Frank Albert Fetter, The German Imperial Inheritance Tax (1907)

Frank Albert Fetter’s short journal article explains the design of Germany’s new imperial inheritance tax and closes by considering its political significance. Authorized by the statute of June 3, 1906, and supplemented by Bundesrat provisions of June 16, the tax also subjects gifts between living persons to the inheritance rules. Fetter’s account moves from exemptions and kinship classifications through progressive rates and administrative safeguards to the relationship between imperial and state taxing powers. Its central concern is how a carefully differentiated fiscal measure combines protection for close family transfers with substantial taxation of larger, more distant inheritances.

The decisive unit is the beneficiary’s share, rather than the estate as a whole:

It is a tax on the distributive shares going to collateral heirs and to forbears.

This distinction organizes both the exemptions and the rate structure. Spouses, legitimate and adopted children, and their offspring appear among the exempt classes; transfers to illegitimate children and their descendants receive exemption when the property comes from the mother or maternal ancestors. Other exemptions depend on value, relationship, or the character of the transfer. They include shares no greater than 500 marks, up to 10,000 marks passing to parents or more distant ancestors, specified personal belongings, and limited gifts to servants. Fetter’s detailed enumeration shows that the law does not impose a uniform charge on inherited wealth: liability is shaped by family status and numerous particular circumstances.

For taxable shares up to 20,000 marks, four basic rates—4, 6, 8, and 10 percent—differentiate beneficiaries by relationship. Parents, siblings, and siblings’ children occupy the lowest-rate class; more distant ancestors and several relationships by marriage fall within the next class. More remote collateral relatives face higher rates, while residual cases bear the 10 percent rate. Charitable and religious gifts instead pay a flat 5 percent without progression. Thus kinship and the purpose of a gift establish the initial burden before the size of the share comes into play.

Larger taxable shares encounter fifteen graduated increases, culminating in a multiplier of two and a half for shares exceeding one million marks. The lowest-rate class receives additional protection because progression does not begin until its shares exceed 50,000 marks:

The tax thus varies from a minimum of 4 per cent. to a maximum of 25 per cent.

Fetter gives particular attention to a safeguard against abrupt increases at class boundaries. When a share exceeds a threshold by only a small amount, the increase in tax produced by the higher progressive rate cannot exceed half that excess. This qualification matters because the tabulated rates alone would otherwise give an incomplete picture of the actual burden. The law combines progression with a mechanism limiting sharp jumps between adjacent classes.

Administrative provisions further qualify its operation. They govern the valuation of life interests, interests limited to a term of years, and conditional or uncertain interests, as well as declaration, assessment, and penalties for neglect. Real property already subjected to this tax within five years is exempt; taxation within five to ten years brings a half reduction. Additional Bundesrat instructions prescribe schedules and reports. Fetter acknowledges the care behind this machinery while identifying the difficulty of interpreting provisions whose effects depend upon one another:

The law gives evidence of careful elaboration, but, unfortunately, it is on the plan of a German sentence,—every part modifies every other part, and none of it is to be taken too literally until the last verb arrives.

The closing paragraph shifts from technical exposition to political apprehension. Fetter reports fears that a Reichstag elected by popular suffrage might use inheritance taxation to repress saving and weaken property; he does not present that outcome as established. He tentatively connects those concerns with the reservation to the states of the entire field of direct-inheritance taxation and the right to levy additional rates on transfers covered by the imperial law. The article’s significance lies in this conjunction of tax design and divided fiscal authority: a new imperial revenue instrument remains bounded by family exemptions, intricate safeguards, and continuing state powers.