GAINs AND LOSSES FROM DEATII DuTfEs.
Assuming that the £400,000 of death duties be applied to the redemption of 3i per cent. War Loan at par the State would have cancelled a liability for interest service of £14,000 per annum. Setting off against this the £12,700 per annum loss of Income Tax and Surtax, the net gain to the State by the death of the millionaire would be £1,300 per annum. Capitalizing this at 3i per cent. interest gives a sum of 137,143. The total value. of the estate, on the other hand, has been reduced from £1,000,000 to £600,000, with the con- sequential diminution in death duties on the occasion of the death of the new owner. Let us assume that that takes place 33 years hence. Property passes by death on the average more frequently than once in a generation, but we will take that period for the purpose of our illus- tration. The estate duty on an estate of the value of £600,000 is £204,000, as compared with £400,000 on an estate valued at £1,000,000—a difference of £196,000. That is the prospective loss facing the State at the end of 33 years, equivalent to a present loss, taking interest at the rate of 31 per cent. for the purposes of the calcula- tion, of £62,982. The immediate gain to the State by the death of a millionaire is .therefore greatly. exceeded by future losses and on balance it is a considerable loser. The loss shown above would be increased by the diminution in the produce of Income Tax and Surtax attending the further reduction in the value of the estate at the next and at every subse- quent passing of the property by death. In fact, in the course of three or four generations the estate will have shrunk so much as to cease to be an important source of national revenue.
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