Evening star., 1932-03-27
Tax Specialist Explains
Character of Legislation Now
Discussed in Congress.
WAS FORMERLY ENACTED
TO MEET WAR EXPENSES
Law Of Diminishing Returns
Would Soon Operate to Reduce
Payments to Government.
BY DIR. MAX WINKLER,

BY DIR. MAX WINKLER.
Special Dispatch to The Star.
NEW YORK. March 26.-After the
defeat Of the sales tax, what is going
to be done in order to balance the
sorely strained budget?
This question was addressed to DR..
Emanuel SAKE, authority on tax ques-
tions and specialist in the taxation of
decedentS' estates, special lecturer on
estate taxation at the College of the
City of New York and author of estate
accounting and taxation and numerous
other works pertaining to tax problems
The brunt of the burden" DR.. SAKE
stated, will be cast back, for the time
being, at least, upon existing mainstays
of governmental income, including the
Federal estate tax In view of the
apparent determination on the part OF
the leaders of the insurgents to soak
the rich it may well be that impor-
tant and far-reaching revisions affect
ing this form of taxation will result.
Levy on Entire Estate.
"The Federal estate tax" continued
DR.. SAKE, lis an excise tax and i'm
poses a levy upon the transfer of ar
entire estate, as an entity, in contra
distinction to the inheritance tax
which is levied on the individual shares
received by each recipient. 1t has been
an integral unit in the governmental
fiscal scheme since 1916, when it was
embodied in the revenue act as a fruit
full source of additional income, sud-
denly made necessary by the shadow
Of an impending war"
Ind Nnf hi rlF nfw
enue been generally reserved to the
States?" DR.. SAKE was asked.
"Quite true" he replied. "You must
remember that the Federal Govern
ment in previous national emergencies
usually during war time, has imposed
duties of this sort. The result was
that the States were vehemently op-
posed to them. However, the Federal
authorities remained adamant in their
determination to utilize this sort OF
income.
by means of statutory credit, de.
ductible from the tax itself, the amount
of the liability under the Federal es.
tate tax may be reduced by the amoun
of any inheritance taxes paid to tht
several States by sum not to exceed
80 per cent of that tax due. Thus, BY
this compromise, the principle of tht
levy of a Federal estate tax has beer
retained, but the way has been opened
for the several States to obtain fol
themselves as much as four-fifths oi
the tax due from this source without
any additional burden whatsoever tt
the estate subject to tax Far from
encroaching upon the revenues of the
States from this source, the existing
revenue act has greatly added to them
Additional Tax Proposal.
"a departure from this policy OF
compromise is indicated, however. in
the legislation now pending before the
House of representatives for consid-
Grafton. An additional estate tax is
proposed in addition to the now exist.
ing tax, but it is specifically provided
that with respect to such additional
tax the 30 per cent credit, above men,
toned, shall not apply. Thus, all ad-
ditional revenue from this source viii
be entirely retained by the Fedora
Government. This proposed additional
tax provides for a graduated increase
In rates, commencing with a levy oi
l per cent ON the first $4,000 of net
taxable estate in excess of an exemp-
ton OF $4,000. and ending with a tai
! OF 40 per cent on such part Of the
net estate as exceeds $10,000,000. II
must always be borne in mind that
THIS proposed tax is an added levy
and Is In addition to that now in force
To put teeth into the effectiveness
OF the Federal estate tax, the commit
tee on Ways and Means has revived
the gift tax as supplement thereto
The revival of the gift tax is ot
momentous Importance, especially ir
view OF decision of the Supreme
Court of the United States, handed
down less than week ago. The court
held unconstitutional that provision OF
the revenue act of 1926 which provided
that transfers made within two years
OF death were presumed to have been
made in contemplation of death and
thus taxable as a part of a decedent's
estate. This decision puts the burden
OF proving a transfer, sought to be
taxed under the estate tax as one in
contemplation of death, upon the Gov
ernment. The difficulties of sustain
ing this burden are at once apparent
when 1t is noted that the assessment
OF the tax depends upon due proof OF
an improper intent, present in the mind
OF the now deceased person, which in
tent must be inferred and proved from
the circumstances surrounding the
transfer.
"One ray Of hope for the taxpayer
may be CLEANED from all of the new
proposals in the field of estate taxation
That is the attempt to provide equit-
able relief in the cases of those estates
the owners of which have died between
September l, 1928, and January /
1882, and which have deprecated So
much because of the extreme decline
in the value of all classes of property
following the stock market debacle OF
1929. ',.''.--1
Diminishing Returns.
The relief afforded by this proposed
amendment in substance permits of a
reduction in the tax originally assessed
This proposed reduction is proportion
ate to the decline in the value of tax
able property as originally reported for
tax as compared with the value of such
property 18 months after the death of
the owner, or at the date of the dis
tribution of the estate, if distribution
be made sooner.
Although it is true" DR.. SAKE con-
cludes his observations, that the bur-
den resulting from the imposition of an
estate or gift tax is least felt by the re-
cipient of a gift, bequest or devise, and
thus an increase in rates applicable to
these taxes might be less productive of
opposition from this source, neverthe-
less an application of the law of dimin-
iShing returns would unquestionably
soon be apparent. All eyes are now
turned to Washington, waiting the final
outcome Of this important legislative
seSsion."
(Copyright 1882 by the North American
Newspaper Alliance, Inc)