^^ LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 
 GIKT OF" 
 
TAXATION 
 
 ITS PRINCIPLES AND METHODS 
 
 TRANSLATED FROM THE 
 
 "SCIENZA DELLE FINANZE" 
 
 DR. LUIGI COSSA 
 
 n 
 
 PROFESSOR IN THE UNIVERSITY OF PAVIA, ITALY 
 
 WITH AN INTRODUCTION AND NOTES 
 
 BY 
 
 HORACE WHITE 
 
 TOGETHER WITH A COMPILATION OF THE STATE TAX SYSTEMS 
 OF NEW YORK AND PENNSYLVANIA 
 
 NEW YORK & LONDON 
 
 G. P. PUTNAM'S SONS 
 
 &|je Jlnkherbocbr JJnw 
 1888 
 
COPYRIGHT, 1888, 
 BY HORACEWHITE. 
 
INTRODUCTION. 
 
 THE author of this treatise kindly sent me a copy 
 of it in the year 1882. I had become interested 
 in his work, through his " Guide to the Study of 
 Political Economy," introduced to English readers 
 by the late Professor Jevons. I, accordingly, had 
 a translation of the Scienza delle Finanze made for 
 my own use, but without any fixed intention of 
 publishing it. The admirable brevity and compre- 
 hensiveness of Professor Cossa's statement of the 
 principles of taxation, and the light thrown on the 
 evolution of the science of public finance, and the 
 want of any short treatise of similar scope in the 
 English language, led me to believe that it would 
 find an appreciative audience in this country. But 
 the time did not then appear to be favorable. 
 
 During the past three or four years there has 
 been a marked revival of interest in economic dis- 
 cussion, as is shown by the number of new works 
 by American writers that have come from the 
 press in that interval, and by the formation and 
 regular meetings of two distinctively economic so- 
 cieties. Notwithstanding the shaking up that Po- 
 litical Economy has received in recent years, which 
 
iv INTRODUCTION. 
 
 some people think has reduced the whole science 
 to chaos, it is certain that it never had so many 
 active, intelligent and persevering votaries in this 
 country as now. Even those who consider the 
 science a chaos always talk and write as though 
 there were a considerable and pretty firm founda- 
 tion to build on. 
 
 It is evident, too, that the public are taking a 
 more general interest than formerly in the sub- 
 ject of taxation in all its bearings. Hardly a year 
 passes that some State Tax Commission is not 
 working on the problems of local revenue, while 
 the question of national revenue, or perhaps we 
 might better say national non-revenue, is the ab- 
 sorbing one in Washington City. 
 
 This work does not deal with customs duties 
 except in their fiscal aspect. The dispute be- 
 tween protection and free trade is not touched 
 upon, since the aim of protection is not to pro- 
 vide means for the support of government, but 
 something quite different. The science of the 
 finances does not deal with things which incident- 
 ally affect the revenue. A dry season may do 
 that, but dryness and wetness are not financial 
 considerations. While the tariff question, as it 
 popularly presents itself, is not touched upon, the 
 effects of taxes on imports, upon different classes 
 in the community, are made sufficiently clear. 
 
 A few notes have been added to the text in 
 
INTRODUCTION. V 
 
 order to give local application and local interest 
 to the abstract principles stated. For the same 
 reason there has been added an appendix, giving 
 in as brief form as possible the State tax systems 
 of New York and Pennsylvania as they stand to- 
 day. A compilation of the tax systems of all the 
 other States would be interesting and valuable, 
 but I would not advise anybody to undertake the 
 task unless he has a great deal of unemployed 
 time to dispose of. 
 
 A two-fold evolution is now going on in State 
 taxation. There is a movement in the first place 
 to drop real estate from the list of State taxables, 
 and to remit it wholly to the lesser political sub- 
 divisions, the cities, towns and counties. There 
 is also a movement to discontinue the attempt to 
 tax floating capital, money at interest and the like, 
 and to look only to those things which can always 
 be found and which cannot get away, for the 
 revenue of the State proper. Pennsylvania led 
 the way in releasing real estate from State tax- 
 ation. That State also led the way in adopting 
 scientific rules for the taxation of corporations, 
 although the system is still far from perfect. 
 Further information will be found in the note 
 on Taxation of Corporations. 
 
 Although the current has always run strongly 
 in this country in favor of the taxation of movable 
 personal property, and even yet affords a favorite 
 
vi INTRODUCTION. 
 
 theme for windy declamation, I am convinced that 
 that particular tax will slowly but surely disap- 
 pear. The State of *New York scarcely pretends 
 to collect the personal property tax, although 
 her laws require its collection. Other States 
 that pretend to collect it meet with little better 
 success, although they do cause a great deal of 
 false swearing and hard feeling. The latest 
 official report on this subject that can be called 
 comprehensive is that submitted by Dr. R. T. 
 Ely, of the Maryland Tax Commission. What 
 he finds and what he says about the taxation of 
 personal property coincides with the views of 
 nearly all the accredited teachers of fiscal science 
 in this country. It is true that Dr. Ely's col- 
 leagues on the Maryland Tax Commission do not 
 agree with him on this point. In the first place, 
 the Constitution of the State of Maryland re- 
 quires that all property shall be taxed equally. 
 But if it were otherwise, the majority of the Com- 
 mission would still be in favor of taxing movable 
 personal property. But they are in favor of ex- 
 empting mortgages from taxation, although this 
 is almost the only form of floating capital that 
 can always be identified and located without any 
 chance of error. 
 
 The report of this Commission came to hand 
 after the body of this work had gone to press. 
 There was accordingly very little opportunity to 
 
INTRODUCTION. Vll 
 
 avail of its certainly valuable investigations. One 
 novel recommendation of the majority is that 
 Maryland shareholders of foreign corporations be 
 taxed or not taxed on their shares according as 
 the State where the corporation is domiciled does 
 or does not tax her own citizens holding shares of 
 Maryland corporations. 
 
 This translation of Professor Cossa's Scienza 
 delle Finanze was- made originally by Mr. A. H. 
 Gumlogsen, who is now, I believe, a resident of 
 Chicago. The translator's want of acquaintance 
 with the terms in use in Political Economy made 
 extensive revision necessary. This was kindly un- 
 dertaken by my friend, Mr. S. Dana Horton, to 
 whom my thanks are due in an especial manner. 
 While the work was going through the press, I 
 learned that Mr. Eugene Schuyler and his nephew, 
 Mr. Louis Bedell Grant the latter, United States 
 Consular clerk at St. Gall, Switzerland were 
 translating the same work into English for publica- 
 tion. I at once offered to surrender the honors to 
 Mr. Schuyler together with the work already done, 
 but he declined the offer and kindly undertook to 
 revise the proofs by the help of his own transla- 
 tion, and the same were accordingly forwarded to 
 him for that purpose. In the fourth edition of 
 Professor Cossa's work it is stated that it had 
 already been translated into the German, Swedish, 
 Polish, Russian and Spanish languages. 
 
Vlll INTRODUCTION. 
 
 A few additions have been made to Professor 
 Cossa's Bibliography of the science. I am aware 
 that further additions might be made, especially of 
 works in the English language. 
 
 Thanks are due to the Hon. Alfred C. Chapin, 
 ex-Comptroller of New York, and to Mr. Frank 
 M. Eastman, law clerk in the office of the Aud- 
 itor-General of Pennsylvania, for quite invaluable 
 assistance in compiling the tax systems of their 
 respective States. H. W. 
 
 NEW YORK, February, 1888. 
 
TABLE OF CONTENTS. 
 
 Introduction iii 
 
 PART I. 
 
 PRELIMINARY CONCEPTS. 
 
 Chapter I. Idea, Limits and Character of the Science of the Finances I 
 II. Sources, Divisions and Importance of the Science of 
 
 the Finances 3 
 
 III. Historical Data of the Science of the Finances 5 
 
 PART II. 
 
 PUBLIC EXPENDITURES. 
 
 Chapter I. The Idea of Public Expenditures , II 
 
 II. Public Expenditure in its Juridical, Political and 
 
 Economical Aspects 13 
 
 III. Classification of Public Expenditures 17 
 
 ii 
 
 PART III. 
 
 PUBLIC INCOME. 
 
 Section I. Original Public Income 24 
 
 Chapter I. The Idea and Division of the Fiscal Domain 24 
 
 II. Administration of the Fiscal Domain 27 
 
 III. Sale of the Fiscal Domain 30 
 
 Section II. Derivative Public Income 35 
 
 Chapter I. Idea, Reason and Form of Fees, Costs and Charges. . . 36 
 
 II. Charges arising in Matters of Judicial Cognizance ... 39 
 
 i. Court Costs. ..' 39 
 
 2. Fees for Certification and Registration 41 
 
 3. Collection of Charges arising from Matters of 
 
 Judicial Cognizance 42 
 
X v TABLE OF CONTENTS. 
 
 PAGE 
 
 Chapter III. Charges on the Means of Exchange and Transport. ... 45 
 
 i. On Coinage 45 
 
 2. On Weights and Measures and on Marking 47 
 
 3. On Railways, Posts and Telegraphs 48 
 
 IV. Idea, Reason and Rules of General Taxation 50 
 
 i. Juridical Rules 51 
 
 2. Economic Rules 58 
 
 3. Political Rules 60 
 
 V. Repercussion of Taxes 62 
 
 VI. Classification of Taxes , ". 64 
 
 VII. Objective Imposts on the Produce of Real Property. . . 69 
 
 I. Imposts on the Produce of Land 69 
 
 2. Imposts on the Rent of Buildings 75 
 
 VIII. Personal Imposts on Income derived from Movable 
 
 Property 78 
 
 i. Imposts on Income derived from Capital 79 
 
 2. Imposts on Personal Income 85 
 
 3. Imposts on Industrial Income 88 
 
 IX. Indirect Imposts on Transfers of Ownership 92 
 
 i. Imposts on Transfers made upon Valuable Con- 
 sideration 93 
 
 2. Imposts on Gratuitous Transfers 95 
 
 3. Imposts in lieu of Transfer Tax 98 
 
 X. Indirect Taxes on Consumption 99 
 
 i. Classification of Imposts on Consumption.. . . ... 100 
 
 2. Fiscal Monopolies 103 
 
 3. Imposts x>n Manufacture and Sale 106 
 
 4. Internal Customs Duties (Octroi) 108 
 
 5. Customs Duties 109 
 
 6. Imposts of Immediate Collection 113 
 
 XI. Direct Imposts on Income and on Property in General. 116 
 
 i. General Tax on Incomes 116 
 
 2. General Imposts on the Entire Estate of the Tax- 
 payer 122 
 
 XII. Comparison of Direct with Indirect Taxes ... 125 
 
 XIII. Comparison between the Multiple Tax System and the 
 
 Single Tax System 128 
 
 XIV. Local Taxes 133 
 
 Note on Taxation of Mortgages 136 
 
 Note on Taxation of Personal Property 139 
 
TABLE OF CONTENTS. XI 
 
 PAGE 
 
 Note on Taxation of Corporations 143 
 
 Note on Taxation of " Land Values " 147 
 
 Note on Taxes on Consumption 150 
 
 PART IV. 
 
 THE RELATION BETWEEN PUBLIC RECEIPTS AND EXPENDITURES. 
 
 Chapter I. General Ideas 153 
 
 II. The Public Debt 156 
 
 III. Floating Debt 160 
 
 i. Classification of the Floating Debt 160 
 
 2. Paper Money 164 
 
 IV. Consolidated Debt 166 
 
 i. Redeemable Debt 166 
 
 2. Irredeemable Debt 170 
 
 V. Administration of the Public Debt 173 
 
 i. Negotiation f . , 173 
 
 2. Extinction 176 
 
 3. Conversion 178 
 
 BIBLIOGRAPHY OF THE SCIENCE OF THE FINANCES 181 
 
 APPENDIX. 
 
 Existing Tax Systems of New York and Pennsylvania 195 
 
 New York State 1 196 
 
 New York City 201 
 
 Pennsylvania 202 
 
 The Pennsylvania Tax Commission Bill 211 
 
PART I. 
 TAXATION ITS PRINCIPLES AND METHODS. 
 
 CHAPTER I. 
 
 IDEA, LIMITS AND CHARACTER OF THE SCIENCE OF 
 THE FINANCES. 
 
 MEN unite together and constitute domestic, civil 
 and political society for the purpose of preserving 
 and perfecting their physical, intellectual and moral 
 faculties, as well as of attaining the highest ends of 
 existence. 
 
 The principal forms of political society are the 
 municipality, the province and the state, each of 
 which possesses a judicial constitution and arrange- 
 ment of its own, and which are severally governed 
 by authorities which represent, defend and promote 
 their interests and provide for the public needs. 
 
 In order to be able to fulfill such duties the sev- 
 eral bodies politic have need of a sufficient amount 
 of exchangeable material property (wealth) ; they 
 must therefore create a special property or estate 
 (patrimonio), which is called the public estate, from 
 the public character of the bodies that dispose 
 of it. 
 
2 TAXA TIONITS PRINCIPLES AND METHODS. 
 
 By public estate is understood that portion of 
 the national resources which is set apart by law to 
 provide for the wants of the government and of 
 lesser political societies (the province, the munici- 
 pality). The public estate, which .comprises the 
 fiscal domain and the proceeds of taxation, both 
 general and local, must not be confounded with 
 the property of private individuals, or, in the case 
 of a monarchy, with that of the sovereign. 
 
 The Science of the Finances is the body of prin- 
 ciples which relate to the public estate {patrimonio). 
 It teaches the best method of establishing, manag- 
 ing and using it. 
 
 The object of the Science of the Finances is 
 common with that of other financial studies, which 
 also deal with the public estate, but regard it from 
 a different point of view. 
 
 Such are the history of the finances, financial 
 statistics and positive financial law, which investi- 
 gate the public estate, either through its trans- 
 formations in the progress of time, or in its actual 
 conditions in given times and places, or in the legal 
 relations that belong to it. 
 
 These studies, which are indispensable for gain- 
 ing a deeper knowledge of the Science of the 
 Finances, consider the public estate in its concrete 
 manifestations, but always conditioned within time 
 and space ; while, on the other hand, the Science of 
 the Finances deals with that which is universal and 
 
TAXATION ITS PRINCIPLES AND METHODS. 3 
 
 permanent, and in this sense it belongs as much to 
 the past as to the present and to the future. 
 
 Although the Science of Finances investigates 
 the causes and effects of financial facts (for example: 
 the effects of taxes and loans), its chief office never- 
 theless is to furnish the guiding principles for the 
 proper management of the revenue of the state, of 
 the province, or of the municipality. 
 
 The Science of the Finances forms a part of the 
 science of public administration, which in its turn 
 is a branch of political science in its wider meaning 
 of the science of government. 
 
 At the present day, however, the Science of the 
 Finances is generally studied as a matter altogether 
 .distinct from the other branches of administrative 
 science by reason of the importance of its objects, 
 the variety of its sources, and the extended scope 
 of the doctrines which it embraces. 
 
 CHAPTER II. 
 
 SOURCES, DIVISION AND IMPORTANCE OF THE SCI- 
 ENCE OF THE FINANCES CLASSIFICATION. 
 
 THE Science of the Finances does not, as many 
 are still inclined to believe, constitute a mere ap- 
 pendix to political economy. It is by no means 
 restricted to the investigation of the economic con- 
 sequences of fiscal provisions. 
 
4 TAXATION ITS PRINCIPLES AND METHODS. 
 
 The general principles of law and political sci- 
 ence are sources of the Science of the Finances as 
 well as those of political economy. All financial 
 questions should therefore be considered in the 
 triple aspect of justice, convenience and social ad- 
 vantage. The knowledge of these three branches 
 of study is accordingly an essential requisite to a 
 clear understanding of the elements of the Science 
 of the Finances. 
 
 There are other branches of learning auxiliary to 
 the Science of the Finances, such as political arith- 
 metic, government systems of account, technology, 
 private economy (domestic and industrial), and 
 notably the history, legislation and comparative 
 statistics of finance, all of which contribute to the 
 science valuable materials for the elaboration of its 
 theories. 
 
 The Science of the Finances divides itself natu- 
 rally into three parts, which treat of expenditure, 
 of income, and of their relations to each other. 
 
 It forms a subject worthy of careful special study, 
 by reason of the theoretical importance of its abject 
 as a part of general education, especially politico- 
 legal education, as well as by reason of the prac- 
 tical utility of its teachings. In particular is it 
 useful to those who, either directly (as magistrates, 
 or as members of deliberative or of consultative 
 bodies), or indirectly through the rights of assem- 
 bly, and of petition, or through the press, exercise 
 
TAXATION ITS PRINCIPLES AND METHODS. 5 
 
 an influence on the government of the State, or of 
 political societies of inferior extent. 
 
 A necessary complement to the Science and the 
 Art of the Finances is practice, which consists in 
 effective action, and avails itself of the truths of 
 science and of the principles of art, strengthening 
 both with the results of individual experience. 
 
 Science, art and practice are the complements of 
 each other, and it is a mistake to assume that one 
 can take the place of the other. Science explains ; 
 art guides and counsels ; practice acts and executes. 
 
 Neglect of any of these elements necessary for 
 the profitable realization of financial thought leads 
 to empiricism and the day-dreams of Utopia. 
 
 CHAPTER III. 
 
 HISTORICAL DATA OF THE SCIENCE OF THE FINANCES. 
 
 THE financial systems of Greece and Rome in 
 ancient times, and those no less notable of Florence 
 and of Venice during the middle ages, must be 
 considered as luminous proofs of practical sagacity, 
 and not as the product of scientific research, which 
 in these epochs has yielded but a few fragments 
 from classical writers (Xenophon and Aristotle), 
 and certain maxims of financial morals buried in 
 the theological, philosophical, political and legal 
 works of the schoolmen. 
 
