EXTENDED TO INHERITED PROPERTIES

With the passage of time, rulers started taxing transfer of property to acknowledge and honor the changed ownership. This succession to property was also taxed separately, called the Inheritance tax, widening it to immovable properties also. The inheritance tax upon the succession of property can be traced to B.C. 117. Roman authorities in the ‘Lex Voconia’[6]of B.C. 169 developed a form of inheritance tax, guided by Emperor Augustus (63 BC-14 AD). Prior to Augustus, the state sold the rights to collect taxes to private citizens, known as ‘Tax farming’. Augustus put an end to this practice by making Roman assessors state employees. In one of such papyri kept in British Museum, we find details of appointment as village scribe in ‘Ptolemais Hormou’. Around 184-187 AD, the qualifying assets a village scribe must possess was 3,000 drachmas. A term of three years was assigned to him by the Roman bureaucracy.

Augustus implemented a valuation system based not on what a farmer produced but what a farmer could produce. If a farmer worked hard and produced more crops than a less productive neighbor, he still paid the same in property taxes. Primarily, it assumed the form of a compulsory bequest; later, it emerged into a true inheritance tax, the ‘Vicesima-hereditatium’. The story runs that when for the first time Augustus proposed inheritance tax, the Senate was hostile to the act. When pointed out that the Great Julius Ceaser favored it, opposition died down. The inheritance tax is extensively documented in sources pertaining to Roman law, inscriptions, and papyri. Succeeding Roman emperors were less insightful; they implemented disastrous policies, leading to collapse of the empire. Public expenditure increased and holidays stretched to entire months and public welfare became very generous. The assessors were no longer honored, requiring military escort to work. With no ability to pay an army, the entire system collapsed. Many citizens welcomed aggressors to be free of the excessive tax burdens.

INHERITANCE TAX IN ENGLAND

In the legend of Robin Hood, the Sheriff of Nottingham collected taxes. The shire or sheriff was the most important local government official, and his responsibilities included law enforcement, tax assessing and collection. After 1066, William the Conqueror created an early form of land taxation. Town officials kept records of properties. Each parcel was measured, its value estimated. Each town kept a book of the assessment of each property and the total amount of property tax due for each person. This book was called the Doomsday Book and the name lasted for hundreds of years.

In the 11th century, Lady Godiva rode naked on a white horse through the streets of Coventry, England to protest the heavy tax assessment on property. In the tenth, eleventh and twelfth centuries an average peasant paid one tenth (a tithe) of the value of crops to the lord who then passed on a percentage to the king. Peasants were also required to give an additional one-tenth of their crop labor for the church.

After abusing his power and raising taxes to a confiscatory level in 1215, King John was forced to sign the Magna-Carta, which limited the king’s power to raise revenue. Taxes from this point on could be collected only with the common consent of his barons. By the sixteenth century, the king’s own lands and estates were taxed. In 1689, the English Bill of Rights endorsed a law that the king could not tax without Parliament’s consent.

From 1662 to 1689, a hearth tax was administered in England and spread to some continental counties. The tax was an estimate of a building’s value. Assessors recorded the number and size of hearths in each home and determined value accordingly. A one hearth house received a low assessment compared to some mansions that had twenty or thirty heated rooms. This tax was hated and was eventually phased out. In England, estate duty was introduced in 1894 as a ‘back tax’. It was believed that the title of the State to a share of the accumulated property of the deceased is anterior to that of the interest to be taken by those who are to share it.

INHERITANCE TAXES IN COUNTRIES NEIGHBOURING ENGLAND

In France, tax known as La Paulette; (after the financier Charles Paulet) was the name commonly given to the “annual right”, a special tax levied by King Henry IV through a Royal edict of December 1604. It resulted in making offices hereditary, a step in the creation of a permanent class of judicial magistrates, the noblesse de robe. The edict provided that, for an annual payment to the crown of one-sixtieth of an office’s value, that office could be sold or bequeathed rather than revert to the crown on the death of the holder. A registration fee or ‘insinuation’ was introduced in 1539 and later it was extended to include all testamentary dispositions. In the beginning of the 18th century, Louis XIV made all transfer of immovable assets, except those in the direct decedents, subject to a registration fee and an additional percentage of the tax.

