2.4.13 The substitution for not imposed taxes justification (apart from tax evasion)

West mentioned that death taxes could be viewed as in lieu of taxes that were not imposed during the deceased’s lifetime. He stated in that regard that death taxes and, in particular, inheritance taxes are regarded as property transfer taxes which were not levied when the deceased was alive. Furthermore, West referred to Bastable who suggested that death taxes are a form of capitalised income tax, paid in a generation instead of once a year. It is paid after the death of the taxpayer, and hence at the time most convenient to him; or it may be regarded as being paid by the beneficiary in advance. The burden of annual taxes may thus be expected to be lightened (in light of the justification of less pain) when a death tax is introduced, and hence the latter is not an additional burden, but only a method of levying part of the property or income tax.1

In the same vein, with regard to taxes on gifts, Rudnick and Gordon stated that “[a]n income tax by itself does not tax wealth, only accretions to wealth. In virtually all income tax systems, gifts and bequests are not taxed as income to the recipient. There are a number of reasons for this exclusion, including problems of income averaging. Assuming that gifts and bequests are not included in the income tax base, a separate wealth transfer tax can serve as a surrogate to such inclusion.”2

Finally, I note that according to the substitution for not imposed taxes justification, the tax must not be graduated according to the kinship of the parties involved, because it merely takes the place of another tax that is not graduated according to such kinship. Therefore, this justification does not seem to be a primary justification of death taxation.