 Since the Renaissance various principles of finan- 
 
O TAXATION ITS PRINCIPLES AND METHODS. 
 
 cial policy show themselves, developed with some 
 fullness in the writings of publicists here and there 
 in the fifteenth (Carafa), and so likewise in the 
 sixteenth century, the Frenchman Bodin ranking 
 foremost among the latter, while among the Ital- 
 ians Palmieri, Guicciardini, and particularly Botero, 
 distinguished themselves. 
 
 These principles were commented upon with 
 more or less prolixity, but with little originality, in 
 many works which saw the light in the seventeenth 
 century, the work being undertaken in some cases 
 from pure motives of erudition (Bornitz, Besold, 
 Klock), in others with a view to administrative 
 interests (Seckendorf and the German and English 
 writers on excise). After a few decades, however, 
 there appeared a number of authors who with 
 greater boldness advocated general or partial re- 
 forms of the system of taxation in the interest of 
 the public treasury (in Spain and Germany), or in 
 that of the taxpayers in the endeavor to bring 
 about a more equitable distribution of burdens 
 (Boulainvilliers, Vauban and Boisguillebert ; Pascoli 
 and Bandini). 
 
 Of more distinct merit, from the scientific point 
 of view, were certain English writers of the seven- 
 teenth century, among whom Hobbes, Petty, and 
 especially Locke, were the first to discuss, although 
 somewhat superficially, the difficult question of the 
 incidence and the repercussion of taxes. 
 
TAXATION ITS PRINCIPLES AND METHODS. 7 
 
 As a worthy parallel to these, other writers, also 
 English (Davenant, Hutcheson, Barnard, etc.), ap- 
 peared, who, in the early years of the eighteenth 
 century, examined in its technical details the novel 
 theory of the public credit, which, after the famous 
 experiment of Law, was further investigated by 
 Melon, by Dutot, and by other apologists or ad- 
 versaries of that system. 
 
 A much wider horizon was opened to financial 
 thought toward the middle of the last century. 
 The little-known, yet methodical and important, 
 treatise on taxation by the Neapolitan, Broggia 
 (1743), was followed by Montesquieu's work on 
 The Spirit of Laws (1748), which, with great 
 penetration, explains the connection between po- 
 litical and financial institutions ; and later came the 
 much-prized political essays of Hume (1752), which, 
 as it were, smoothed the path for the famous French 
 school of physiocrats (Quesnay, the elder Mira- 
 beau, Turgot, etc.), which, with a rigorous logic, 
 derives the fiscal corollary of the single tax on the 
 revenue of landed property (impot unique) from 
 the certainly ingenious yet fallacious theory of " net 
 product" (1758 and following years).* 
 
 * It was a doctrine of the physiocratic school that since land alone yielded 
 a " net product," i. <?., a surplus over the value of the labor spent upon it, 
 therefore agriculture was the only productive industry and ought to bear the 
 entire burden of taxation. To sustain this thesis it is necessary to assume 
 that the agriculturist (meaning thereby the man who tills his own land) 
 is outside of and superior to the law of competition, for if he is subject to 
 
3 TAXATION ITS PRINCIPLES AND METHODS. 
 
 Almost contemporaneously with this systematic 
 derivation of financial from economic theories in 
 France, Italy and England an attempt is made at 
 a simple, empirical co-ordination of several fiscal 
 doctrines (Forbonnais, Genovesi, and especially 
 Steuart), which reaches its climax in the works of 
 the so-called Kammeralists of Germany, particu- 
 larly in those of Justi and Sonnenfels. 
 
 The theories of finance finally obtain a much 
 broader basis, a safer and more correct develop- 
 ment, through the progress of political economy, 
 which is raised by Adam Smith to the dignity of a 
 true science by his memorable investigations into 
 the Wealth of Nations (1776). 
 
 The financial principles of Adam Smith, as com- 
 mented upon and discussed in the books of political 
 economy (for example, in those of Say, Ricardo, 
 Sismondi, Lotz, Rossi, Mill, Cherbuliez, Sidgwick 
 Vissering, Walker, Pierson, Nazzani), were further 
 illustrated by special treatises on financial science, 
 for example, in those of McCulloch, Matlekovitz, 
 Kautz, Bilinski, De Luca, Marescotti, recently sur- 
 
 that law there is no more reason why he should pay all the taxes than why . 
 carpenters should do so. Whatever the condition of the world may come 
 to be in the remote future, when all tillable land shall have been brought 
 under cultivation, it is not now true that agriculture, upon the whole, 
 possesses any advantages over other callings. And this is made mani- 
 fest by the patent fact that there is no special eagerness to take up agri- 
 culture as a means of livelihood in the United States, even where land is 
 offered gratis. ED. 
 
TAXATION ITS PRINCIPLES AND METHODS. 9 
 
 passed by Leroy-Beaulieu. Among these, the fore- 
 most place for critical penetration, breadth of 
 erudition, and systematic arrangement is awarded 
 to the German manuals of Jakob, of Malchus, Rau, 
 Hock, Stein and Roscher, who (the four last men- 
 tioned particularly) are distinguished by a more 
 complete and correct determination of the functions 
 of the state, which, both by the disciples of Smith 
 and the publicists who followed Kant, had erro- 
 neously been restricted to the function of merely 
 juridical defence of person and property. 
 
 The Science of the Finances has likewise profited 
 considerably by a goodly number of excellent mono- 
 graphs published in the present century, and chiefly 
 bearing on the questions of taxes (Krehl, Tourgue- 
 nieff, Hoffman, Vocke, Helferich, Meyer, Nasse, 
 De Parieu, Pastor, Besobrasoff, Pierson, Pescatore, 
 etc.) and of public credit (Hamilton, Nebenius, 
 Massedaglia, Bunge, Newmarch, Capps, Baxter, 
 etc.). 
 
 In recent times financial science in Germany has 
 been achieving a new development under the influ- 
 ence of the historical school and of the many 
 adherents of so-called social politics. The latter 
 are, indeed, so far from regarding public loans as 
 an evil often unavoidable, that they actually assign 
 to them a normal function within the financial sys- 
 tem. They, moreover, teach that taxes, so far 
 from a mere fiscal expedient, should become a 
 
IO TAXATION ITS PRINCIPLES AND METHODS. 
 
 means for bringing about a more equitable distri- 
 bution of wealth. Ideas of this order, discussed in 
 important works of Schaffle, Dietzel, Schmoller, 
 Laspeyres, Held, Scheel, Neumann, Friedberg, 
 Leser and Lehr, have now received in the (still 
 incomplete) Science of Finance of Adoph Wagner 
 and in the Manual of Political Economy ', under the 
 direction of Schonberg, a full and profound expla- 
 nation, which is appreciated even by those who, 
 like ourselves, do not admit such radical theories. 
 
 In Italy the fiscal reforms anterior to the French 
 Revolution had very efficient precursors and scien- 
 tific promoters in the Milanese, Beccaria, Verri 
 and Vergani ; in the Neapolitan, Palmieri ; in the 
 Tuscans, Neri and Gianni. Among the financial 
 economists of the nineteenth century, besides 
 those already mentioned, Bianchini, Fuoco, Pe- 
 titti, and especially Scialoja are to be noted. 
 
 Among the living votaries of the study of finance 
 Ferrara, Busacca, Broglio, Minghetti, Boccardo, 
 Magliani, Baer, Lampertico, Luzzatti, Ellena, 
 Boselli not to mention many others have pub- 
 lished valuable monographs. Of the younger 
 writers who give great promise by their talent, cul- 
 ture and activity, we record the names of Ricca- 
 Salerno, Ferraris, Salandra, Piperno, De Viti de 
 Marco and Pantaleoni. Praise should be given 
 also to Alessio, Zorla and Errera. 
 
PART II. 
 PUBLIC EXPENDITURE. 
 
 CHAPTER I. 
 
 THE IDEA OF PUBLIC EXPENDITURE. 
 
 PUBLIC expenditure is that which is made by the 
 competent authorities, to satisfy the needs of the 
 political society, by applying the funds coming 
 from the national estate {patrimonio), of which, as 
 has been already said, the public estate {patrimo- 
 nio) is a part. 
 
 Public is distinguished from private expenditure, 
 
 ist. By the different duration (continuity) of the 
 persons for whose advantage it is incurred. 
 
 2d. By the monopoly of sale and of purchase 
 which bodies politic enjoy in respect of the pro- 
 duction and consumption of certain goods. 
 
 3d. By the arbitrary fixing of the price of certain 
 corporeal and incorporeal goods, which are pro- 
 duced by the state, the province, or the munici- 
 pality. 
 
 4th. By the sale of certain goods, which at times 
 may purposely be sold below cost. 
 
 5th. By the less varied nature of the objects 
 produced, which mainly depends upon the gen- 
 
12 PUBLIC EXPENDITURE. 
 
 erally subsidiary character of all public expendi- 
 ture. 
 
 6th. Through the different criteria with refer- 
 ence to which the compensation of the individual 
 who gives his labor to public business is fixed, 
 because : 
 
 (a) As there can seldom be any participation 
 allowed in the profit, public production will gene- 
 rally be more expensive than private, by reason 
 of this lack of individual interest on the part of 
 public functionaries, who often depend on seniority 
 and on political interest or recommendation : 
 
 (3) As certain guarantees are offered for the 
 permanency of his tenure of office, for the order of 
 promotions and for pensions, the compensation of 
 a public functionary is almost always inferior to the 
 salary of professional men who have received a 
 similar scientific training. 
 
 There is, however, no noteworthy difference in 
 results between public and private expenditure 
 arising from the fact that public expenditures 
 usually are made to secure benefits not material or 
 corporeal in their nature. 
 
 It is therefore equally mistaken to blame all 
 public services on account of the incorporeal form 
 of the greater part of the benefits that are obtained 
 by means of them, as to approve them all without 
 taking heed of the objects to which they are di- 
 rected. 
 
PUBLIC EXPENDITURE. 13 
 
 CHAPTER II. 
 
 PUBLIC EXPENDITURE IN ITS JURIDICAL, POLITICAL 
 AND ECONOMICAL ASPECTS. 
 
 IN examining public expenditures in their jurid- 
 ical aspect, that is, in respect to their legitimacy, it 
 is necessary to keep in view : 
 
 ist. The utility of the object, considered in itself 
 and in reference to other eventually more urgent 
 wants that have not as yet been satisfied. 
 
 2d. The universality of the need, 
 
 (a) Whether with regard to the territory (de- 
 centralization from a fiscal point of view), 
 
 (<) Or with reference to the various classes of 
 society (the relation between the distribution of 
 burdens and of political advantages). 
 
 3d. The impossibility of providing for it in any 
 other manner (individually or through free associa- 
 tions), because the public authority must charge 
 itself only with the performance of those services 
 which private individuals 
 
 (a) Either ought not to perform, as in the case 
 of certain functions, which by their nature are be- 
 yond the competence of private persons (such as 
 national defence, administration of justice, etc.) ; or, 
 
 (&) Cannot discharge in a satisfactory manner, 
 
14 PUBLIC EXPENDITURE. 
 
 from certain reasons of public order and of public 
 security (such as coinage, posts and telegraphs, 
 etc.) ; 
 
 (c) Or in many cases will not perform, whether 
 from lack of the required knowledge, or of means, 
 or of the spirit of association, or because when a 
 monopoly is actually unavoidable the monopoly of 
 bodies which are the legitimate representatives of 
 social interests is in many cases preferable to that 
 of associations having merely profit in view. 
 
 4th. The equality, or relation of correspondence, 
 which should be, as far as possible, complete, be- 
 tween the sum total of public services and the 
 sacrifice imposed on private individuals the ob- 
 ligatory character of the contributions, or at least 
 the arbitrary determination of the price, render- 
 ing more manifest any injustice in their distribu- 
 tion. 
 
 In this respect it must not be forgotten that the 
 problem of the limits of competency, even of 
 merely economic competency, between the individ- 
 ual and political societies an arduous problem, 
 which does not admit of absolute solution does 
 not at all belong to the Science of the Finances, 
 which is simply the doctrine of the best means of 
 obtaining certain pre-established ends, but must 
 be judged by the light of all the social and politi- 
 cal sciences. 
 
 In the political aspect, that is, in respect of the 
 
PUBLIC EXPENDITURE. 15 
 
 relations between financial mechanism and the 
 constitutional and administrative arrangements, 
 the excellence of the political system has its effect 
 on the financial system, and the quality of the lat- 
 ter, in its turn, reacts on the working of the former. 
 
 In this respect there are three fundamental rules, 
 namely : 
 
 i st. The expenditures must be acquiesced in by 
 those who furnish the means required to defray 
 them (the tax-payers), either directly or by their 
 representatives, in order that they may be able to 
 compare equitably the amount of the benefit an- 
 ticipated with that of the sacrifice required for its 
 attainment. 
 
 2d. The authorities empowered to expend the 
 sums voted by the tax-payers must be placed under 
 the superintendence of other authorities, either 
 superior in official rank, or at least must possess 
 sufficient guarantees of independence. 
 
 3d. The publicity of the accounts and of the 
 documents relating thereto, and the publicity of 
 the discussions about them, whether these take 
 place in political, provincial or municipal assem- 
 blies who deliberate upon the expenditures, or are 
 made known through the press, are a necessary 
 guarantee of the best satisfaction of the require- 
 ments of any civil association. 
 
 In the economic aspect, that is, in respect of the 
 effects of public expenditure on private economy, 
 
1 6 PUBLIC EXPENDITURE, 
 
 we have to guard against the erroneous conclusions 
 of two schools radically opposed to each other. 
 
 There are those who maintain that all public 
 expenditure is always advantageous, or at least 
 harmless, when it is made within the limits of the 
 State, because the money which is levied on the 
 tax-payers, with one hand is returned to them with 
 the other in the form of salaries, emoluments, 
 fees and profits, paid to those who furnish goods 
 to the State, the province and the municipality, or 
 who discharge the needed services. 
 
 This conclusion, however, is doubly erroneous. 
 To the exploded notion that all exportation of 
 money is injurious, it adds the strange sophism 
 of the supposed restitution of money to the tax- 
 payers ; whilst it is clear that in public expenditure 
 money is not returned to them in proportion to 
 their respective contributions, but merely that 
 either the tax-payers themselves, or other persons, 
 acquire new products or advantages, corporeal or 
 incorporeal, which, as everybody can see, is a very 
 different matter. 
 
 On the other hand, another no less exclusive 
 school regards all public expense as always injuri- 
 ous, because it resolves itself into a diminution of 
 the income of private individuals, and hence into a 
 loss to the industry of the community. 
 
 Yet this school forgets that while it may often 
 happen that public expenditures are injurious, still 
 
PUBLIC EXPENDITURE. 17 
 
 in the case of many others the injury resulting 
 from the diminution of private income is largely 
 compensated by the benefit obtained from the en- 
 hancement of the public resources. 
 
 The evident truth is, that we cannot approve or 
 disapprove any public expenses in the abstract, but 
 in order to judge them we must give heed to the 
 purposes for which they are designed, purposes 
 which may be either praiseworthy or blamable, 
 either absolutely or in relation to the private em- 
 ployments which may be injuriously affected there- 
 by. Generally, in the economic aspect, those public 
 expenditures can be approved which do not dimin- 
 ish either existing capital or the possibility of its 
 regular increase. 
 
 CHAPTER III. 
 
 CLASSIFICATION OF PUBLIC EXPENDITURE. 
 
 To judge of the merit of the various objects of 
 public expenditure does not belong to the Science 
 of the Finances. It must accordingly abstain from 
 investigations which belong to other parts of the 
 science of administration, and must confine itself 
 to a simple classification of public expenditures. 
 The principal criteria for distinguishing public ex- 
 penditures are the form they assume, the place and 
 the time in which they are made, their importance, 
 
1 8 PUBLIC EXPENDITURE. 
 
 their economic effects, and finally the purposes for 
 which they are incurred. 
 
 In regard to form, that is, in respect of the ma- 
 terial in which disbursement is made, we have to 
 distinguish : 
 
 ist. Expenditure in natural products (goods and 
 raw produce), once customary but now exceptional. 
 
 2d. Expenditure in money, once exceptional 
 but now customary. 
 
 These expenditures comprise : 
 
 (a) The remuneration of the services of public 
 functionaries, civil and military ; 
 
 (b) The lease and rent of real property ; 
 
 (c) The acquisition of goods and chattels by the 
 public administration. 
 
 In regard to place, that is, to the source of the 
 means acquired, we distinguish : 
 
 i st. Foreign (external) expenditure; that is, 
 made beyond the borders of the national territory. 
 
 2d. Home (internal) expense, made within the 
 aforesaid limits. 
 
 In regard to the time in which they take place, 
 we distinguish : 
 
 ist. The ordinary expense which repeats itself in 
 every fiscal period, whether in a constant or varia- 
 ble amount. 
 
 2d. Extraordinary expense, which does not occur 
 constantly, nor with periodical regularity. The 
 category of foreseen and unforeseen expenditures, 
 
PUBLIC EXPENDITURE. 1 9 
 
 however, does not correspond with this distinction, 
 because not all ordinary expenditures can always be 
 foreseen, at least not in their precise amount, nor 
 are all extraordinary expenditures al ways >unf ore- 
 seen. 
 
 In a somewhat different sense expenditure is 
 called ordinary, the useful effect of which merely 
 concerns the current fiscal year, and extraordinary, 
 that which inures to the benefit of several successive 
 periods. 
 
 In respect of importance, we distinguish : 
 
 ist. Necessary expense. 
 