INHERITANCE TAX INUNITED STATES OF AMERICA

During the American Revolutionary War the Sheriff of Albemarle County, kept a ledger of all of the citizens who owed and paid taxes in the county.  The tax assessment was made on land and moveable property, including his slaves and cattle.  One also had to pay a parish levy, which covered ministers’ salaries, church upkeep, and aid to the poor and orphans.US had estate tax of some form since 1916, after the modern personal income tax. In Nunnemacher v. State 129 Wis. 190 (1906) case, the Wisconsin Supreme Court upheld a tax on inheritance, one of the key laws of that time.

IMPOSITION OF HOUSE TAX IN BENARAS

In 1810, the East India Company attempted to extend a house tax that was in effect in Calcutta, to other areas in Eastern India. Poor financial conditions and widespread poverty made the tax difficult to bear. Various groups in Benaras opposed the tax, and decided on a general strike. Everything was at a standstill, even the dead bodies were cast unceremoniously into the river, because there were none to perform the last rites. The thieves refrained from the exercise of their vocation, although the shops and houses were left without protection[7]. Civil protesters presented a petition to the magistrate asking for the repeal of the tax. They remained peacefully assembled from December 26, 1810 to January 8, 1811. The protesters planned a march to Calcutta to present their demands, but later petitioned through bureaucratic channels. Their firm stand was forced the government to modify the house tax. The following year, a limited version of the tax was instituted in some other cities, sparing Benaras. The assessment and spending of the tax was placed in the hands of Indian representatives.

A similar tax known as ‘Pandhri’ was imposed on houses in Central India, which originated from the medieval Maratha administration. It was abolished in 1902. Even before East India Company’s rule, Panchayats (Village self-administration) were allowed to collect tolls for the use of river ghats, ferries, bridges, and grazing fields.

At present, the property tax is collected in India by local governments.It is interesting that Kolkata Municipal Corporation also still levies a ‘Howrah Bridge tax’ @ 0.25% to 0.5% of the Gross Tax based on the location of the property.

ESTATE DUTY IN INDIA

Estate duty as a tax was not alien to Indians[8]. Under the Zamorins of Calicut, a duty was imposed on the value of the estate’s landlords. In Bikaner state, a form of death duty was levied. The Government of India considered for the first time in 1859 the imposition of such a tax in their discussions relating to the imposition of income-tax; the financial exigencies after the 1857 mutiny. In 1866, William Nathaniel Massey, (Member Finance, under a scheme of provincial finance. addressed a Circular to all provincial governments, proposing to transfer to them some heads of expenditure like education, police, public works etc. and hinted that funds might be found from sources like license tax, house tax, octroi and a succession duty. In India, for the first time, in 1925 a measure of this kind was recommended by the Taxation Enquiry Committee. ‘Estate Duty’ in India remained in force from 1953 to1985.It was payable only if the total value of the inherited portion of the property exceeded the limit prescribed under the Estate Duty Act, 1953. Objective was to collect revenue, prevent accumulation and preservation of wealth in the hands of a few and reduce the economic disparity. Despite the bona fide objective collection of tax was meager, the administrative costs were high, and it faced resistance.In 1985, estate duty law was abolished in India.

TAX ON BURIAL

There is an interesting story on collection of tax at the time of last rites in Indian mythology-the story of King Harishchandra. It is very popular in all Indianregional languages. Harishchandra is an epitome of truth and virtue in Indian culture.

OPINION OF ECONOMISTS

In the opinion of eminent 19th-century political theorist Jeremy Bentham and John Stuart Mill, an inheritance tax was the best of all possible taxes. Since it was collected in essence from the dead, Bentham and Mill reasoned, the tax could not interfere with any important incentives to work or save. Further, since under English or American law, no one had a right to an inheritance, the tax also would not interfere with anyone’s entitlement. It seemed like a win-win situation—a tax without burden. The tax, in theory, is an important inducement to charitable giving at death. However, the tax has been termed unfair because it falls on wrong persons- savers and not spenders.

