Wednesday, November 9, 2022

Gladstone and Taxes: "Death Tax" or "Estate Tax" - which one is the euphemism?

According to Merriam-Webster online, an “estate tax” is “a tax . . . on a property owner’s right to transfer the property to others after his or her death.” And a “death tax” is “a tax arising on the transmission of property after the owner’s death; especially: estate tax.” Sounds like the same thing, right? But many people prefer one word over the other for rhetorical purposes.

Supporters of the taxes use “estate tax,” while opponents prefer “death tax.” Supporters criticize the opponents’ choice of word as a cynical ploy, to use an emotionally laden, negative term to unfairly cast a bad light on a good tax; a “dysphemism” - the “substitution of a disagreeable, offensive, or disparaging expression for an agreeable or inoffensive one.”i But that characterization depends on the assumption that “death tax” is a “substitution” of something with the pre-existing, agreeable name, “estate tax.”

Recent commentary on the issue generally assumes that is the case. Some credit (blame) the Republican pollster, Frank Luntz, with coining the expression during the 2000 Presidential campaign in the United States.ii Others trace the expression to 1996 and a man named Jack Faris, then the head of the national Federation of Independent Business; “the Newt Gingrich-led Republican caucus caught wind of the evocative term and ran with it.”iii

But “death tax” is much older. It even pre-dates “estate tax.” When viewed in historical context, perhaps “estate tax” is a “euphemism” (“the substitution of an agreeable or inoffensive expression for one that may offend or suggest something unpleasant”) for “death tax” and not the other way around.

 

Sign: “Ruined by the New Death Duties on succeeding to a large estate of 100,000 acres.”

“What d’you think of that, Bill?”

“Why - ‘e dunno where ‘e are!”

The Westminster Budget (London), May 25, 1894.

 

William Ewart Gladstone, then the Chancellor of the Exchequer for the United Kingdom, may have coined the expression “death duties” in 1863. He used it as an umbrella term for a group of various duties or taxes assessed after death. Speaking in the House of Commons during debate on a proposed tax on charities, Gladstone reeled off statistics on the relative contributions of various kinds of taxes to the treasury.

The next is that cluster of duties which, for convenience, may be called death duties - succession, probate, and legacy duties.

The Times (London), May 5, 1863, page 8; The Standard (London), May 5, 1863, page 2; Daily News (London), May 5, 1863, page 2.


Two decades later, a member of the House of Commons named Mr. Dodds said that it was Gladstone who had “very fittingly called” such duties the “Death Duties.”iv An essay on the adoption of a Federal inheritance tax in the United States also credited Gladstone with coining the expression. The piece, published in Harper’s Weekly in 1894, provides a good summary of the various taxes or duties encompassed by the expression.

What is generally meant by an “Inheritance Tax” is a tax on the transfer of the title to any property - real, personal, or mixed - either by the owner’s last will and testament, or by the laws of descent. Mr. Gladstone put the grim name of “death duties” on the intricate system, embracing five distinct but analogous taxes, then in operation in England. One is “Probate” tax, which is really a stamp tax on the affidavit, or inventory, required before the issue of letters of administration on the estate of a deceased person. Another is the “Account” tax, to re-enforce the former, and to prevent the evasion of it by gifts during the life unless made a year before death. A third is a “Legacy” tax, payable out of personalty coming to a legatee, or heir. The fourth is a “Succession” tax, imposed by Mr. Gladstone in 1853, and applicable to land as the “Legacy” tax is to personalty. The fifth is an “Estate” tax, invented by Mr. Goschen in 1889, and increasing the progressive character of all death taxes.

“A Federal Inheritance Tax,” Sidney Webster, Harper’s Weekly, Volume 38, Number 1933, January 6, 1894, page .

 

Gladstone’s use in 1863 is the earliest example of the expression I could find in print, suggesting that the attribution to him may be correct. The expression remained in regular use in public debate in the United Kingdom thereafter.

