The inheritance tax is a tax that is only imposed in six states, that initiates a tax rate against the inheritance of a beneficiary from someone else. The only six states that have a formal inheritance tax are Iowa, Nebraska, Kentucky, Maryland, New Jersey, and Pennsylvania. The way it works is that the rate can be anywhere from 1% to 18%, depending on the amount inherited. The advantage of states imposing a state inheritance tax is that it allows that state to raise more money above all other taxes. Usually these states have lower tax rates in other areas, so the inheritance tax just balances it out. The big disadvantage of the inheritance tax is on the expense of the people who have to pay it. Beneficiaries are forced to pay a piece of what is rightfully theirs to the government, so needless to say it isn't popular among citizens.