SOME STRANGE WILLSAFFECTING INHERITANCE AND ITS TAXATION

A Will is a document, which specifies method to be applied for the management and distribution of his estate after his death.As there is no Estate duty applicable in India, asset transferred under a will is tax-free, at the point of selling, subject to rules prevalent. Capital gains tax may be applicable on sale. Ideally, a will should not only distribute the assets but also account for applicable taxes, way it will be paid, as well as who will pay it. Absence of a will can substantially affect not only legal expenses but may attract taxes which could have been avoided by proper planning.

Tom Synder, an American TV anchor once said-“Misers are no fun to live with, but they make great ancestors”. The following instances may confirm it: –

> In his will dated July 17, 1788, Benjamin Franklin made generous disposition for his son, whowas loyal to the British crown andmoved to Britain in 1782. Franklin created two philanthropic trusts for others, to last exactly 200 years, bequeathing eachof 1,000 pounds—to the cities of Boston and Philadelphia foradvancing small loans, at 5 percent interest per annum, to married men under 25 who had completed apprenticeships and wanted to start their own businesses. It might be the first ‘Unicorn’ for the startups, conceived centuries ago!

> William Shakespeare, through his will[9], passed his “second best bed” to his wife, Anna Hathway, with most of theremainder of his estate to his daughter Susanna.

> An unnamed person in New York, (died in 1919), left instructions to the executor that hisseventy-one pairs of trousers, be sold by auction and the proceeds of the sale be distributed to the deserving poor of his parish. Trousers must, however, be disposed of severally to different bidders, no single individual being permitted to purchase more than one pair. Much after the orders were carried out, it was discovered that hidden in each pair of pants was a pouch containing $1000 bills. He left his family nothing.

> Napoleon Bonaparte (deceased in 1821) provided that the hair from his deceased head beshaved and given to close friends. It was this hair that was analyzed in 2008 and was found tocontain large amounts of arsenic, raising the controversy, whether the British poisoned him slowly over long time.

> Heinrich Heine, a German poet, gave his entire estate to his wife on the condition that she mustremarry so that “there will be at least one man to regret my death.”

> Comedian Jack Benny (deceased in 1974) gave a bequest to his florist, with the requirement that the floristdeliver one long stem red rose to his wife each day of her life. Before she passed in 1983, she had received over 3,000 roses.

> ZsaZsa Gabor, Hollywood actress, died at the age of 99 years. She had married nine times and left an estate estimated to be $40 million, mostly in real estate and jewelry. When asked about houses, she said- “He taught me housekeeping – when I divorce, I keep the house.” And about the diamonds, she said- “I never hated a man enough to give him his diamonds back.”

> Luis Carlos de Noronha Cabral da Camara was a well-to-do Portuguese aristocrat, was a bachelor. In lieu of having his forgotten relatives receive his assets, he chose 70 people at random out of the local phonebook to equally inherit his assets, choosing the people in front of two witnesses.

> Samuel Bratt loved to smoke cigars, but his wife prohibited it. When he died in 1960 his willpassed £330,000 to his wife on the condition, she smoked 5 cigars a day for the rest of her life.

> Gene Roddenberry, the creator of Star Trek, was obsessed with space. What is surprising is that his will specified that his ashes were to be scattered in space, which was done in 2014 by a rocket provided by Celestis Inc.

> Toronto attorney Charles Vance Miller had three friends, not amicable together. He left a vacation home to them, if three men lived there together. He left several anti-horse-racing activists each $25,000 worth of Ontario Jockey Club stock. He started a phenomenon known as the Great Stork Derby when he left his estate to the mother who bears in Toronto, the greatest number of children. After a decade, the money was split among four women, having nine children each.