The whole amount of death duties on personalty, legacy, and probate in England in 1872 was £3,800,000, while realty bore a duty of £600,000, together with rates to the amount of more than £18,000,000.

Berrow’s Worcester Journal (Worcester, England), January 24, 1874, page 7.

 

When the “estate duty” was introduced in 1889, it was considered just one more among several “death duties.” Without a deeper dive into Victorian-era finance law, it is not clear how the “new estate duty” differed from the others. Nor was it clear to all members of Parliament at the time. Some of the debate revolved around whether this “new” duty was actually new, or just a revision to one or the other of the old “death duties.”

The Chancellor of the Exchequer said the intention of the Government was, in cases where there was absolute power of disposal, for the purpose of the new estate duty, the value should be taken according to the capital value of the succession, and not according to the life interest, as in the succession duty.

. . .

The Attorney General explained that the phrase “value of the succession,” meant the capital value of the personalty or realty, whether the interest was for life or absolutely. As to the probate and legacy duties, they were not four taxes, but two, which were so divided as to cover different classes of property. The estate duty was levied equally upon settled personalty and realty.

. . .

Sir H. Davey congratulated the Chancellor of the Exchequer on having had the honour of introducing a measure which laid down principles which he had always advocated - namely, those of graduated taxation, and that real property should bear the death duties in exactly the same way as personal property. To all intents and purposes, however, the estate duty was a succession duty; and if that were so, he asked why a distinction was to be made between the way in which this succession duty was levied, and the way in which the succession duty was levied under the Act of 1853.

. . .

Mr. H. H. Fowler did not agree with the Attorney General, that the estate duty was to be levied in every sense on the value of the succession.

The Standard (London), May 3, 1889, page 3.

 

A few years later, there was an effort to consolidate the several “death duties” under a new duty to be called the “estate duty.” But even revised and re-branded, it was still considered a “death duty.”

The death duties have grown up piece-meal, and bear traces of their fragmentary origin. They have never been established on any general principle, and they present extraordinary specimens of tessellated legislation. . . .

The proposal of the Government, therefore, is this. We propose to clear the ground by abolishing or merging the present probate, account, and estate duties and the addition made by Mr. Goschen in the succession duties, and to start afresh. We constitute in their place a single duty of the “A” class of which probate is the type and which we propose to call the estate duty. . . .

We make no difference in the legacy and succession duties, except charging interest on the installments. The new estates duty will take the place of the present probate account and estates duties and of the additional half and one and a half of succession duty. The portion which will remain of the succession duty, though much diminished by having been absorbed to a great degree in the estate duty, will be to some extent augmented by the proposal to charge the duty on capital value, and to charge the interest on payments by installments. . . .

The allowances will constitute an immediate relief to real property in land and houses, and it will be enjoyed before any increased burdens in the death duties are suffered. The allowance will be a boon to the living owners; the increased burden on the death duties will be a tax on the successor.

Aberdeen Journal, and General Advertiser for the North of Scotland (Aberdeen, Scotland), April 17, 1894, page 6.

 

Gladstone was a liberal politician and generally favored the imposition of “death taxes.” He and others in favor of such taxes, or in favor of reforms to make them more effective, used the expression without judgment and without any apparent sense that “death duties” gave off any sort of negative vibe. There appears to have been a general sense that it was merely descriptive, of duties imposed after death.

American papers reporting on financial reforms in the United Kingdom translated “death duty” into American-English, as “death tax.”

A number of Conservative members of the House of Commons . . . have endeavored to impress upon the mind of Mr. Goschen the extent of the hardship imposed upon the landed classes by the proposal of the Chancellor of the Exchequer to increase the death tax on properties valued at over £10,000.

The Tennessean (Nashville, Tennessee), May 12, 1889, page 1.