 2d. Useful expense. Some do not approve of 
 this distinction, maintaining that any necessary ex- 
 pense is also a useful one, and that any really use- 
 ful one may, in almost all cases, be regarded as 
 necessary. 
 
 In regard to economic effects, we have to distin- 
 guish : 
 
 i st. Productive expenditure, which is 
 
 (a) Either directly such, if it increases the public 
 estate, or, 
 
 (U) Indirectly such, if it increases that of private 
 individuals. 
 
 2d. Unproductive expenditure, in which the 
 wealth consumed is not sufficiently repaid by the 
 usefulness of the services for which it is incurred. 
 
 We must not confuse the utility of public expen- 
 diture with its productiveness. Unproductive ex- 
 
20 PUBLIC EXPENDITURE. 
 
 penditure may be useful, or, indeed, necessary, 
 when it satisfies any real and urgent want. 
 
 Finally, in respect of the purposes for which 
 public expenditure is intended, the following clas- 
 sification may be made, which, however, may be 
 varied in a thousand ways : 
 
 I. Constitutional expenditure; that is, for 
 
 (a) The head of the State, Emperor, King, 
 President, etc., and in a monarchy, for his family 
 (civil lists, endowments, appanages, etc.) ; 
 
 (fr) The representative bodies, national, provin- 
 cial, municipal ; 
 
 (c) The highest governmental departments with 
 general powers. 
 
 II. Expenditure of administration; that is, for 
 
 A. The financial administration, and in particu- 
 lar for 
 
 ist. The public domain ; 
 2d. The collection of taxes ; 
 3d. The public debt (interest and redemp- 
 tion) ; 
 
 4th. The treasury and accounts. 
 
 B. The administration proper ; that is to say, 
 (A A} Administration for purposes of public se- 
 curity, and in particular for 
 
 1. External security, and hence, for 
 (a) War and marine ; 
 
 (<) Diplomacy (missions, consulates). 
 
 2. Internal security (justice); hence, for 
 
PUBLIC EXPENDITURE. 21 
 
 (a) Repressive justice (contentions, civil juris- 
 diction, i. ., law courts for civil causes and penal 
 justice) ; 
 
 (b) Preventive justice (voluntary civil jurisdic- 
 tion and police). 
 
 (BB) The administration of public well-being, 
 and in particular, 
 
 1. Intellectual and moral well-being; hence, 
 (a) Public worship ; 
 
 (B) Institutions of education and learning. 
 
 2. Material prosperity : 
 
 (a) Physical (public health) ; 
 
 (b) Economic; hence, 
 
 (aa) Charitable and provident institutions ; 
 
 (bK) Public works ; 
 
 (ci) Industries (agricultural, manufacturing, com- 
 mercial, etc.). 
 
 But the practical distinction of public expendi- 
 ture for departments, bureaus, divisions, sections, 
 etc., will never exactly coincide in any State with 
 the scientific classification given, or, indeed, with 
 any other classification. It varies according to the 
 extent, the historical traditions, and the political 
 constitutions of the different States. 
 
PART III. 
 PUBLIC INCOME. 
 
 THE public income by which the State, the prov- 
 ince, the municipality provide for their own wants 
 is divided into ordinary and extraordinary income. 
 The former is collected regularly in every fiscal 
 period ; the latter is intended to provide for casual 
 deficits. 
 
 The ordinary public income is subdivided into 
 original and derivative, the former governed by 
 the common law and the latter by statute. Not- 
 withstanding notable differences the two coincide 
 in the main, because they resolve themselves into 
 two modes of setting aside a portion of the national 
 wealth for purposes of public utility. 
 
 The following is a summary of the principal pub- 
 lic receipts : 
 
 I. Ordinary income, which is : 
 
 A. Original income, arising from the property 
 of the State. 
 
 B. Derivative income, and therein : 
 ist. The proceeds of taxation. 
 
 (a) Special fees, costs and charges. 
 (U) General taxes, commonly so called. 
 
PUBLIC INCOME. 2$ 
 
 2d. Fines, penalties. 
 
 3d. Escheats. 
 
 II. Extraordinary income, namely: 
 
 A. The reserves of the treasury. 
 
 B. The sale of the fiscal domain. 
 
 C. Increase of taxation. 
 
 D. Public loans. 
 
 E. War contributions. 
 
PART IV. 
 ORIGINAL PUBLIC INCOME. 
 
 ORIGINAL public income is that which the State, 
 province and municipality derive directly from their 
 own property, in contrast with the derivative in- 
 come which they obtain indirectly from the obliga- 
 tory contributions of private individuals. 
 
 The original income constitutes the fiscal do- 
 main, in the fullest signification of the term. 
 
 CHAPTER I. 
 
 IDEA AND DIVISION OF THE FISCAL DOMAIN. 
 
 THE fiscal domain comprises the wealth, mov- 
 able and immovable, possessed by the State, the 
 province or municipality, the profitable rights that 
 they enjoy, and the industries carried on by the 
 same, under the ordinary regulations of law, with a 
 view of obtaining revenue, interest or profit, which 
 are designed to provide for a part of the public ex- 
 penses. 
 
 In reference to the mode of acquisition, of man- 
 agement and of sale respectively, of the domanial 
 
ORIGINAL PUBLIC INCOME. 2$ 
 
 property and industries, they are controlled by the 
 rules of common law, and of the economic law of 
 competition, which regulates both the cost and the 
 value of the products obtained. 
 
 Distinct from the strictly fiscal domain, which by 
 its nature is alienable, prescriptible and productive, 
 is the public domain (unproductive, imprescriptible 
 and inalienable) which the citizens enjoy individu- 
 ally and not collectively, and on which the State, 
 province and municipality enjoy no true right of 
 property, but only the right and duty of pres- 
 ervation and of protection. Such, for instance, 
 are the roads, canals, harbors, coasts, fortifica- 
 tions, etc. 
 
 From the fiscal domain differ also the fiscal 
 monopolies, which are industries exercised by the 
 public authority independently of the ordinary 
 rules of law and of competition, with a view of 
 drawing a net product greatly superior to ordinary 
 profit, and which, therefore, really includes an im- 
 post. 
 
 From the fiscal domain must further be distin- 
 guished those administrative services which the 
 State, province or municipality undertakes, with or 
 without monopoly, from motives of public useful- 
 ness, with a view of deriving, not indeed a profit, 
 but a simple reimbursement, either partial or total, 
 of the expenses incurred, and constituting accord- 
 ingly a special tax. This frequently happens in 
 
26 ORIGINAL PUBLIC INCOME. 
 
 the managements of posts and telegraphs, and 
 always in the manufacture of coins. 
 The fiscal domain comprises : 
 
 A. Property. 
 
 ist. Immovable (domanial property in a limited 
 sense), namely : 
 
 (a) The public workshops ; 
 
 (K) Cultivated lands, forests, mines, etc., owned 
 by the State. 
 
 2d. Movable, namely : 
 
 (a) Corporeal goods, as military implements 
 (arms, ships, horses, etc.), furniture, documents, 
 books, pictures, etc., and, in general, the contents 
 of archives, libraries, picture-galleries, museums, 
 national printing-offices, money in the public chest ; 
 
 (3) Incorporeal goods, as rights of hunting, fish- 
 ing, etc. 
 
 B. Industries. 
 
 ist. Territorial and mining, connected with the 
 ownership of real estate. 
 
 2d. Manufactories (as national printing-offices, 
 tapestry, porcelain and arms factories). 
 
 3d. Commercial, namely : 
 
 (a) Ordinary commerce ; this is very rare in the 
 present day; 
 
 (b) Banking, which in our day is everywhere car- 
 ried on, not by State banks, but by private banks, 
 with or without special privileges, the government 
 being able by means of taxation to exercise super- 
 
ORIGINAL PUBLIC INCOME. 2/ 
 
 intendence over the issue of notes payable at sight 
 or to bearer, and to obtain a fiscal revenue from 
 them ; 
 
 (V) Posts, telegraphs and railways, when they 
 yield a profit. 
 
 C. Permits for hunting, fishing, etc. 
 
 CHAPTER II. 
 
 ADMINISTRATION OF THE FISCAL DOMAIN. 
 
 THE administration of the fiscal domain can be 
 regulated by " regie " (direct official management), 
 by contract, and (in the case of real estate) by 
 lease. 
 
 In the first mentioned, a system once generally 
 prevalent, the proprietor (the State, province or 
 municipality) assumes the care and risk of invest- 
 ment in raw material, manufacture and sale of cer- 
 tain products, and intrusts it to public officers, who 
 are paid by fixed stipends. 
 
 In this system, which has the object of securing 
 to the proprietor the entire profit of the enter- 
 prise, the lack of personal interest on the part of 
 the administrators is to be regretted, as well as the 
 many drawbacks of a bureaucratic management, 
 which is invariably slow, expensive, intricate, some- 
 times yields no profit, and even results in loss. 
 
 By the contract or farming system the proprietor 
 
28 ORIGINAL PUBLIC INCOME. 
 
 withdraws from all risks, and grants to others the 
 use of the property or the exercise of the industries 
 of the fiscal domain in return for a fixed yearly 
 payment in goods or money. 
 
 In favor of the contract system may be adduced 
 the saving which the proprietor is able to effect in 
 the expenses of administration and supervision ; 
 the greater revenue that is obtained by private, 
 free and diligent management ; the greater security 
 of a payment fixed as to time and amount, the pos- 
 sibility of improvements, and, in general, the in- 
 crease of the gross and of the net produce, which 
 also results to general advantage. 
 
 On the other hand, stress is laid on the possibil- 
 ity of conflicts of interest between the grantor, who 
 is most concerned about maintaining the property 
 intact, and the contractor, who wishes to derive 
 the greatest amount of produce while the contract 
 lasts ; hence there may arise frequent litigation, 
 and sometimes fraudulent bargains, between the 
 contractors and the agents who are charged with 
 making the contracts and watching over their ful- 
 fillment. 
 
 To prevent such mishaps, in part at least, there 
 have been established certain precautions respect- 
 ing the choice of the* conTraHoT^yprivate con- 
 tract or aT^puEHc auction)7~also in respect to the 
 duration of 'the contract (at a fixed and relatively 
 long term of duration), to the extent of the grant, 
 
ORIGINAL PUBLIC INCOME. 2$ 
 
 and to the guarantees for the^ strict fulfillment of 
 the contract (bond, inventory, etc.), and concern- 
 ing the regulations (which must not be too many 
 or too vexatious) as to the methods of manage- 
 ment. 
 
 Different from contract (in the case of real prop- 
 erty) is also the so-called concession^ in which the 
 greater duration of the grant, the obligation of ef- 
 fecting improvements, and the smallness of the 
 payment prove frequently of great advantage to the 
 administration and the betterment of the property 
 of the State, of municipalities and of charitable in- 
 stitutions, which in this manner avoid the trouble 
 and risk of such improvements, and to which more- 
 over is assured a small but safe revenue. 
 
 Still, under different conditions, the progressive 
 diminution of the payment as equalized to money 
 through the diminished value of the latter the 
 smallness of the payment itself no longer corre- 
 sponding to the produce of the lands together 
 with the many controversies, especially in the case 
 of an excessive subdivision of workable lands, have 
 given rise to a decidedly unfavorable opinion in 
 respect to this system of administration of the fiscal 
 domain. 
 
 There are also mixed systems of administration. 
 Among these there is the system o^sharing^ in 
 which the fiscal agents are made to participate in 
 
 * A very long, or perpetual, heritable lease at a fixed rent, (Rom. law.) 
 
30 ORIGINAL PUBLIC INCOME. 
 
 the profits of the undertaking, in order to stimulate 
 their activity through the hope of obtaining greater 
 profits. 
 
 In the so-called system of guarantee, which at 
 one time was much in vogue, the fiscal agent, who 
 is paid by a fixed stipend, warrants to the exche- 
 quer a minimum of product, and divides with it any- 
 thing that may be obtained beyond this limit. But 
 it has always been difficult to find persons possess- 
 ing capital and endowed with high administrative 
 capacity who would be inclined to charge them- 
 selves with the fixed burden of this guarantee in 
 the hope of enjoying only a part of the greatest 
 eventual profit. 
 
 CHAPTER III. 
 
 SALE OF THE FISCAL DOMAIN. 
 
 THE various systems of administering fiscal prop- 
 erty and industries have almost always presented 
 very grave inconveniences, which have induced the 
 more civilized States to sell the greater part of the 
 domain. 
 
 It is plain, if the matter be considered in its legal 
 and in its political aspect, that the possession of a 
 large fiscal domain may produce a conflict of inter- 
 ests between the public authority and the citizens, 
 because the duty of the equal protection of every 
 
ORIGINAL PUBLIC INCOME. 31 
 
 order of persons and property is often forgotten, 
 and through the system of privilege, private prop- 
 erty and private industry are injured for the bene- 
 fit of the exchequer. 
 
 Besides this the administration of the fiscal do- 
 main increases the number of public functionaries, 
 heightens the influence of the executive power, 
 and diverts a number of persons from the careers 
 of private life. Nor should we omit to mention the 
 danger contained in the fact that domanial wealth 
 furnishes powerful means of financial resistance to 
 the popular will expressed in the political delibera- 
 tive assemblies. 
 
 Finally, in case of war the public estate is more 
 easily exposed to devastation and confiscation by 
 the enemy, which produce not only the most serious 
 injuries, but also numerous legal conflicts with the 
 buyers of confiscated property. 
 
 In the economic aspect the subtraction of a con- 
 siderable quantity of property from private owner- 
 ship constitutes a serious obstacle to industrial 
 progress, and compels the citizens to much greater 
 sacrifices than under a system of taxation would 
 suffice to obtain greater revenues for the treasury. 
 
 In fact, when we consider the lack of individual 
 interest in the public functionaries, the complica- 
 tions, the slowness, the expenses of book-keeping 
 and of supervision, no doubt indispensable, but 
 frequently inadequate when we consider the im- 
 
32 ORIGINAL PUBLIC INCOME. 
 
 perfection of the entire bureaucratic management, 
 which is always adverse to reforms, and by its own 
 constitution prevented from speedily effecting those 
 small savings and profiting by those favorable oc- 
 casions which so materially contribute to the in- 
 crease of returns, it is not to be wondered at if the 
 revenues of the fiscal domain prove small, or if at 
 times they disappear entirely and are swallowed up 
 by expenses. But the capital obtained from their 
 sale, the amount of which will bear due relation to 
 the greater revenue which private industry could 
 derive therefrom, may be applied to a much more 
 productive employment, as, for example, when used 
 for the partial extinction of the public debt, the in- 
 terest of which, often very burdensome, stands in 
 marked contrast to the smallness of the income 
 arising from the domain. 
 
 Hence the sale of the fiscal domain is, in general, 
 to be recommended. 
 
 It may, however, produce the worse results if it 
 is not made with suitable precautions. It is neces- 
 sary to take heed of, 
 
 ist. The choice of what is to be sold, and of the 
 regulation of the sale itself, in order that the sud- 
 den offer of a great quantity, especially of real prop- 
 erty, may not result in loss to the exchequer 
 (which would receive a lower price) or to private 
 individuals, whose property might be lowered in 
 value. 
 
ORIGINAL PUBLIC INCOME. 33 
 
 2d. The territorial extent of the property sold, 
 which should be divided up in such manner as to 
 invite the competition of buyers, due regard being 
 paid to the systems of cultivation in different 
 countries. 
 
 3d. The time of the sale, which ought to take 
 place in periods of political tranquillity and of 
 economic prosperity, in order to obtain good prices 
 and to avoid the irreparable loss of a sale at an im- 
 proper price. 
 
 4th. The persons to whom sale is made, in order 
 to avoid as far as possible the evils of speculation. 
 
 5th. The guarantee offered for the punctual ful- 
 fillment of the contract. 
 
 6th. And above all, the use made of the proceeds 
 of the sale, which must always be regarded as 
 capital, to be employed either in the extinction of 
 old debts, or to meet extraordinary expenses, for 
 which it would have been necessary to incur fresh 
 debts. 
 
 The desirability of making sale of the fiscal 
 domain, which some advocate unconditionally, ad- 
 mits, however, of a few exceptions. It may, for 
 instance, be important to retain the possession of 
 certain public forests in mountainous localities or 
 on the banks of certain rivers and "mountain 
 streams, from motives of public health, and for the 
 protection of private property. Also, from yet 
 different reasons, one may advocate the manufact- 
 
34 ORIGINAL PUBLIC INCOME. 
 
 ure at the expense of the treasury of objects neces- 
 sary to the civil and military administration, and 
 also, in countries of a less advanced civilization, the 
 maintenance of certain lands and factories for pur- 
 poses of instruction (model farms, manufactories 
 of tapestry, etc.). 
 
PART V. 
 DERIVATIVE PUBLIC INCOME. 
 
 DERIVATIVE public income consists of obligatory 
 contributions produced by taxation, those sums 
 which the public authority levies on the wealth 
 of private individuals in return for the ser- 
 vices rendered to them by the administrative in- 
 stitutions of the State, province or municipality. 
 
 Such contributions are distinguished from the 
 fiscal domain, and from its products, both by their 
 origin and their effects on the national wealth, and 
 also by their character as obligatory loans, with- 
 drawn entirely or partially from the action of com- 
 petition. 
 
 Taxes are either special or general ; the former 
 being more closely designated as fees, costs and 
 charges, the latter as taxes merely, or as imposts. 
 To the derivative public income belong also fines, 
 pecuniary penalties, and in certain respects also 
 escheats, or unappropriated goods. But by reason 
 of the relatively small importance of the latter in 
 modern financial systems, it may suffice merely to 
 mention them here. 
 