> Hotel magnate Leona Helmsley, who had served 18 months in US prison on tax evasion charges in the early 1990s, left $12 million to her dog named ‘Trouble’. She excluded two of her grandchildren and entire family in her will, earning her the title- ‘Queen of Means’.

> Not all die so rich. Alexander Hamilton (1755-1804), US President, is said to have died so poor that mourners at his funeral passed the hat to pay for his burial.

ALFRED NOBLE AND HIS WILL

It is said that the news of death of Alfred Nobel’s brother Ludwig in 1888was published by a French newspaper, presuming that Alfred Noble had died. It carried a scathing obituary that branded him a “Merchant of death”, grown rich by developing new ways to “mutilate and kill.” The error was corrected, but Alfred had the unpleasant experience. The incident shook his conscience and led him to re-evaluate his social standing. It is believed that Nobel rewrote his will, bequeathing most of his fortune to a cause upon which no future obituary writer would be able to cast aspersions. Nobel kept quiet about it during his lifetime. After his death on December 10, 1896, some of Nobel’s family members tried to have the will overturned. Many criticized his dictate that the prizes were to be awarded without regard to nationality. The Nobel Foundation had gross fund of $9,200,000. The interest on it is annually divided into five equal parts and awarded as prizes to the person who shall have made, the most important invention or discovery in the domain of physics, chemistry, physiology, medicine, literature and one for promoting the universal peace.It ultimately took five years before the executors of Nobel’s will were able to sort out all the legal issues, set up a foundation, and convince the designated Swedish and Norwegian institutions to accept the task of awarding the prizes.

CHARVAK’S THEORY OF LOKAYATA

Leaving nothing to successors was the view of great Indian philosopher, Charvak, (Carvak). He postulated the idea of ‘Eat, drink and make merry’ (leave nothing to inheritor). Charvaka, (also known as Lokāyata), promoted, ancient school of Indian materialism and logic. Charvaka embraces philosophical skepticism and rejects ritualism, and supernaturalism. It was bold and almost a rebellious belief system in India, much before the emergence of Jain and Buddhist tradition.

CONCLUSION

A similar philosophy was discussed in the book-‘Die Broke’. Authors, Stephen M. Pollan and Mark Levinesuggest that wealthy persons must use up all their resources while alive and avoid passing anything on to their children at death. The authors argue that one should basically spend every penny of his wealth because “creating and maintaining an estate does nothing but damage the person doing the hoarding.” Saving is a fool’s game, they claim, while “dying broke offers you a way out of your current misery and into a place of joy and happiness.”

Opinion polls and practices consistently reveal that people everywhere oppose the idea of death taxes. Many countries have abolished such taxes. Still, the death tax can be thought of as the opposite of a sin tax: it is a virtue tax. As Warren Buffett said–“The perfect inheritance is enough money so that they feel they could do anything, but not so much that they could do nothing.”

CHANDRA PRAKASH BHATIA
Additional Commissioner of Income Tax,
Kolkata.

[1]Herodotus, History, Part-III, page 128-129 translated in English by A D Godley, 1950

[2]Sacred engravings on the monuments of Egypt, Cyclopedia of History- by F A Durivage, W M & Thos, 1852

[3]Papyrus CXIX, 2^nd century Roman Empire, Greek Papyri, British Museum edited by F. G. Kenyon,1893

[4]The World’s Great Events, Vol II, P F Collier & Sons, 1945

[5]Studies in Death Duties by NV Gadgil& V Vithal Babu, Bombay 1949

[6]Studies in Death Duties, by N. V, Gadgil and V. Vithal Babu, The National Information & Pub Ltd, Bombay, 1949

[7]Mill, James; Wilson, H H (1858). The History of British India. Vol. 7. JamesMadden. p. 334.

[8]Studies in Death Duties, by N. V, Gadgil and V. Vithal Babu, The National Information & Pub Ltd, Bombay, 1949

[9] Shakespeare’s Will- J. O. Halliwell, Esq, F.R.S, F.S.A., Published by John Russell Smith, London 1851