 

An “American Citizen” writes in a distracted manner from England about the fell consequences of the late death tax law passed by the British parliament. He says that it applies not only to citizens, but to strangers who may casually die while visiting England or an English colony. No matter, he says, whether the decedent has any investments in England or the colony or not, “one-tenth of all that he has will be taken from his heirs.”

The Nebraska State Journal (Lincoln, Nebraska), July 7, 1894, page 4.

 

An early application of the expression to taxes imposed in the United States appeared in print in 1893. Such taxes had apparently been imposed in a number of states for decades, generally referred to as “inheritance taxes.” But inheritance taxes were only imposed on heirs who were not children; the estate passing to the children was generally untouched. What was new in the 1890s was a tax on certain large estates - an “estate tax” or “death tax” that was imposed on the estate before it passed to the children.

Bill Arp’s Chat.

It is an old saying that “there is nothing certain in the world but death and taxes,” but I didn’t know that both of these afflictions came together. They don’t in Georgia and one of the comforts of dying is to get rid of taxes but it seems that in some of the states and in many foreign countries, the biggest tax of all is the death tax.

Many of the states have had an inheritance tax for fifty years but it didn’t apply to children It affected collateral kindred only - legacies had to pay it, and all heirs who were not children of the deceased. But of late years this death duty - this penalty for dying, has taken hold of all estates worth over $10,000 and the government takes the first slice. This law is only two years old in New York, Massachusetts and Maryland, so far as children are concerned, and it has not been heavy on collateral heirs.

The Atlanta Constitution, February 19, 1893, page 10.

 

Bill Arp was not the first person to use the expression. It appeared in print a few years earlier, in debates about the best method of taxing the concentration inherited wealth. One proposal is identical to the new “death taxes” on large estates described in Bill Arp’s essay a few years later.

Mr. Hammel, of Milwaukee, a member of the assembly, is of the opinion that concentration of wealth by inheritance should be prevented by law. He goes about it in the most direct way - that is, by escheating to the state all bequests to persons above half a million dollars in value.

Mr. Hammel’s method is rather clumsy and not to be compared to the method of taxation which has been urged by some economists - merely to impose a death tax of ten percent upon all estates above a moderate value.

The Journal Times (Racine, Wisconsin), February 12, 1887, page 2.

 

So, when “estate taxes” were adopted in a number of states beginning around 1890, they were considered something different from the “inheritance taxes” that had in place before. But they were both encompassed by the term “death taxes,” in the same way various British duties been collectively referred to as “death duties.”

The expression “death taxes” remained in use in the United States to refer to various such taxes for many decades, without much comment or criticism of it as a ploy or dysphemistic, rhetorical device.

Washington Post, December 14, 1906, page 2.

 

Fort Worth Record and Register, December 1, 1906, page 2.

 

Pittsburgh Sun-Telegraph, August 12, 1935, page 6.

 

The Miami Herald, February 2, 1949, page 3-D.

 

The new Revenue Act of 1950 makes it easier for stockholders of close corporations to finance the payment of death taxes. Under the old law, raising enough cash to pay death taxes often imposed a ruinous income tax burden on the estates of large stockholders in close corporations.

St. Louis Post-Dispatch, November 2, 1950, part 2, page 1.

 

In 1961, a bi-partisan commission on Intergovernmental Relations, chaired by Frank Bane and including members Wilbur Mills and Sam Ervin, used the expression, “death taxes” freely. They were not staunch conservatives trying throw shade on the concept. Frank Bane had been the first executive director of the Social Security Board; Wilbur Mills is considered the architect of Medicare; Sam Ervin led the Senate Watergate Committee. Their report, focusing on Federal and state coordination of “inheritance, estate, and gift taxation,” provides a summary on the history of “death taxes” in the United States.

The overlapping of State and national taxes on transfers of property at death, imposed either on the estate of the decedent or on the shares of his heirs, has been well-nigh universal for over a generation. A death tax has been a permanent feature of the national tax system since 1916 and of practically ever State tax system almost that long. Indeed, some of the State inheritance taxes date from the past century. . . .