36 DERIVATIVE PUBLIC INCOME. 
 
 CHAPTER I. 
 
 IDEA, REASON, AND FORM OF FEES, COSTS, AND 
 CHARGES. 
 
 IN scientific language, fees, costs, and charges are 
 the remuneration for special public services which 
 are rendered to private individuals at their request. 
 
 They differ, therefore, from ordinary taxes ; 
 
 ist. By their object, because the former refer to 
 special services that have been voluntarily sought, 
 and the latter to general services that are compul- 
 sorily offered. 
 
 2d. By the criterion of the assessment, which, as 
 regards fees, etc., is the amount of expense in- 
 curred, and, as regards taxes, the amount of the 
 property of the tax-payers. 
 
 As certain institutions that are administered by 
 the public authority, either because essentially per- 
 taining to its competency (as the maintenance of 
 external and internal security, etc.), or because it 
 can manage them better than private industry 
 (mint, post-office, telegraph, etc.), yield two kinds 
 of advantages, the one general and indeterminate 
 to the whole body of citizens, the other special to 
 certain classes and persons, it is conformable to 
 reason that the necessary expenses for the main- 
 tenance of such institutions should be defrayed 
 partly by general taxes and partly by special taxes, 
 which means^ in other words, that these expenses 
 
DERIVATIVE PUBLIC INCOME. 37 
 
 should be defrayed in quotas proportioned to the 
 wealth of the individual contributors, and to the 
 greater expense caused by a portion of them. If- 
 such expenses were defrayed solely from the pro- 
 ceeds of general taxes, or solely from those of spe- 
 cial taxes, there would result privileges favorable 
 to some and injurious to others. 
 
 In order that any fee be legitimate, the ser- 
 vice rendered must be a real one, and its 
 amount should not exceed certain limits, fixed 
 precisely by the expense occasioned by the one 
 who pays it.* 
 
 Such is the criterion for the determination of 
 fees in which no heed is taken of the economic 
 condition of the contributors, except in the two 
 following cases : 
 
 ist. Of absolute poverty, in which case exemp- 
 tion is allowed from certain fees, costs and charges 
 to be paid for services which are certainly special, 
 
 * The State of Pennsylvania obtains net revenue of nearly $200,000 
 per year from the fees of court clerks, recorders of deeds, and registers of 
 wills. All these officers are required to report their fees to the Auditor 
 General. When the amount exceeds $2,000 per annum, they are required to 
 pay one-half of the surplus to the State treasury, retaining 3 per cent, of the 
 sums so paid. Notaries public pay 5 per cent, of their fees, and are charged 
 $25 each for their commissions. This method of obtaining a net revenue is 
 incidental, not direct, and is quite unobjectionable. As it is never possible 
 to adjust the fees precisely to the cost of the service rendered, or the ex- 
 pense occasioned, it is fitting that the excess received should inure to the 
 benefit of the State. But the officers charged with the collection of the fees 
 must have a sufficient pecuniary inducement to collect them in full and pay 
 over the State's portion. ED. 
 
38 DERIVATIVE PUBLIC INCOME. 
 
 yet which should always be rendered in the interest 
 of justice (court costs). 
 
 2d. In case of straitened means combined with 
 signal merit, where exemption is allowed from cer- 
 tain charges for particular services of mere utility 
 (as school taxes). 
 
 In the first case it is equivalent to an alms ; in 
 the second, to a prize awarded by the wealthier 
 tax-payers to the poorer ones. 
 
 If we wish to distinguish special charges in their 
 relation to the several administrative services that 
 may lay claim to special remuneration, we obtain 
 a classification analogous to that already given in 
 the case of public expenditures. 
 
 We cite from the great variety of special taxes 
 the following merely by way of example : 
 
 1. Public security. 
 
 (a) External (charges for exemption from 
 military service, for passports, consular fees, 
 etc.) ; 
 
 (ft) Internal: ist. Repressive justice (court 
 costs and official fees, etc.). 2d. Preventive 
 justice (permits for hunting, carrying arms, 
 etc.). 
 
 2. Public prosperity. 
 
 (a) Intellectual and moral (school tax, 
 charges for dispensations from observance 
 of strict conditions with reference to mar- 
 
DERIVATIVE PUBLIC INCOME. 39 
 
 riage, for naturalization, decorations, hon- 
 ors,* etc.) ; 
 
 (jf) Material (charges on coinage, on weights 
 and measures, for stamping precious metals, 
 on railway service, posts and telegraphs,etc.). 
 
 CHAPTER II. 
 
 CHARGES ARISING IN MATTERS OF JUDICIAL COGNI- 
 ZANCE. 
 
 THOSE charges which require special mention 
 may be divided into court costs and fees for certifi- 
 cation, registration and copies of papers. 
 
 SECTION i. Court costs. 
 
 Court costs are charges which are paid in return 
 for certain special services rendered by the State 
 on the occasion of certain acts that are completed 
 in the civil tribunals. 
 
 These concern lawsuits or litigious civil juris- 
 diction. 
 
 Their principal justification consists in the par- 
 ticular advantage which these judicial proceedings 
 offer to certain persons, who ought not to be al- 
 lowed to enjoy them at the expense of the mass of 
 
 * In nearly every country of Europe there is a tax on the orders or 
 decorations bestowed by the sovereign, and on any rise in the official 
 hierarchy, which gives a distinct title. So also on patents of nobility. 
 
4 DERIVATIVE PUBLIC INCOME. 
 
 tax-payers. Another reason, but subordinate and 
 of a political character, is the need of putting some 
 restraint on litigation. 
 
 Court costs, however, should not exceed certain 
 limits, because otherwise : 
 
 1. They would become prohibitive or would 
 greatly restrict the usefulness of judicial institutions, 
 to the injury especially of the poorer classes. 
 
 2. They would diminish the very great and uni- 
 versal benefit which we derive from a proper ad- 
 ministration of justice independently of special 
 judicial aid. 
 
 Court costs have to be paid by the losing party 
 in a suit in due proportion to the expenses which 
 he may have caused. 
 
 In the absence of any established principle for 
 fixing charges of this kind, rules may be framed 
 indirectly, by reference 
 
 1. To the rank and dignity of the magistrates 
 who hear and decide ; 
 
 2. To the importance of their judgments ; 
 
 3. To the kind of questions brought before 
 them. 
 
 The objections made by many to court fees are 
 either founded on the false premise that the exist- 
 ence of the civil tribunals is not more useful to the 
 litigants than to other citizens, and that taxes are 
 levied on the oppressed poor and not on the rich 
 oppressors; or are only valid against arbitrary, 
 
DERIVATIVE PUBLIC INCOME. 41 
 
 excessive and badly distributed costs that is, 
 against the abuse, and not the use, of fees or taxes 
 of this kind. 
 
 SEC. 2. Fees for certification and registration. 
 
 These fees are paid in return for special services 
 rendered by the State through the compilation, cer- 
 tification, preservation and multiplication of certain 
 documents by means of which a right is established, 
 insured, changed, transferred or extinguished. 
 
 In fact, both the civil judicial authority (in its 
 non-litigious capacity) and the financial authority, 
 as well as the other administrative authorities, often 
 co-operate toward enhancing the value of such acts, 
 by investing them with certain solemn forms, by as- 
 certaining their date, by inscribing and transcrib- 
 ing them in public registers, and making authentic 
 copies of them. 
 
 But in this category taxes on business transac- 
 tions or contracts are not to be included, and not 
 even registry and stamp taxes, because they happen 
 to be collected in the same method, which may 
 be identical in form both for official fees and for 
 imposts on the transfer of property. 
 
 Official fees are essentially different from charges 
 on transfers : 
 
 ist. By the object, which in the one case is the 
 document and in the other is the property trans- 
 ferred. 
 
 2d. By the purpose, because the fees aim at ob- 
 
42 DERIVATIVE PUBLIC INCOME. 
 
 taining a reimbursement of expense, while imposts 
 aim at obtaining a net revenue. 
 
 3d. By the criterion of the assessment, which in 
 one case is the amount of expense caused, but in 
 the other is inferred from the nature of the trans- 
 fer, from the value of the property transferred, and 
 from the personal relations between those who 
 make the transfer and those who receive it. 
 
 In the case of charges for official documents the 
 effort is also made to ascertain the expenses caused 
 by individuals by having recourse to certain in- 
 direct data inferred from the nature and impor- 
 tance of the transactions. 
 
 The distinction often met with in practice be- 
 tween fixed fees and fees proportioned to the 
 values involved in the document is not a sufficient 
 argument to justify the assertion that the fee has 
 been converted into an impost, because within cer- 
 tain limits the proportion may be an indirect and ap- 
 proximate criterion of the amount of expense incur- 
 red for the special advantage of certain tax-payers. 
 
 SEC. 3. Collection of charges arising from mat- 
 ters within judicial cognizance. 
 
 Both court costs and charges for official docu- 
 ments may be collected according to various sys- 
 tems, which are either peculiar to them or are 
 common to a few indirect taxes on transfers and on 
 consumption. 
 
 The distinction is to be noted between the two 
 
DERIVATIVE PUBLIC INCOME. 43 
 
 systems of direct collection (made by public 
 officers) and of indirect collection (performed 
 through a system of stamps). 
 
 The direct collection is made : 
 
 ist. By the obsolete, not very creditable and 
 even dangerous method of so-called perquisites, or 
 payments made by the parties concerned to the 
 public officials, and accepted by the latter as a 
 stipend or an addition to their salary.* 
 
 2d. By means of the so-called office charges 
 (diritti di cancellaria), belonging to the public 
 treasury, but collected by public officers, either 
 salaried or remunerated with a share in the pro- 
 ceeds, who simply receive the document or com- 
 pile it or make a registration of it. 
 
 The indirect collection, which is made by means 
 of a seal or stamp, which in itself is not a tax, 
 
 * This discreditable and dangerous method of collecting fees and charges 
 is by no means obsolete in the United States. Having been adopted at a 
 time when the fees, by reason of the smallness of the business transacted, 
 amounted to no more than a fair compensation for the officers' time and 
 labor, the compensation increased with the growth of States and cities till 
 in some cases it amounted to a princely revenue. Then it became a source 
 of political corruption. Offices of a merely clerical and perfunctory sort 
 have become prizes of such magnitude that political parties and "bosses" 
 have quartered their favorites and henchmen upon the nominal holder of 
 the offices as the price of nomination and election, and have levied " assess- 
 ments " upon them corresponding to the aggregate amount of the fees. 
 Every attempt to reduce the fees or to turn the excess, over and above a 
 fair compensation, into the public treasury, is fiercely opposed by the poli- 
 ticians who divide the "spoils," but the tendency of opinion and of leg- 
 islation is now strongly in favor of the system prevailing in Pennsylvania, 
 mentioned in the note to page 37. ED. 
 
44 DERIVATIVE PUBLIC INCOME. 
 
 offers the advantage that the contributor is bound 
 to co-operate at his own risk and peril in the col- 
 lection of the fees, that the secrecy is better main- 
 tained, and that the collection is rendered more 
 speedy, less costly and more consonant with the 
 dignity of the public functionaries. 
 
 The forms in which this collection is made differ 
 as follows : 
 
 1. The stamp or seal may be affixed by a public 
 officer upon papers prepared beforehand, in which 
 case we return to the system of direct collection. 
 
 2. Stamped paper prepared by the State is 
 sold at a profit by officers expressly appointed, 
 and has to be used for the compilation of certain 
 documents. 
 
 3. Separate stamps are manufactured and sold 
 for account of the State that have to be affixed 
 to instruments drawn upon unstamped paper. 
 
 The adoption of this latter system, which is the 
 most recent, and also the most convenient as well 
 as least expensive, is daily gaining ground, al- 
 though many precautions are required to prevent 
 frauds, consisting in counterfeiting the stamps, de- 
 lay in affixing them, and in affixing the same 
 stamp successively to different instruments. 
 
DERIVATIVE PUBLIC INCOME. 45 
 
 CHAPTER III. 
 
 CHARGES ON THE MEANS OF EXCHANGE AND 
 OF TRANSPORT. 
 
 AMONG the charges imposed for administrative 
 services which relat'e to public prosperity, the first 
 place belongs to those on the means of exchange 
 and transport, which serve to defray the expense 
 required for the maintenance of certain economic 
 institutions, which for reasons of public utility re- 
 main in the hands of the State. These comprise 
 charges : 
 
 1. On coinage. 
 
 2. On the verification of weights and measures 
 and on the marking of the precious metals. 
 
 3. On railroads, posts and telegraphs. 
 SECTION i. On coinage. 
 
 The manufacture of coins, for which the State 
 provides either directly by government manage- 
 ment or indirectly by contract, forms a legitimate 
 title for the exaction of charges to reimburse a 
 part of the corresponding expense. 
 
 Gratuitous coinage, which would seem to real- 
 ize the idea of what money should be, by creating 
 identity between the value of the metal and the 
 value of the coin, would be somewhat dangerous 
 in practice, because it would continually promote 
 
46 DERIVATIVE PUBLIC INCOME. 
 
 the melting and exportation of new coins, and 
 thus encourage the speculations of goldsmiths, 
 money-changers and bankers to the injury of the 
 public, who would receive only worn and light 
 coin. 
 
 On the other hand, to extract from the coins a 
 net revenue over and above the reimbursement of 
 the expense of coinage, which was once practiced 
 by systematic alteration of the coins (in weight, 
 fineness and value), must be considered the worst 
 of all taxes, because it nominally raises prices, com- 
 promises the certainty of contracts, injures private 
 creditors who had made bargains in the old coin, 
 and finally ruins the treasury, for whose benefit the 
 impost was intended. 
 
 The best system is that in which the State is 
 satisfied with a partial reimbursement of the ex- 
 penses of the mint, and which may be effected : 
 
 1. By causing an equivalent of the expenses for 
 assaying and coining, to be paid by those who 
 bring metal to the mint to be converted into coin. 
 
 2. By turning to account the gain which it de- 
 rives from the minting of the subsidiary coins, to 
 which it will generally affix a nominal value higher 
 than their metallic value. 
 
 The expense caused by the withdrawal and re- 
 melting of worn coin has, on the other hand, to be 
 borne by the tax-payers (by means of imposts), be- 
 cause it is not in accord with equity that they 
 
i> U U I V 
 
 DERIVATIVE PUBLIC INCOME. 47 
 
 should be borne wholly by the person who may 
 have received them last. 
 
 SEC. 2. Charges on weights and measures, and 
 on marking. 
 
 The authority of the community should provide 
 for the establishment and maintenance of a system 
 of weights and measures which should be generally 
 obligatory, and should satisfy the conditions of in- 
 trinsic merit, of consistency within itself, of appli- 
 cation to the whole territory, and of invariability. 
 For this reason the same authority should be 
 charged with the task of the verification of weights 
 and measures, on which occasion there are also 
 levied certain taxes, originally paid by the manu- 
 facturers, but which are afterward periodically 
 levied on tradesmen. 
 
 It is only proper that these taxes should be paid 
 by those who have the direct benefit of the official 
 verification, and who, at all events, are able to re- 
 imburse themselves through the price of the mer- 
 chandise sold. 
 
 The trade in the precious metals (gold and sil- 
 ver) and in the objects manufactured from them 
 becomes sometimes the subject of a charge which 
 is collected by means of the application of a stamp 
 (obligatory or optional) impressed by a public of- 
 ficer who certifies to their weight and fineness. This 
 charge is also provided for by the manufacturers 
 and the tradesmen; but they obtain reimbursement 
 
48 DERIVATIVE PUBLIC INCOME. 
 
 from the buyers, who in this manner are fully 
 guaranteed in respect of the fine metal contained 
 in the articles, which they would not be able to 
 verify for themselves with equal ease and accu- 
 racy. 
 
 SEC. 3. Charges on railways, posts and tele- 
 graphs. 
 
 The ownership and operation of railways are by 
 the very nature of things, in fact if not by right, 
 almost wholly removed from the beneficial action 
 of competition. 
 
 Instead therefore of being branches of industry, 
 they are institutions of public utility, necessarily 
 subject to an effective control on the part of the 
 State, which in many countries assumes the prop- 
 erty of them, and in some even works them. 
 
 When the State works the railways, reason de- 
 mands that it should obtain the reimbursement of 
 the greater part, if not the whole, of the working 
 expenses and interest on the fixed and floating 
 capital invested, by means of charges which are to 
 be paid by those who avail themselves of the rail- 
 roads for the transportation of their persons and 
 goods, and so derive a special benefit from them. 
 
 But when, on the other hand, the operation of 
 the railroads is in the hands of companies under 
 State inspection and control, the State usually 
 levies an impost on the persons and things trans- 
 ported, either in express or slow trains, which im- 
 
DERIVATIVE PUBLIC INCOME. 49 
 
 post is anticipated by the companies, which obtain 
 their reimbursement by raising their rates in due 
 proportion. 
 
 For still stronger reasons the postal, and now 
 also the telegraph service (except the submarine) 
 are becoming almost everywhere concentrated in 
 the hands of the State, which, by means of charges 
 on the transmission of letters and dispatches, ob- 
 tains the total or partial reimbursement of the ex- 
 penses of plant and administration. 
 
 The system of postal and telegraph charges be- 
 comes every day more simple, uniform and eco- 
 nomical, a process promoted by frequent interna- 
 tional conferences and conventions. 
 
 Prepayment by postage-stamps, the notable dim- 
 inution and simplification of rates, the introduction 
 of postal and telegraphic money-orders, and the 
 more recent one of postal cards and postal packets, 
 are the most important features of reforms, which, 
 however, admit of still further development. 
 
 The postal and telegraph charges, in which re- 
 gard is had to weight (for letters) and to the num- 
 ber of words (for dispatches) are now more uni- 
 form, and not, as formerly, graduated according to 
 distances. The latter system was too complicated 
 and costly, as well as incompatible with equity, 
 since it has been ascertained that the element 
 of distance, imperfectly estimated according to 
 the plan of the so-called " postal and telegraphic 
 
 3 
 
$0 DERIVATIVE PUBLIC INCOME. 
 
 zones," has in reality but little relation to the cost, 
 which falls off considerably with the increase in 
 number of letters and telegrams, the latter effect 
 being in great measure due to the reforms above 
 mentioned. 
 
 CHAPTER IV. 
 
 THE IDEA, REASON AND RULES OF GENERAL 
 TAXATION. 
 
 A TAX is that part of the wealth of private indi- 
 viduals, which the authority of the State, province 
 or municipality appropriates in order to provide for 
 the public expenses incurred for the advantage of 
 the general body of tax-payers. 
 
 The reason of a tax is evident. In order to sat- 
 isfy certain collective wants, where it is quite im- 
 possible to decide what are the expenses caused by 
 individual citizens, and where the direct perform- 
 ance of personal services, which would prove to be 
 uncertain, inconsiderable and badly distributed, 
 would be of no use, there will be required a com- 
 mon fund, to establish which voluntary contribu- 
 tions would not be adequate. 
 
 To the right of the public authority to levy 
 taxes there corresponds the duty on the part of 
 private individuals of paying them. Hence we 
 
DERIVATIVE PUBLIC INCOME. 5 1 
 
 must condemn the tolerance with which certain 
 moralists encourage the selfish aversion which 
 some citizens entertain against payments of this 
 kind, extenuating the offences of those who de- 
 fraud the treasury ; as if such delinquencies were 
 less reprehensible or less injurious than those in 
 private life. 
 
 The science of finance furnishes a few juridical, 
 economic and political rules for the regulation of 
 imposts. 
 
 SECTION i. Juridical rules. 
 
 The tax must above all possess the requisites of 
 legality, of certainty, of legitimacy, of equality and 
 of morality. 
 
 In fiscal matters, as in others, juridical considera- 
 tions should prevail over economic and political 
 ones. As, however, the rigorous application of the 
 principle of justice meets very serious difficulties, 
 both in the selection and the valuation of taxable 
 objects, and by reason of the incidence and of the 
 repercussion of taxes, which cannot always be ex- 
 actly calculated, it follows that in practice we must 
 be satisfied with an approximation to equity. 
 
 A tax is legal when it has been decreed by com- 
 petent authority with all the solemnities of legisla- 
 tive enactment, and hence, in free States, with the 
 previous assent of the contributors, expressed 
 either directly by their votes or indirectly through 
 their representatives. 
 
52 DERIVATIVE PUBLIC INCOME. 
 
 It is certain, that is, not arbitrary, when the law 
 with precision and clearness determines its nature 
 (subject, object, extent), the means of determining 
 its distribution, the methods of collection, the fines 
 and penalties in cases of delinquency, the authori- 
 ties that are to decide in practical administration, 
 and ultimately the judicial remedies in case of com- 
 plaints from the tax-payers, etc. 
 
 It is legitimate when its proceeds are effectively 
 employed for the advantage of the whole body of 
 contributors, an equitable relation between the 
 sum total of the taxes and that of the public ex- 
 penses being thus attained. 
 
 The equality of the tax relates to the justice of 
 its apportionment among the contributors, and is 
 the fiscal application of the principle of equality of 
 the citizens before the law. The tax will be equal 
 not only in name but in fact, when it is at the same 
 time universal and rightly graduated. 
 
 The universality of the tax consists in the ex- 
 clusion of every privilege, real and personal, be- 
 cause it is not equitable that any person or corpora- 
 tion should enjoy a share in the benefits of political 
 society, and at the same time be exempt, wholly 
 or partially, from the corresponding burdens. The 
 exemption of the poor from certain taxes is a neces- 
 sity based on a fact, which resolves itself into a 
 special form of public chanty. 
 
 The graduation of taxes consists in a corre- 
 
DERIVATIVE PUBLIC INCOME. 53 
 
 spondence between the tax and the economic 
 condition of individual contributors. If the tax 
 should be uniform, notwithstanding the economic 
 inequalities between the citizens, it would not 
 only be unjust, but also impracticable, for, con- 
 sidering the smallness of the separate contri- 
 butions, which is necessarily implied by uniform 
 taxes, the revenue derived would be alto- 
 gether insufficient for the needs of modern civil 
 societies. 
 
 Admitting the justice of graduation, it will be 
 necessary to find an equitable and practical crite- 
 rion to carry it into effect. 
 
 The criterion of equivalence between the tax 
 and the services rendered individually to the con- 
 tributors is neither just nor possible, because the 
 value of these services cannot be determined even 
 approximately, and because such a system would 
 tend to oppress those who, through weakness, 
 ignorance or poverty, stand in greater need of the 
 protection of society, and accordingly derive greater 
 advantages from it. 
 
 Nor is it just or possible to set up the criterion 
 of equivalence between the tax imposed and the 
 expenses caused by the contributors individually, 
 or, in other words, the principle, which should gov- 
 ern in the case of fees, costs and charges, etc., be- 
 cause there are a great number of public services 
 concerning which it is impossible to decide what 
 
54 DERIVATIVE PUBLIC INCOME. 
 
 portion of the aggregate expense is caused by each 
 contributor. 
 
 And, finally, it is neither just nor possible to 
 treat the impost as a premium of insurance for 
 social protection, because the public authority does 
 not limit its action to the defence of property, but 
 extends to personal security also, and^to the promo- 
 tion of moral and intellectual well-being. Even in 
 respect of property, the social authority does not 
 assume any real guarantee, but only binds itself to 
 the protection of private property, and to the pun- 
 ishment of crimes committed against it. 
 
 We must also consider erroneous the theory of 
 those who, in order to avoid the defects of the 
 criteria of the value of services rendered, of the 
 expenses caused, and of the premium of insurance, 
 declare that the best way of applying these criteria 
 is to apportion the taxes according to the total 
 wealth of the contributors. It is erroneous simply 
 because the hypothesis is wrong which assumes 
 that in this manner services, expenses and pre- 
 mium would become exactly proportional to 
 wealth ; for this theory also leaves out of view the 
 fact that the action of the public authority is not 
 limited merely to property, and that in the matter 
 of insurance the premium must be proportioned 
 not only to the value of the goods, but also to the 
 kind of risks against which the property is to be 
 insured. 
 
DERIVATIVE PUBLIC INCOME. 55 
 
 In accord with the more equitable and prac- 
 ticable scheme of graduation the burden on the con- 
 tributors should be assessed in proportion to their 
 means, estimated, in the opinion of some, accord- 
 ing to their estates ; in the opinion of others, ac- 
 cording to their income. Yet, either of these 
 principles being admitted, the advocates of propor- 
 tional, and those of progressive or graduated taxa- 
 tion differ among themselves as to the methods of 
 actual application. 
 
 A tax is called proportional, when the relation 
 between one's property and the amount which he 
 pays is invariable for all contributors, so that the 
 individual quotas increase in perfect correspondence 
 with the increase of wealth. 
 
 On the other hand, a tax is called progressive 
 where its rate varies with the variation of the 
 wealth itselt, so that the quotas increase more 
 rapidly than the wealth increases. >\ 
 
 The adherents of progressive taxes, who in our 
 time are very numerous, and not all of them social- 
 ists, start from the idea that taxation should, above 
 all other considerations, perform a social function. 
 Taxation, they say, should prevent the accumula- 
 tion of wealth in few hands, or at least should 
 bring it about that the burden should press equally 
 upon the tax-payers; in other words, it should con- 
 sider what is left to the tax-payer and not merely 
 what is paid, and should bear upon what is super- 
 
5 6 DERI VA TIVE P UBLIC INCOME. 
 
 fluous rather than upon what is necessary. They 
 thereupon seek to prove that fiscal legislation fur- 
 nishes a great many instances of at least the partial 
 application of this system, as when a minimum is 
 fixed of property which is to be exempt from direct 
 imposts, and when rents are taxed progressively ac- 
 cording to rental value.* 
 
 * The progressive tax system has been in force in the city of Basle, Swit- 
 zerland, upwards of fifty years. Incomes derived from property pay on an 
 ascending scale, viz. : 
 
 $200 per year, about 2^ per cent. 
 400 " " 3 & " 
 
 600 " " 4 
 
 800 " " 4 " 
 
 1200 " " 5 
 
 and so on to $12,000 per year, when the tax is ten per cent. After this the 
 rate of increase is very slow. Incomes derived from earnings are also taxed 
 progressively at about one-half the rate of income from property. There 
 has been a gradual but steady increase in the progressive feature of taxation at 
 Basle, accompanied by further exemptions of the smaller incomes, until now 
 the returns show that 500 persons, in a total population of 60,000, pay 
 eighty per cent, of the taxes. The democracy of Basle are apparently mak- 
 ing experiments to see how far the progressive principle can be carried 
 without causing a disastrous emigration of capital. It is certain that capital 
 is not now increasing in Basle. There was a slight decrease from 1884 to 
 1887, but whether this was due to temporary or to permanent causes is 
 doubtful. See London Economist, July 9, 1887. 
 
 Progressive taxation has been adopted recently in the Canton Vaud, 
 Switzerland, differing in some details from the system in force at Basle, 
 exemptions being allowed in proportion to the number of children in the 
 family. There has been some emigration of capital from Lausanne in con- 
 sequence of the progressive tax, but whether it amounts to a serious loss it 
 is too early yet to determine. 
 
 The advocates of the progressive tax have scarcely been heard in the 
 United States, all the talent that would naturally be applied to it being ab- 
 sorbed in the effort to enforce the proportional tax by causing personal prop- 
 erty to bear its due share of the public burdens. ED. 
 
DERIVATIVE PUBLIC INCOME. 
 
 57 
 
 The advocates of proportional taxation, on the 
 other hand, deny the justice and expediency of 
 any act of the treasury which aims directly at 
 changing the distribution of wealth. They object 
 to the fixing of a progressive scale as being arbi- 
 trary, since its increase, in order not to confiscate 
 the entire fortune of the greater contributors, must 
 necessarily stop short somewhere and precisely at 
 the point where the rigor of the principle would 
 seem to require greater severity in respect of a 
 superfluity of property which has become colossal. 
 They moreover observe that progressive imposts 
 would cause capital to emigrate or to disappear ; 
 that it would discourage saving to the injury of the 
 poorer classes, and that it would be the occasion 
 of many frauds (fictitious sales, divisions and trans- 
 fers), all seeking to elude its rigor. They conclude 
 finally that the alleged partial application of pro- 
 gressive taxes is really a favorable testimony to 
 the system of proportional taxation. And in fact 
 the exemption granted from direct taxes accorded 
 to persons of small means is a compensation for the 
 greater burden to which they are subjected through 
 the faulty distribution of the indirect imposts on 
 consumption ; while, on the other hand, the pro- 
 gressive taxation of rental value is made on the 
 hypothesis that this is the best method of taxing 
 proportionally the wealth of the contributors, 
 which is estimated by its outward indication in 
 
58 DERIVATIVE PUBLIC INCOME. 
 
 order to avoid the serious difficulties of direct 
 investigation. 
 
 The morality of an impost must not be under- 
 stood in the sense that the taxation of certain arti- 
 cles aims at preventing certain injurious or vicious 
 acts, because in order to reach such a result the im- 
 post would have to be made prohibitory and hence 
 would be devoid of fiscal effect ; but merely in the 
 sense that the impost itself must not be immoral : 
 
 ist. In its object, as if it distinctly taxed the 
 gains of vice, which should neither enjoy exemp- 
 tion, nor be subjected to any special imposts. 
 
 2d. In its effects, as if it should incite to gambling, 
 divert attention from labor, and from habits of 
 saving, or encourage idleness, ignorance and super- 
 stition. 
 
 3d. In its application, as when the impost, by its 
 excessive amount or by uncertain, onerous or ex- 
 ceedingly lax methods of collection, offers an in- 
 centive to smuggling, thereby sacrificing the honest 
 to the dishonest tax-payer. 
 
 SEC. 2. Economic rules. 
 
 The principal economic rules of taxation are the 
 two following : 
 
 i st. It should, when possible, tax the income 
 only, whether national or individual, but spare the 
 estate itself. 
 
 2d. It should cause the least possible disturbance 
 of the natural development of industry. 
 
DERIVATIVE PUBLIC INCOME. 59 
 
 The former rule indicates the economic limit of 
 the impost, and points at its true source (the in- 
 come) ; for it is bound to protect and not to dimin- 
 ish the property of private individuals, in order 
 that the sources of the public receipts may not be 
 imperiled. 
 
 The rule, however, has no absolute character, 
 for in normal conditions the imposts must remain a 
 great deal below that extreme limit, while in ab- 
 normal cases the limit may be exceeded in order to 
 avoid greater evils. 
 
 This principle relative to the source was by some 
 applied to the subject matter, that is, to the basis 
 of the impost, the contention being advanced 
 that imposts should be regulated, not according to 
 property but according to income. This is not 
 true in an absolute sense, because the effects which 
 an impost produces on the property depend on the 
 fact and not on the quality of the impost. In fact 
 a light impost may leave the property intact even 
 when based upon property, while an onerous one 
 may diminish the property even when it is based 
 upon income. 
 
 The second rule enjoins such an arrangement of 
 the impost as shall cause the least possible disturb- 
 ance in the production, circulation, distribution and 
 consumption of wealth. By this it is not pretended 
 that all injurious effect from the impost can be 
 guarded against, for, by reason of the objects 
 
60 DERIVATIVE PUBLIC INCOME. 
 
 which it taxes, the systems of collection and the 
 guarantees required always produce certain re- 
 straints, that are more or less opposed to the 
 liberty of the citizen. 
 
 SEC. 3. Political rules. 
 
 The political rules of taxation refer to its suffi- 
 ciency, to its flexibility and to the means of collec- 
 tion. 
 
 The tax should in the first place suffice for the 
 needs for which it is intended, and be capable of 
 adaptation to the essentially variable nature of the 
 public expenses. 
 
 The means of collection is the sum total of tin . 
 acts by which the amounts due by the contributors 
 pass from their hands into those of the fiscal 
 authority. The collections should be made by 
 competent persons, and according to convenient 
 methods. 
 
 In respect to the persons charged with the col- 
 lection we have to distinguish the two systems of 
 " regie " or direct government management and of 
 contract (farming of the revenue), as also their 
 combinations, among these especially the so-called 
 " co-interested regie," and the collection guaran- 
 teed or executed by the local communities even in 
 case of State imposts. 
 
 Public opinion in the past was decidedly adverse 
 to the contract system, and is not even now entirely 
 agreed as to its merits. 
 
DERIVATIVE PUBLIC INCOME. 6l 
 
 Against this system may be mentioned the ra- 
 pacity, arbitrary acts, scandalous fortunes and un- 
 popularity of the contractors ; whilst in favor of 
 the " regie " system it is maintained that it is nat- 
 urally lenient, not bent on private gain, and that 
 it moreover affords the advantage of showing 
 the cost of collection accurately in the balance 
 sheet. 
 
 In favor of the contract system, particular stress 
 is laid on the advantage of being able at given 
 times to obtain fixed sums, whilst the profit of the 
 contractors is compensated by the saving of ex- 
 penses growing out of the inducement of profit, 
 which is wanting in the agents of the treasury. It 
 is observed, moreover, that the abuses of the old 
 contract system, although greatly exaggerated, are 
 rather to be attributed to the inherent faults of 
 any tax system than to the particular methods of 
 collection ; for the contract system, when controlled 
 and regulated by wise laws, has even lately yielded 
 excellent results in the collection, notably, of di- 
 rect taxes, and it has frequently been opposed 
 merely from a desire of administrative centraliza- 
 tion. 
 
 In respect of methods, the collection should 
 cause the least possible inconvenience to either the 
 exchequer or the contributors ; in other words, it 
 should be prompt, safe, economical, and not vexa- 
 tious. 
 
62 DERIVATIVE PUBLIC INCOME. 
 
 The collection will be prompt, when it is so ar- 
 ranged that there are no arrearages left, and that 
 the sums collected are forthwith deposited in the 
 treasury. 
 
 The collection is safe when it is subject to a 
 system of accounting and to a board of control 
 possessing sufficient guarantees to prevent or at 
 least to promptly detect any mistakes or fraud. 
 
 The collection will be economical, when a mini- 
 mum of difference is reached between the amount 
 turned into the treasury and that obtained from 
 the contributors. 
 
 Finally, the collection will not be vexatious : 
 
 ist. When the convenience of tax-payers is con- 
 sulted in respect of time, place and form of pay- 
 ment. 
 
 2d. The process should be simplified as far as 
 possible, useless formalities should be avoided, as 
 well as any abuse of oaths, examinations, exhibition 
 of documents and other practices which cause loss 
 of time to the contributors, undue restrictions of 
 individual freedom, invasion of domiciles and of 
 business secrets. 
 
 CHAPTER V. 
 
 REPERCUSSION OF TAXES. 
 
 WE call the repercussion (riper cussione, rim- 
 balzo, traslazione) of a tax that process through 
 
DERIVATIVE PUBLIC INCOME. 63 
 
 which certain persons affected by the tax succeed, 
 by proportionally increasing the price of their 
 goods or of their services, in getting reimbursed 
 by other persons, who are therefore the real tax- 
 payers. 
 
 Such a shifting, which is difficult to be deter- 
 mined exactly in individual cases, is variously 
 judged by theoretical writers. Some deny it, or 
 consider it vague and unimportant ; others (pessi- 
 mists) believe "it to be an unavoidable disturbing 
 element in every financial system ; still others 
 (optimists) insist that it is beneficent, and repairs 
 the inevitable inequality in the incidence of taxa- 
 tion. 
 