Coordination of State and Federal Inheritance, Estate, and Gift Taxes, a Commission Report of the Advisory Commission on Intergovernmental Relations, January 1961,

 

Even into the 1990s, some people who favored “estate taxes” used “death tax” without judgment. For example, an opinion piece advocating the eliminating Iowa’s “inheritance tax,” while retaining a separate “estate tax.” The author lumped both taxes under the collective term, “death taxes,” precisely as Gladstone had done a century and a half earlier.

The Iowa estate tax is integrated with a provision under federal estate tax laws that allows a credit against federal estate taxes for state death taxes that are paid. . . .

With federal estate tax rates at that level, and with the existing credit for state death taxes that already is in place, many people believe that it is unfair for Iowa to levy an alternative inheritance tax that imposes an even greater death-tax burden on many people with medium-size estates.

The Iowa inheritance tax is out of step with the laws of a majority of other states. The majority integrate their tax laws with the federal estate tax and levy an amount exactly equal to the credit for state death taxes allowed under federal law.

The Iowa Legislature should adopt this same philosophy and repeal the alternative Iowa inheritance tax, leaving in place the Iowa estate tax law.

“Repeal Iowa’s inheritance tax; The state still can levy the estate tax,” David W. Belin, The Des Moines Register, January 28, 1997, page 5.

 

But somewhere along the line, journalists began ignoring a century and a half of common tax policy parlance, describing “death tax” as merely a rhetorical device; a cynical ploy to tug voters’ heartstrings by replacing the more upbeat “estate tax.”

There do seem to be actual, technical differences in meaning. “Death tax” is arguably a broader, more generic word, encompassing a variety of separate, postmortem assessments, including “inheritance tax” and “estate tax,” state and federal. But those distinctions are generally ignored in practice. Was the attempt to paint the use of “death tax” as a cynical ploy itself a cynical ploy, removing the word “death” to make it more palatable, even though death is a prerequisite for imposing the tax?

Whether yes or no, the following discussion about whether inheritance taxes are imposed on the dead, the estate or the living heirs illustrates how the difference between “death tax” and “estate tax” is largely a difference without distinction. Their explanation may be technically true, but even the Wall Street Journal makes it sound like an Abbott and Costello bit.

You will see, therefore, that A and B do not pay the inheritance tax. They inherit what is left after the death tax is paid. Of course, if there were no death tax they would inherit more, but it cannot be said that any tax is “imposed” on them or for them. The duty is imposed on the executor of paying the estate tax out of the proceeds of the estate before the estate is divided, but not out of anything that belongs to the beneficiaries. All that belongs to the beneficiaries is what is left to be divided.

The Wall Street Journal, January 30, 1920, page 2.

 


i  https://www.merriam-webster.com/dictionary/euphemism

ii  https://rationalwiki.org/wiki/Death_tax (“’Death tax’ is an emotive neologism coined by pollster Frank Luntz during the 2000 U.S. presidential elections to refer to inheritance or estate taxes.”).

iii  “Republicans say ‘death tax’ while Democrats say ‘estate tax’ - and there’s a fascinating reason why,” mark Abadi, October 19, 2017, https://www.businessinsider.com/death-tax-or-estate-tax-2017-10 .

iv  Hansard’s Parliamentary Debates, Third Series, Volume 260, March - May 1881, April 4, 1881, column 605 (“Mr. Dodds wished to express his thanks to the right hon. Gentleman the Chancellor of the Exchequer for the very kind and complimentary manner in which he had been pleased to refer to his (Mr. Dodds’) action in respect to the Probate and Legacy Duties. . . . He only regretted that the right hon. Gentleman had not viewed, what he had very fittingly called the Death Duties, from the point they ought to be viewed - namely, as duties attaching upon the capital left by the testator.”).

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