 We must not confound that repercussion which 
 has been foreseen and desired by the law-making 
 body, and which allows the adoption of more con- 
 venient methods of collection (e. g., in certain im- 
 posts on consumption), with the shifting of a tax 
 to persons whom the treasury wishes to spare. 
 In this last case justice in the distribution of taxes 
 is really impeded. 
 
 A good system of taxation should take care, as 
 far as possible, that there should be only that 
 repercussion that is desired and intended, and no 
 other. For repercussion is often very hurtful, be- 
 cause it frequently is effected by concealed means 
 {e. g., by deteriorating or adulterating the goods 
 sold). 
 
64 DERIVATIVE PUBLIC INCOME. 
 
 The displacement of the economic consequences 
 of a tax by means of an improvement in the system 
 of production, which reduces its expenses, is far 
 different from repercussion, and is always benefi- 
 cent in its effects.* 
 
 CHAPTER VI. 
 
 CLASSIFICATION OF TAXES. 
 
 TAXES may be divided into classes according to 
 different criteria, some of which are theoretically 
 and practically important. 
 
 In respect of the kind of property that the tax 
 to be paid consists of we have to distinguish : 
 
 i st. Imposts in kind (provisions, merchandise, 
 services), which once were the rule, but now are 
 an exception, and to be avoided as far as pos- 
 sible ; 
 
 2d. Pecuniary imposts (in coin, money), which 
 were once the exception, but are now the rule. 
 
 In respect of the rules of assessment, we have 
 
 * The question of shifting of taxation is not always sufficiently considered 
 by law-makers, as it frequently enables the manufacturer to make a higher 
 profit. For example, the tax on matches in the United States and England 
 caused each box of matches to be sold at a higher price than the mere addi- 
 tion of the tax would have caused, because the tax was less than the unit of 
 the currency. In France it resulted in a very great deterioration of quality. 
 Similarly with the tax on railway journeys and railway tickets. 
 
DERIVATIVE PUBLIC INCOME. 65 
 
 the distinction, already alluded to, of uniform im- 
 posts and of graduated imposts, whether graduated 
 proportionally or progressively. 
 
 In respect of the permanent or transitory char- 
 acter of the imposts, we have to distinguish : 
 
 ist. The ordinary imposts which form an in- 
 tegral part of the financial system, and are con- 
 stantly repeated in every fiscal period ; 
 
 2d. Extraordinary imposts that are levied to 
 meet exceptional wants (as, for instance, in war), 
 and which cease with their disappearance. 
 
 In respect to the nature of the property sub- 
 jected to taxation, we have the well-known distinc- 
 tion between direct and indirect imposts ; a dis- 
 tinction, however, which is variously understood 
 both in science and in practice. 
 
 Some, in fact, call those imposts direct which, 
 either effectively or according to the intent of the 
 legislator, are a charge upon the person who pays 
 them ; and indirect those that are provisionally paid 
 into the treasury by certain persons, who secure 
 the reimbursement of them from others, that is, 
 from the real contributors. 
 
 Others again call those imposts direct that are 
 founded on essential and permanent relations be- 
 tween the contributors and the treasury, which 
 provides for their collection at fixed times by 
 means of a roll of names ; and those indirect that 
 are founded on relations merely accidental and 
 
66 DERIVATIVE PUBLIC INCOME. 
 
 temporary, and which, therefore, are usually col- 
 lected by means of tariffs. 
 
 Others, finally, and, as it seems, with more rea- 
 son, call those imposts direct that are levied on 
 wealth in its immediate manifestations (persons, 
 income, estate) ; and indirect those that are levied 
 on the secondary manifestations of the wealth of 
 the contributors, such as transfers and consump- 
 tion. 
 
 In respect to the manner in which the sums to 
 be paid are determined, especially in the depart- 
 ment of direct imposts, are to be distinguished : 
 
 ist. Imposts of apportionment or quota, where 
 the public authority, having first fixed the sum 
 which it intends to exact, distributes it, or causes it 
 to be distributed, among the various subdivisions 
 of the territory (quotas for the district, the prov- 
 ince, the municipality, etc.), and finally among the 
 single contributors, without fixing the individual 
 quotas in advance ; 
 
 2d. Imposts of fixed assessment, in which the 
 public authority without more ado fixes the amount 
 to be paid by each individual subject to taxation, 
 without determining in advance the sum to be paid 
 in the aggregate. 
 
 Where there happens to be available an exact 
 list of property the difference between the system 
 of apportionment and that of assessment is rather 
 a matter of form than of substance. 
 
DERIVATIVE PUBLIC INCOME. 67 
 
 The system of apportionment answers the in- 
 terests of the exchequer better, because it assures 
 a fixed return ; that of assessment seems in gen- 
 eral ^nore conformable to justice, although it opens 
 a wider door to frauds. 
 
 Direct imposts are divided into : 
 
 ist. Real (objective, impersonal), when they are 
 levied on property, without regard to the personal 
 condition of the owner, and hence, without taking 
 his debts into account. 
 
 2d. Personal (subjective), when they are levied 
 on persons : 
 
 (a) As such (poll tax). 
 
 (<$) Or with reference to their economic condi- 
 tion, as a basis for the calculation : 
 
 (aa) In respect of income, or, 
 
 (6$) Of property, or, as some less correctly put 
 it, of capital. 
 
 In respect of the mode of ascertaining the prop- 
 erty, we distinguish : 
 
 ist. The rigorous or exact systems, which re- 
 quire a precise determination of the value of the 
 thing subject to taxation, which may be made, 
 
 (a) By the payer (declarations). 
 
 (b) By the fiscal agent (official appraisements), 
 (r) With the co-operation of both (verified dec- 
 larations). 
 
 2d. The approximative systems, that are satis- 
 fied with simple indications, or legal presumptions, 
 
68 DERIVATIVE PUBLIC INCOME. 
 
 concerning the value of the objects subject to tax- 
 ation. 
 
 In the matter of direct personal imposts on in- 
 come, we may inquire into : 
 
 i st. The actual income of the last fiscal period 
 (for instance, during a year). 
 
 2d. The average income of a short definite 
 period, the variations being thus more or less com- 
 pensated (for instance, the average income of five 
 or three years). 
 
 Direct objective taxes, and among the personal 
 taxes those on income and on property, may be 
 general or special, that is, relating to all, or only 
 to a few classes of income and of property. 
 
 In the following chapters we shall inquire into : 
 
 ist. Direct objective imposts on the produce of 
 real property ; 
 
 2d. Direct personal imposts on income from 
 movable property ; 
 
 3d. Direct imposts on transfers of property ; 
 
 4th. Indirect imposts on consumption ; 
 
 5th. Direct personal imposts on income and on 
 property in general. 
 
DERIVATIVE PUBLIC INCOME. 69 
 
 CHAPTER VII. 
 
 OBJECTIVE IMPOSTS ON THE PRODUCE OF REAL 
 PROPERTY. 
 
 THE impost on the produce of real property 
 (called also predial, land and territorial Tax) was 
 at one time the most important, and at times the 
 only one, among direct imposts, and still retains 
 to-day an important place in systems of taxation. 
 It is subdivided into the two imposts, on the land 
 and the buildings, which generally are regulated by 
 somewhat different rules. 
 
 SECTION i. Imposts on the produce of land. 
 
 The land impost is levied on the gross or net 
 produce of cultivated ground of every kind. 
 
 In order to determine well the subject of this 
 impost, we must know its nature (quality) and 
 amount (measure). 
 
 If we consider the nature of agricultural produce, 
 it comprises : 
 
 ist. The rent, in the technical sense of political 
 economy, that is, what the land yields by itself ; 
 
 2d. The product of the capital invested in the 
 land, that is : 
 
 (a) Of the capital permanently invested in the 
 land for improvements of every kind ; 
 
JO DERIVATIVE PUBLIC INCOME. 
 
 (K) Of the working capital which serves for the 
 cultivation, without being inseparably connected 
 with the land (machines, implements, tools, pro- 
 visions, etc.). 
 
 3d. The product of the agricultural labor (of 
 the farmer and his hired hands) as such. 
 
 By summing up the rent and the product of the 
 capital expended in improvements we obtain the 
 so-called proprietary revenue ; by summing up the 
 produce of the active capital and that of agricul- 
 tural labor, after deducting the wages of the labor- 
 ers, we obtain the produce of the enterprise, that 
 is, the agricultural profit. 
 
 In some systems, especially in those founded on 
 lists of real property (cadaster) the tax on the lands 
 is only levied on the proprietary revenue, whilst 
 the agricultural profit either remains exempt from 
 direct imposts, or is subject to personal imposts on 
 the income of movable property. 
 
 If we consider the measure of the produce of 
 the lands^ the imposts may be levied on either the 
 gross or the net produce. The former method is the 
 more simple, but unjust, and has now been aban- 
 doned, because it overlooks differences of fertility 
 and of tillage. By the second method we do not 
 inquire into the actual produce of the year, but 
 rather into the average produce of a long period 
 (for instance, of a. decade), and, more frequently 
 still, the usual produce of land cultivated with 
 
DERIVATIVE PUBLIC INCOME. /I 
 
 ordinary diligence according to the systems of the 
 country ; the variations are neglected, both as re- 
 gards the quantity of the harvest and the price 
 of the crop, and the debts with which the property 
 is incumbered are subtracted. 
 
 For the ascertainment of the amount of produce 
 subject to impost, there are three systems, viz., es- 
 timates, lists and declarations. 
 
 The system of estimates is founded on the 
 datum of an imperfect measurement of the land 
 combined with inferences drawn from the amount 
 of capital employed (plows, animals, seeds,, etc.) ; 
 it is accordingly inexact and exceedingly un- 
 just ; in fact, it became entirely unbearable with 
 the increase of the impost, and by degrees was 
 changed into the system of descriptions and of 
 summary appraisements, which serve as a transi- 
 tion to the more perfect method of cadaster (list, 
 census). 
 
 The cadaster (by regular survey of parcels) 
 takes as a basis of the impost the exact topo- 
 graphical description of the property, inquires 
 concerning the respective proprietors, and makes 
 a careful estimate of the produce of all the sepa- 
 rate pieces of land. 
 
 In some countries the cadaster, besides its fiscal 
 and statistical purpose, performs also the juridical 
 service of a basis for the ascertainment and trans- 
 mission of real property. 
 
72 DERIVATIVE PUBLIC INCOME. 
 
 The operations of the cadaster are technical and 
 economic. 
 
 The technical operations comprise : 
 
 i st. The measurement of the ground, based on 
 the geodetical survey of the territory in general, 
 or, rather, of the single taxable district. 
 
 2d. The topographical maps (plots), which are 
 the graphic exposition of the results of the meas- 
 urement, and which describe the grounds in their 
 several parcels or plots, distinguished according to 
 ownership, collocation, and tillage. 
 
 3d. The delineation of the boundaries and the 
 ascertainment of ownership. 
 
 The economic operations (estimates) consist in 
 the pecuniary valuation of the taxable product. 
 In order to avoid the difficulty of individual esti- 
 mates of the single plots, this is executed accord- 
 ing to a system of classification ; whence, having 
 made the correct estimate of the average produce 
 of a few specimen plots in every census district, 
 and having compiled the relative scale of the 
 prices of crops, the other plots are divided into 
 classes, keeping in view the different kinds of cul- 
 tivation and degrees of fertility. 
 
 The estimates are thereupon completed : 
 
 (a) According to the indirect or approximative 
 method, which is based either on the purchase 
 price of the landed property (combined with the 
 datum of the normal rate of interest), or on the 
 
DERIVATIVE PUBLIC INCOME. 73 
 
 customary rental value. These data, however, 
 are very often insufficient, constantly changing, 
 and not always exactly proportional to the prod- 
 uce. 
 
 (K) Or by the method which some regard as 
 rigorous and scientific, of direct inquiry into the 
 value of the property subject to impost, through es- 
 timates, made by experts, of the average or normal 
 produce. The first instance of this was furnished 
 by the famous Milanese census in the last century. 
 
 The cadaster with all its documents (maps, reg- 
 isters of property and owners) must be continued ; 
 that is, must be kept up to date according to every 
 change, whether in the persons or the property ; it 
 must also be corrected periodically, in order to 
 show modifications required by the introduction 
 of new elements, by the elimination of old ones, 
 and by the correction of material errors. The 
 basis of the estimate, however, must always be 
 maintained, except in the case of extraordinary re- 
 visions (perequations). But the adherents of the 
 so-called " consolidation of the land tax" raise very 
 grave doubts as to the justice and convenience of 
 these, because they maintain that in progress of 
 time the impost is converted into a rent charge 
 which is no burden to the owners who already 
 have discounted it in a capitalized form in the pur- 
 chase price of the property. 
 
 The system of cadaster, which in some countries 
 
 4 
 
74 DERIVATIVE PUBLIC INCOME. 
 
 was at one time unquestioned, has now strong 
 opponents. They complain of the slowness of the 
 operation ; the excessive expenses ; the inexactness 
 and inequalities caused by the decisions of the ex- 
 perts ; by the different periods in which the opera- 
 tion is performed, and by the uncertainty of the 
 classification ; finally, of the unjust privilege enjoyed 
 by certain owners of real property, the income 
 from which, being augmented by successive im- 
 provements, is subject to relatively trifling imposts. 
 They accordingly desire to substitute for the system 
 of cadaster that of declarations of the prop'rietors, 
 revised by appointed commissions of control, a 
 system which they regard as prompt and econom- 
 ical, having yielded satisfactory results in the 
 impost on buildings, and which, in accordance 
 with the requirements of justice, is levied on the 
 actual income, and not on the normal produce, 
 which is a mere abstraction. In this manner the 
 tax on the land would become a personal tax on 
 the income. 
 
 But the 7 system of declarations has likewise not 
 a few opponents who fear the bad faith of the con- 
 tributors, the difficulty of control and of applica- 
 tion, especially in countries where property is much 
 divided, where intellectual culture is slight, and 
 agricultural book-keeping imperfect. They main- 
 tain that the system of cadaster is a wise legacy 
 handed down to us by our sires, and if not abso- 
 
DERIVATIVE PUBLIC INCOME. 75 
 
 lutely perfect, at all events does not afford oppor- 
 tunity for arbitrary proceedings; that we are not 
 justified in abandoning this system, considering its 
 many advantages, other than the purely fiscal ones, 
 that well repay the expense it causes, and that 
 finally the revisions made at reasonable intervals 
 diminish its dangers, which are, in fact, unavoidable 
 in any system of taxation. 
 
 SEC. 2. Imposts on the rent of buildings. 
 
 The impost on buildings falls on the gross or net 
 revenue of all kinds of structures. 
 
 The direct impost on the rent of the buildings 
 must be distinguished from the indirect impost on 
 dwellings. The former is levied immediately on 
 the mere income from buildings ; but the latter falls 
 indirectly on any wealth inferred from the evidence 
 of the so-called rental value of the house, whether 
 inhabited by the owner or not. 
 
 Exemptions, total or permanent, are allowed for 
 buildings, which serve for any purposes of public 
 defence, of worship, of beneficence, and partial or 
 temporary exemptions to new structures. 
 
 If we consider the nature of the rent derived 
 from buildings, it comprises : 
 
 ist. That of the ground, perfectly analogous to 
 that of cultivated grounds, and which is extremely 
 variable. 
 
 2d. That derived from the construction (from 
 the building in a strict sense), to wit, the interest 
 
76 DERIVATIVE PUBLIC INCOME. 
 
 on the capital invested in the building an element, 
 as a rule, but slightly variable. 
 
 If we consider the measure of revenue derived 
 from buildings, the impost will fall on either the 
 gross or on the net revenue, which latter is ob- 
 tained by deducting from the gross receipts the ex- 
 penses of repair, insurance, and the yearly fund for 
 reconstruction. 
 
 In imposts on buildings, the various purposes for 
 which they serve are often kept in view. Hence 
 we should distinguish : 
 
 i st. Farm dwellings, cottages intended for the 
 use of laborers, for the housing of cattle, for the 
 storage and first manipulation of agricultural prod- 
 ucts. 
 
 2d. Town habitations in the more populous 
 centres. 
 
 3d. Manufactories, in the case of which we must 
 keep in view the large deductions required for re- 
 pairs, insurance, etc., etc. 
 
 Farm dwellings are usually subject to the land 
 tax (forming generally a part of the cadaster), be- 
 cause they are considered as intended for the pro- 
 duction of an income from cultivated land. 
 
 For the ascertainment of the taxable income we 
 may adopt as in the case of the land tax the three 
 systems of signs, official estimates and declarations. 
 
 The system of signs, although once common, is 
 very imperfect, because it infers the amount of the 
 
DERIVATIVE PUBLIC INCOME. 77 
 
 revenue from the uncertain criterion of the number 
 of hearths, or of rooms, or of openings (doors and 
 windows) toward the street. Even irrespective of 
 the inconveniences which, without any profit to 
 exchequer, the tax on doors and windows may pro- 
 duce, especially in the case of houses inhabited by 
 the poorer classes, it remains certain that the 
 aforesaid elements are anything but correctly pro- 
 portional to the income. 
 
 In the system of official estimates we may adopt 
 the approximative method, based on the data of 
 purchase price, of cost of construction, or better 
 still on that of the rent ; or the more rigorous 
 method of estimates by experts, simplified as in 
 the cadaster of landed property by means of classi- 
 fication. 
 
 The houses inhabited by their respective owners 
 which give them a latent revenue (saving of ex- 
 pense) should also be subject to taxation. 
 
 Also houses, or the parts of them, which are not 
 inhabited, and which do not yield any return, are 
 frequently charged with an impost, because the 
 lack of income is considered as only temporary. 
 
 The system of declarations, although dangerous 
 and on this account opposed by many theorists, 
 still finds greater favor when it is applied to con- 
 structions and not to the soil.. 
 
 It is, in fact, to be observed : 
 
 ist. That for town buildings the declarations of 
 
78 DERIVATIVE PUBLIC INCOME. 
 
 the owners can easily be verified by the datum of 
 the rents. 
 
 2d. That when the declarations are revised at 
 certain intervals (leaving aside the abstraction of 
 " normal produce "), the impost may keep pace 
 with the very appreciable variations of the effective 
 income. 
 
 3d. That at all events the system of the official 
 estimates, proceeding by classes and averages, 
 under normal conditions at least, presents dangers 
 that certainly are not less than those of the system 
 of declarations. 
 
 By the system of declarations accordingly the 
 tax on buildings may be entirely or partly trans- 
 formed into a personal tax on income. 
 
 CHAPTER VIII. 
 
 PERSONAL IMPOSTS ON INCOME DERIVED FROM 
 MOVABLE PROPERTY. 
 
 IN a perfect system of direct imposts we should 
 tax the income from personal property, which in 
 our time has greatly increased. 
 
 This income is divided, in respect of its source, 
 into : 
 
DERIVATIVE PUBLIC INCOME. 79 
 
 ist. Income from capital. 
 
 2<d. Personal income. 
 
 3d. Industrial income. 
 
 SECTION i. Imposts on income derived from 
 capital. 
 
 The impost on the returns of capital falls on 
 the gross or net income, average or actual, verified 
 or presumed, obtained from movable property, in- 
 dependently of the exertion of the owner. 
 
 Income from capital is distinguished according 
 to the person (individual or collective, public or 
 private), according to its duration (perpetual or 
 temporary), and according to the character of the 
 payment (interest or annuities, and the latter an- 
 nuities for life or for a fixed term). 
 
 Against imposts on income derived from capital, 
 whether general or special, many objections are 
 made, and stress is laid particularly on the injustice 
 of the double taxation of the same thing (as for 
 instance the mortgaged land and corresponding 
 credit),* the repercussion of the impost from the 
 lender to the borrower, which alters its character ; 
 its dangerous effect on existing capital, and on the 
 accumulation of new capital, the unavoidable in- 
 equality of treatment, according to the degree of 
 facility with which it can be concealed, the con- 
 tinuous changes of the amount of income derived 
 
 * See Note on Taxation of Mortgages p. 136. 
 
80 DERIVATIVE PUBLIC INCOME. 
 
 from it, and the inevitable imperfections of the 
 method of collection. 
 
 But these objections (in part utterly erroneous) 
 are untenable when confronted with reasons of jus- 
 tice, which condemn any form of privilege, and 
 which must prevail over the apprehension of un- 
 certain and indeterminate repercussions, and over 
 fears of the destruction of capital, which are ad- 
 missible only in the case of imposts which are ex- 
 cessive or unfairly distributed. The difficulties 
 are certainly real, but not insurmountable, nor at 
 all greater than those met with in the taxation of 
 other receipts from movable property. 
 
 The impost should fall on the full returns of the 
 capital (interest or annuity) without the deduction 
 of either premium for risk or of the sinking-fund 
 comprised in the annuity. Otherwise it would un- 
 duly favor uncertain and temporary incomes, and 
 it would be forgotten that the lesser duration of 
 the impost corresponds with the lesser duration of 
 the income. 
 
 This impost usually falls on the actual or aver- 
 age income of a relatively short period (for in- 
 stance, of three years), and the amount of the tax 
 is less than that of other direct imposts. But such 
 inequality of treatment does not find sufficient sup- 
 port in the reasons of convenience that are alleged 
 in its favor. 
 
 For the application of imposts on income de- 
 
DERIVATIVE PUBLIC INCOME. 8 1 
 
 rived from capital, we must distinguish between 
 two different systems ; that of the indirect taxation 
 of the debtor required to be reimbursed by his 
 creditor, and that of the direct taxation of the 
 latter. 
 
 In favor of indirect taxation may be adduced the 
 greater facility and simplicity of collection, the 
 avoidance of publicity, the less danger of double 
 taxation, and also the possibility of taxing the capi- 
 tal of strangers. 
 
 Against indirect taxation, on the other hand, 
 there are the difficulties of exercising the right of 
 retention granted to the debtor ; the difficulty of 
 putting in practice the exemption, which, however, 
 is necessary, of the smallest incomes, and finally 
 the impossibility of its falling on capital invested 
 in foreign countries, or lent to persons who do not 
 pay other direct taxes. 
 
 Direct taxation takes place either by means of 
 official estimates or on the basis of declarations 
 supervised by appropriate commissions ; but these 
 methods present much greater defects than those 
 already noticed in their application to the land 
 tax. 
 
 In practice, certain eclectic methods have been 
 at times adopted with varied success, in which the 
 proceeding is partly by retention (indirect taxa- 
 tion), and partly by declarations verified by the fis- 
 cal agents, and by commissions of honest, experi- 
 
82 DERIVATIVE PUBLIC INCOME. 
 
 enced men, keeping in view the different kinds of 
 income, and not infrequently with the assistance of 
 certain presumptions (for instance, that of rental 
 value). 
 
 The taxation of the public funds (the public 
 debt of the State, the municipality, etc.) has long 
 formed the subject of controversies that have not 
 been completely nor everywhere settled. 
 
 The opponents of such taxation proclaim that it 
 is unjust because it confiscates a certain amount of 
 capital corresponding to the impost ; because it re- 
 solves itself into a disguised partial bankruptcy of 
 the debtor government, which arbitrarily reduces 
 the interest and violates the agreement of exemp- 
 tion from tax solemnly entered into with the cred- 
 itors, and because it deals a deadly blow at the 
 public credit, and prevents the negotiation, at tol- 
 erable rates, of loans that may be needed here- 
 after. They, moreover, observe that the embarrass- 
 ments caused by the problem of the taxation or 
 exemption of foreigners, the inefficiency of the 
 means of collection by declarations that are es- 
 caped by those holding obligations payable to 
 bearer (coupons), and the vexations of a method 
 of collection enforced by means of retention, are 
 sufficient to dissuade altogether from an impost of 
 this kind. 
 
 Still the advocates of this impost (which, more- 
 over, is daily gaining ground), with better reason, 
 
DERIVATIVE PUBLIC INCOME. 83 
 
 as it seems, base their assumptions on principles of 
 justice and equity, which are opposed to fiscal 
 privileges in favor of the creditors of the State, 
 who should not be released from the fulfilment of' 
 the duties of citizens. They observe, moreover, 
 that the assurances of exemption that have been 
 given are either null and void, if they grant an 
 absolute and general privilege, or must be inter- 
 preted as simple promises of exemption from spe- 
 cial imposts on the evidences of the public debt ; 
 that a moderate impost does not produce the an- 
 ticipated evils, because the tendency toward a de- 
 cline of the public credit may be balanced by a 
 tendency toward a rise owing to financial improve- 
 ment, partly due to the impost itself ; and finally, 
 that the alleged pretext of the difficulty of collec- 
 tion cannot make head against the principle of 
 justice ; in a word, that this kind of difficulty is 
 common to every direct impost on personal prop- 
 erty, and not peculiar to that on the public funds.* 
 
 * The author here gives an apparent sanction to the argument in favor of 
 the taxation of public securities, even though an express agreement has been 
 made that they should be exempt. I cannot agree with this view. The State 
 should set no questionable example to the citizen. Granted that the ex- 
 emption was wrong in the beginning and ought not to have been decreed : 
 granted that taxation ought always to be equal, or as nearly so as human 
 contrivance can make it : still, the highest public interest is, that the State 
 shall not seem to be a cheat. 
 
 The earlier acts of Congress, under which our war debt was au- 
 thorized, exempted the bonds of the United States from State and muni- 
 cipal taxation only. The act of July 14, 1870, under which the outstand- 
 
84 DERIVATIVE PUBLIC INCOME. 
 
 The duty of foreigners to pay the impost may be 
 open to considerable discussion, if it be a question 
 of personal impost ; but on the other hand it seems 
 admissible if we look upon this as an objective im- 
 post ; that is, levied on the sum total of products 
 obtained from the country. In this way we may 
 overcome the serious practical difficulty, incident 
 to the exemption of foreigners, namely, that it af- 
 fords to natives the opportunity of avoiding the 
 payment of the impost by having their interest 
 drawn in foreign countries. 
 
 Against the system of retention, opponents al- 
 lege the inflexible character by which it is distin- 
 guished, and which changes the original nature of 
 the impost ; the difficulties which it presents, both 
 in the calculation of the sums due and in the ex- 
 emption of the smallest incomes, and, finally, also 
 in its application to provincial and municipal im- 
 posts, where the collection is made through the 
 treasury of the State. 
 
 But the advocates of retention do not admit 
 that a simple method of collection can change the 
 nature of the impost ; they allege the little or no 
 result which the impost would yield without reten- 
 tion, and the facility of its application, which re- 
 
 ing 4 and 4^ per cents were issued, went a step farther and exempted 
 these issues from "all taxes or duties of the United States," as well as 
 from all local taxation, and these exemptions are printed on the face of 
 the bonds. ED. 
 
DERIVATIVE PUBLIC INCOME. 85 
 
 solves itself into a mere balancing of credits and 
 debts ; and they observe that it is possible to rem- 
 edy, at least partially, the other notable defects by 
 applying measures that have been adopted by 
 those States which already practice, with signal 
 success, the system of retention. 
 
 SEC. 2. Imposts on personal income. 
 
 Personal incomes are those derived from labor, 
 past or present, and are divided into salaries and 
 pensions (of public functionaries), fees (of those 
 who follow the so-called learned professions), and 
 wages (for manual labor). 
 
 These incomes are certain or uncertain (as to 
 duration), and fixed or variable (as to amount) ; 
 both kinds should be subject to tax, for no reason 
 can be adduced in favor of exemption. 
 
 The arguments frequently adduced in support 
 of the exemption of salaries and pensions are, that 
 the impost would seem to be an arbitrary diminu- 
 tion of the agreed compensation ; that it would be 
 injurious to the service by reason of the tempta- 
 tions to which the public officials would find them- 
 selves exposed when they are not sufficiently paid ; 
 and that to take away with one hand what has 
 been given with the other is to bring about a use- 
 less and costly complication of accounts. These 
 arguments are insufficient. 
 
 In point of fact, the State has not merely special 
 duties toward the public functionaries, but it is 
 
86 DERIVATIVE PUBLIC INCOME. 
 
 also in general committed to a fair apportionment 
 of taxation, because any favor granted to one class 
 results only in a burden unjustly laid on others. 
 Besides, imposts do not prevent the fixing of sal- 
 aries at a fair rate, nor can it be regarded as a use- 
 less complication, because in a good administrative 
 system salaries are not frequently changed; be- 
 cause in this way the appearance of privilege is 
 avoided, and because finally a faithful mirror is 
 thus obtained of the receipts and expenditures 
 relating to salaries and pensions. 
 
 But neither the ease of collection, nor the diffi- 
 culty of repercussion, nor the impossibility of con- 
 cealing the amount of income can at all justify a 
 less rate of taxation on salaries and pensions ; in- 
 deed, it is hardly a creditable course to diminish 
 the charge of certain contributors merely on the 
 hypothesis that there may be others who fraudu- 
 lently evade the burden. 
 
 Professional incomes are frequently made sub- 
 ject to imposts in company with industrial incomes 
 rather than with other personal receipts. 
 
 Incomes from manual labor must also be subject 
 to impost, because an exemption would be contrary 
 to proportional equality, except only in the case of 
 incomes that are barely sufficient for the support 
 of the workman. 
 
 On the other hand, it may be questioned whether 
 it is more suitable to subject this class of incomes 
 
DERIVATIVE PUBLIC INCOME. 8/ 
 
 to personal tax (in the strict sense), or to the in- 
 direct tax on consumption. 
 
 These personal imposts, which, in the stricter 
 sense, aim at persons independently of their prop- 
 erty, are called special when they are levied on a 
 definite class of contributors ; and are called gen- 
 eral when they tax all the adult male contributors 
 who are able to earn a living. 
 
 And in respect of their assessment they are uni- 
 form (as the poll tax or the hearth tax), or gradu- 
 ated, when, deviating somewhat from their origi- 
 nal character, they admit of a classification of the 
 contributors based on their rank, or better still, on 
 their general economic condition, if not in exact 
 ratio with their wealth. 
 
 If we compare general personal imposts, and 
 those on the consumption of certain products of 
 universal use, considered as a means of causing the 
 incomes derived from manual labor, and in general 
 those of the poorer class to contribute to the im- 
 post, we find that both plans, regarded alone, with- 
 out reference to the tax system in its totality, have 
 the fault of inequality, and even that of being 
 odious. By advancing the comparison a little fur- 
 ther, we find that personal imposts also have the 
 special defect of difficulty and excessive harshness 
 in execution ; they yield but a small revenue by 
 reason of the many and necessary exemptions ; 
 they cause serious discomfort to a considerable 
 
88 DERIVATIVE PUBLIC INCOME. 
 
 number of tax-payers, who will not, or do not 
 know how to keep in reserve the sums that must 
 be paid at fixed times. On the other hand, indi- 
 rect imposts are collected more easily; they are 
 mixed with the price of certain articles of daily use, 
 and are even (when they spare objects of absolute 
 necessity) to a certain extent voluntary, at least 
 in their amount. Again, we cannot overlook their 
 signal merit in avoiding personal contact, not 
 always desirable between fiscal agents, who are 
 often hated, and contributors not properly con- 
 vinced of the benefits conferred by the govern- 
 ment, but, on the contrary, impressed with the ap- 
 parent injustice of taxation that is seldom exactly 
 proportioned to the means of those who have to 
 pay. 
 
 In general, we may also observe that the various 
 degrees of intellectual culture, of morality, of pa- 
 triotism and foresight, as well as the more or less 
 widely spread consumption of certain products, are 
 all very important elements in deciding in a given 
 case to which of the two systems the preference 
 should be given. 
 
 SEC. 3. Imposts on industrial income. 
 
 Industrial incomes are those derived from the 
 business of manufacturing or trade. They accord- 
 ingly comprise the return for invested capital, com- 
 pensation for the work of direction and of constant 
 attention on the part of the entrepreneur, and the 
 
DERIVATIVE PUBLIC INCOME. 89 
 
 premium for the risk inherent in the enterprise. 
 Such incomes are also called mixed, because they 
 are derived both from capital and from labor. 
 When they are derived from joint undertakings, 
 exercised by stock-companies, they are called divi- 
 dends. 
 
 We cannot admit as valid reasons for the ex- 
 emption of industrial incomes from taxation, either 
 the alleged repercussion upon the consumers, nor 
 their constant variability, nor the apprehended dis- 
 couragement of industry, nor even the difficulty of 
 collection, by some denounced as arbitrary, or such 
 as to impair the credit of the managers, to whom 
 secrecy is a matter of business necessity. 
 
 The impost should fall on the net income, and 
 should accordingly allow the necessary deductions 
 for the replacement of the capital consumed in 
 production and in the payment of interest and 
 wages for capital and labor. On the other hand, 
 deductions must not be allowed for the interest of 
 passive capital not invested in the enterprise, and 
 which accordingly does not assist in producing the 
 income, still less for the sums required for the sup- 
 port of the proprietor and of his family. 
 
 The tax on industrial income inquires into the 
 actual income, or the average or normal (ascer- 
 tained or presumed) income for a certain short 
 period (for instance, of three years). 
 
 In the practical arrangement of this impost, two 
 
90 DERIVATIVE PUBLIC INCOME. 
 
 systems of investigation contend with each other 
 for preference that of indirect and that of direct 
 inquiry into the income subject to taxation. 
 
 By the former, which, especially in the past, ob- 
 tained a wide application, the income of the vari- 
 ous individuals following a trade is determined by 
 a system of presumptions, taking as a basis certain 
 criteria established by law. 
 
 The principal among these criteria are the na- 
 ture of the industry, the actual population of the 
 place in which it is exercised, the rental value, the 
 fixed and circulating capital, the number of the 
 workmen engaged in the undertaking, etc. Taken 
 singly, these criteria have but little value, but 
 some legislative systems have learned how to com- 
 bine them in such manner that they have yielded 
 relatively satisfactory results. This system, in 
 fact, excludes the arbitrary measures and personal 
 vexations which are almost unavoidable in the 
 plan of direct inquiry, but it does not sufficiently 
 recognize the variableness of the income, and by 
 resorting to classification, which must always be 
 imperfect, it weighs heavily upon the poorer con- 
 tributors. 
 
 To remove these defects, some advocate the sys- 
 tem of direct inquiry into the actual income, 
 which seems more conformable to the principle of 
 proportionality, because it closely follows the fluc- 
 tuations of industrial success ; yet in its concrete 
 

 DERIVATIVE PUBLIC INCOME. 9 1 
 
 applications (official estimates and verified declara- 
 tions), it presents many difficulties and dangers 
 that are both serious and manifest. 
 
 Hence, there are not wanting instances of legis- 
 lative systems that have resorted to eclectic 
 methods, in which the attempt is made to combine 
 in various ways the indirect and direct modes of 
 inquiry into the income, yet almost always giving 
 preference to the former over the latter, as it 
 happens, for instance, when the indirect system is 
 made to serve for the allotment of the general 
 assessment among the various territorial divisions 
 of the State, whilst to the direct system is assigned 
 the more limited task of determining individual 
 quotas. 
 
 But direct taxation of the income of agricultural 
 industry still forms a lively and ever-interesting 
 topic of controversy. Some accept it ; others 
 reject it, because they maintain that agricultural 
 profits have already been taxed by the impost on 
 the land ; there are still others who only admit it 
 partially, when applied to profits obtained by agri- 
 culturists who are not the owners of the soil. 
 
 The question, being to a great extent connected 
 with the economic problem of rent, cannot be 
 solved in the abstract. In fact, it must be evident 
 that both the ordinary argument of repercussion, 
 and the argument of special protection due to agri- 
 culture, and of the difficulty of applying a scheme 
 
Q2 DERIVATIVE PUBLIC INCOME. 
 
 of taxation of agricultural profits in poor countries, 
 and in the case of property greatly subdivided, 
 cannot be regarded as valid, because too general 
 and too indefinite, and because they are in some 
 respects contrary to the supreme reasons of jus- 
 tice, and in due degree must yield to other more 
 important economic considerations. 
 
 It will, however, be useful to ascertain whether 
 in reality the land tax falls effectively on agricul- 
 tural profits, which has been gratuitously asserted 
 to be the fact by some, and gratuitously denied 
 by others. In other words, it is desirable to know 
 whether in the case of the farm products subjected 
 to the land tax, deduction has or has not been 
 made of the farmer's profits ; in the former case 
 the application of a special impost on the income 
 of agricultural industry would be equitable, but in 
 the latter it would not. 
 
 The solution of these difficulties is accordingly 
 connected with the rational re-arrangement of the 
 land tax of which in some States there is urgent 
 need. 
 
 CHAPTER IX. 
 
 INDIRECT IMPOSTS ON TRANSFERS OF OWNERSHIP. 
 
 THE indirect imposts on transfers of ownership, 
 which, like those on consumption, are indirect be- 
 cause founded on secondary and external manifes- 
 
DERIVATIVE PUBLIC INCOME. 93 
 
 tations of the wealth subject to tax, are levied on 
 the transfer of real property, and of certain pro- 
 ductive personal property, whether made between 
 living individuals, or on the occasion of death, 
 and either upon valuable consideration, or as a 
 gift. They not only concern transfers of property 
 (successions, purchases, sales, etc.), but also those 
 of use and enjoyment, especially of real estate 
 (leases, etc.). 
 
 Imposts on transfers comprise 
 
 ist. Those on transfers made upon valuable 
 consideration. 
 
 2d. Those on gratuitous transfers. 
 
 3d. Those levied on the property of institutions 
 and of industrial companies in lieu of a transfer- 
 tax. 
 
 SECTION I. Imposts on transfers made upon 
 valuable consideration. 
 
 These imposts on transfers are levied on pur- 
 chases and sales, exchanges, leases (especially of 
 real estate) and on loans at interest. 
 
 The ever-increasing needs of the State, the diffi- 
 culty of augmenting direct taxes and those on 
 consumption, the facility and economy of collec- 
 tion when the contributor has at hand the means 
 of paying, are reasons which serve to explain and 
 to justify the very general prevalence of such im- 
 posts in modern times. 
 
 Yet the often excessive proportions which im- 
 
94 DERIVATIVE PUBLIC INCOME. 
 
 posts on transfers upon valuable consideration 
 have assumed in certain States have added to the 
 already formidable number of their opponents. 
 The latter observe that imposts of this kind are 
 contrary to equity, because they are levied on 
 transfers which are symptoms of poverty rather 
 than of wealth ; and also because they look only 
 at the capital value of the property transferred 
 without taking any account of the return, or of the 
 debts that may exist to diminish it; and, finally, be- 
 cause the variation in the number of transfers of 
 property of equal value which take place in a 
 given time contribute in no small degree to 
 heighten the injustice referred to. They deplore, 
 moreover, the vexations, frauds, arbitrary acts, 
 controversies and lawsuits which these imposts so 
 easily provoke, and the injury inflicted upon private 
 credit, upon public morality, and upon the interests 
 of the treasury itself. 
 
 Hence, when absolute need compels recourse to 
 imposts of this kind, it will be necessary in their 
 application to use all due precautions, in order 
 that the burden may not prove too heavy, but may 
 be fairly distributed among the contributors. This 
 result is obtained : 
 
 ist. When the measure of the impost is moderate. 
 
 2d. When a graduated scale is made on the basis 
 of the value of the property transferred, and of the 
 nature of the transfers. 
 
DERIVATIVE PUBLIC INCOME. 95 
 
 3d. When necessary exemptions are granted to 
 persons of small means. 
 
 4th. By .omitting all acts through which the 
 payment may prove either inconvenient or embar- 
 rassing to the movement of property (circola- 
 zione). 
 
 5th. When the expressions of the law are clear, 
 and the methods of collection not too complicated. 
 
 6th. When the penalties imposed upon the con- 
 tributors are moderate, and distinction is prop- 
 erly made between cases of culpable transgression 
 and those of involuntary error or excusable igno- 
 rance. 
 
 SEC. 2. Imposts on gratuitous transfers. 
 
 Imposts on gratuitous transfers comprise 
 
 ist. Necessary transfers (in case of death), to 
 wit, successions, both testamentary and by opera- 
 tion of law. 
 
 2d. Voluntary transfers (inter vivos), namely, 
 gifts which, as is evident, have a smaller economic 
 and fiscal importance, but which must be regu- 
 lated by the principles that are adopted for succes- 
 sions. 
 
 Against imposts on gratuitous transfers, and 
 particularly against those on successions, objec- 
 tions are made : 
 
 ist. That they often (for example, in the case 
 of succession in direct line in families of moderate 
 means) fall, not on an increase, but rather on a 
 
g DERIVATIVE PUBLIC INCOME. 
 
 devolution of the wealth, which does not bring the 
 least gain to the heir, who entertained a reason- 
 able expectation of this property, and who, per- 
 haps, already enjoyed it while living with the de- 
 ceased person, and since it frequently happens that 
 the inherited patrimony scarcely suffices to fill the 
 void left by the cessation of the personal or indus- 
 trial income which the deceased person used to earn. 
 
 2d. That they necessarily diminish the patri- 
 mony by their generally high rate, by the shortness 
 of the time allowed for payment, by the many ex- 
 penses with which the heir is charged, and espe- 
 cially by the absence of an incentive to induce the 
 latter to restore even slowly the capital absorbed 
 by the impost, which as a rule is obtained either by 
 partial sales of the inherited property or by loans. 
 On the other hand imposts on income have the 
 virtue of stimulating the tax-payer to obtain a re- 
 imbursement of the sum paid to the exchequer by 
 renewed labor and saving. 
 
 The advocates of imposts on successions do not 
 omit to adduce the gravity and urgency of the 
 public needs, and the almost insuperable difficulty 
 of providing for them by other means ; they more- 
 over lay stress on the fact that such imposts do 
 not in the least fetter the freedom of industry, 
 and do not produce any disturbing repercussion. 
 To the arguments of its opponents they present 
 the following reply : 
 
DERIVATIVE PUBLIC INCOME. Q/ 
 
 1st. That in the cases of succession in direct 
 line only a very mild impost is reasonably admissi- 
 ble, from which, further, the property should be 
 exempted in cases where it is too small to bear the 
 burden. 
 
 2d. That except upon the hypothesis, which is 
 quite unjustifiable, of an excessive impost required 
 to be paid without the necessary delay, it cannot 
 be absolutely maintained that the impost on suc- 
 cessions need diminish the patrimony of the heir, 
 because the possibility of replacing the capital paid 
 to the exchequer depends on the intellectual and 
 moral qualities, the means and methods of the 
 heir, and not on the character of the impost. 
 
 These arguments seem sufficient to justify the 
 impost when its amount is moderate, fairly dis- 
 tributed, founded on laws that are clearly ex- 
 pressed, and applied by means of ascertainment 
 and of collection that are efficacious without being 
 vexatious. 
 
 In respect of the criteria of assessment, it seems 
 necessary to abandon the once common distinction 
 between successions by will and by operation of 
 law, as well as between personal and real property, 
 and to adopt instead the principle of the propor- 
 tional taxation of the inheritable estate (exclusive 
 of debts), yet with a different rate according to 
 the nearer or more distant relationship of the heir 
 to the deceased person. Thus, for instance, suc- 
 
 5 
 
98 DERIVATIVE PUBLIC INCOME. 
 
 cessions between collateral branches should be 
 subjected to a heavier impost than those between 
 parents and children, and the tax on the succession 
 of strangers should be heavier still. 
 
 SEC. 3.- Imposts in lieu of transfer-tax. 
 
 These imposts (which are sometimes called com- 
 plementary to those on the transfers of property 
 already described) are applied, for the purposes of 
 equalization, to certain property, especially real 
 estate, which either by reason of the character of 
 the ownership, or for other reasons, legal or eco- 
 nomic, is not transferable, or which could not, with- 
 out grave inconvenience, be subjected to imposts 
 on transfers by the ordinary methods of ascertain- 
 ment and collection. 
 
 Imposts in lieu of transfer-tax accordingly relate 
 to: 
 
 ist. The property of benevolent institutions and 
 of other ecclesiastical and lay corporations ; 
 
 2d. The property of industrial and commercial 
 companies. 
 
 To property in the first category, which under 
 the political system of certain States is made in- 
 alienable (mortmain), special imposts are applied, 
 which are collected periodically on the basis of a 
 record expressly prepared for this purpose. 
 
 Such imposts, notwithstanding the diversity of 
 title and purpose, have therefore the character and 
 form of taxation additional to the ordinary direct 
 
DERIVATIVE PUBLIC INCOME. 99 
 
 imposts. Their amount is calculated on the aver- 
 age of what other property, the transfer of which 
 is unrestricted, pays upon transfer of title within 
 the given period. 
 
 Imposts of this kind on the property of indus- 
 trial and commercial companies (not to be con- 
 founded with the direct imposts which they pay 
 upon their profits *) are exacted periodically or by 
 means of a proportional duty which falls on their 
 shares. 
 
 This is an expedient adopted for the purpose of 
 avoiding the payment which must otherwise be 
 made for every single transfer of such instruments 
 and which would prove too inconvenient or entirely 
 incompatible with the multiplicity and rapidity of 
 circulation of modern fiduciary instruments. Such 
 imposts are generally exacted by means of a stamp, 
 proportional to the nominal or real capital of the 
 instruments issued by the company, and sometimes 
 also by means of annual subscriptions stipulated 
 between the indebted company and the public 
 treasury. 
 
 CHAPTER X. 
 
 INDIRECT TAXES ON CONSUMPTION. 
 
 INDIRECT taxes on consumption are levied on the 
 expenditures of the contributors, and are founded 
 
 * See note on Taxation of Corporations, p. 143. 
 
100 DERIVATIVE PUBLIC INCOME. 
 
 on the presumption of their proportionality to 
 their respective incomes. 
 
 This presumption within certain limits is reason- 
 able, because there unquestionably exists a relation 
 between wealth and consumption, income and ex- 
 penditure. But it still remains very imperfect, be- 
 cause it does not take into account that important 
 part of the individual income which is not spent, 
 but saved ; whence it results that the expenditures 
 are not rigidly proportional to the income. 
 
 It is also to be observed that by reason of the 
 practical impossibility of embodying in acts a gen- 
 eral and proportional impost on all consumption 
 and of finding an article of consumption that 
 can be regarded as a safe and exact indication of 
 the total income of citizens, resort must be had 
 to the still more faulty expedient of the combined 
 taxation of various objects of consumption, form- 
 ing, so to speak, a system ; but this answers still 
 less to the supposed ideal proportion between in- 
 come and expenditure, and presents also the misfor- 
 tune of an excessive burden upon the less wealthy 
 classes, to whom accordingly we must grant by 
 way of compensation a reduction, and sometimes 
 even a complete exemption, from other taxes. 
 
 SECTION i. Classification of imposts on con- 
 sumption. 
 
 In respect of the kind of objects most frequently 
 taxed, there are to be distinguished : 
 
DERIVATIVE PUBLIC INCOME. IOI 
 
 ist. Imposts on articles of food (salt, cereals, 
 meats, sugar, etc.) ; 
 
 2<i. Imposts on beverages (wine, beer, spirits, 
 coffee, tea, etc.) ; 
 
 3d. Imposts on various objects (tobacco, build- 
 ing materials, fuel, clothes, almanacs, playing cards, 
 
 etc.). 
 
 In respect of the intensity of the need which 
 these objects satisfy, and hence the extent of their 
 consumption, the distinction is to be observed be- 
 tween : 
 
 ist. Imposts on objects of prime necessity (salt, 
 cereals, soap, certain combustibles and fabrics, 
 etc.) ; 
 
 2d. Imposts upon objects of general consump- 
 tion, but not indispensable (tea, coffee, wine, beer, 
 tobacco) ; 
 
 3d. Imposts upon objects of luxury (silks, costly 
 ornaments, carriages, horses, etc.). 
 
 This distinction can neither be precise nor abso- 
 lute (for every time or country), but applies only 
 as an approximation. 
 
 In respect, finally, of the methods of collection 
 we distinguish : 
 
 ist. Government monopolies, when, in order to 
 secure the imposts, the State reserves to itself the 
 exclusive right of the production and sale of the 
 taxed objects ; 
 
 2d. Imposts on consumption in a strict sense, 
 
102 DERIVATIVE PUBLIC INCOME. 
 
 which fall on objects of free production. These 
 latter are subdivided into : 
 
 ist. Imposts collected directly from the consum- 
 er (as the taxes on dwellings, servants, carnages, 
 etc.). 
 
 2d. Imposts collected indirectly, which fall on 
 products before they reach the consumer, to wit : 
 
 (a) In the act of manufacture or sale ; 
 
 (b) During their circulation within the State (in- 
 ternal duties, octroi\ or from one State to another 
 (boundary or customs duties). 
 
 Generally speaking, and especially in very rich 
 countries, imposts on objects of general consump- 
 tion are preferable, by reason of their large amount, 
 because all classes join in paying them, because up 
 to a certain point they are voluntary, and because 
 this is really a case of consumption which increases 
 with the increase of wealth; while, on the other 
 hand, imposts on objects of luxury that are some- 
 times required by reason of equity yield but very 
 scanty returns ; and imposts on objects of prime 
 necessity which cannot, it is true, be wholly dis- 
 pensed with, since they afford the readiest means 
 of causing the poorer classes to share in the tax 
 have still the defect of being proportional to 
 the need and not to the means, and they accord- 
 ingly require, by way of compensation, the reduc- 
 tion of other imposts as regards this class.* 
 
 * See note, Taxes on Consumption, p. 150. 
 
DERIVATIVE PUBLIC INCOME. 103 
 
 But, inasmuch as the good fiscal result of im- 
 posts on consumption depends in great measure 
 on knowing how to find the proper rate of taxa- 
 tion, which in its turn is relative to the nature of 
 the object, and the means of the consumer, it must 
 not be forgotten that the raising of the rates fre- 
 quently produces a lessening or displacement of 
 consumption, and an increase of smuggling, even 
 to the injury of the treasury, whose revenue di- 
 minishes or at least does not increase in the ex- 
 pected ratio. 
 
 SEC. 2. Fiscal monopolies. 
 
 Fiscal monopolies consist in the exclusive right 
 of the manufacture and sale of certain products, 
 which the State reserves to itself with a view of 
 deriving a greater revenue than it could obtain 
 from the same products if left to private industry. 
 Monopolies do not constitute a special category of 
 imposts, but simply a method of collection of cer- 
 tain "imposts on consumption. 
 
 To the objections against other fiscal industries, 
 fiscal monopolies add those which are common to 
 all monopolies ; for which reason their abolition 
 should, in principle, be favored. Still, in the case 
 of certain industries that are naturally exercised 
 on a large scale and limited to a few points of the 
 territory, or that can be concentrated artificially 
 within a limited number of places, without a diffi- 
 cult and complicated process of production and 
 
104 DERIVATIVE PUBLIC INCOME. 
 
 sale, monopoly becomes economically tolerable, 
 when there are other motives, which counsel us to 
 maintain it as an exceptional case. 
 
 Among fiscal monopolies still subsisting in many 
 States, the foremost are those of salt, tobacco, lot- 
 teries, and other games of chance, to which in the 
 past were added the manufacture of gunpowder, 
 playing-cards, etc., and at the present day that of 
 lucifer matches, etc. 
 
 The salt monopoly, which is more or less com- 
 plete and absolute, according as it comprises the 
 gathering, preparation and sale, or leaves some of 
 these functions to private enterprise, has always 
 had many opponents, and in practice is steadily 
 losing ground in the richer countries. 
 
 To the arguments adduced against every impost 
 having salt for its object, which condemn its mani- 
 fest inequality, its injurious effect on the food of 
 the poor, its injury to agricultural and manufac- 
 turing industries in which salt is used as an auxil- 
 ilary element, there are added the capital economic 
 objections against all monopolies. 
 
 Still, the advocates of this monopoly, with a 
 view to the urgent needs of the poorer States, and 
 to the serious difficulty of finding another yielding 
 an equal revenue even at a low rate, observe that 
 the impost on salt, having once entered into the 
 customs of the people, is paid almost uncon- 
 sciously, being confused with the price of an ar- 
 
DERIVATIVE PUBLIC INCOME. 105 
 
 ticle of daily use ; and they maintain that the im- 
 post once existing, the application of the monopoly 
 is very convenient to the treasury, and that pro- 
 vision has been made for the accommodation of 
 industries by the production of salt of inferior 
 quality and price, and which cannot be used as an 
 article of food. 
 
 More generally approved is the impost on to- 
 bacco, and to a certain extent also the State to- 
 bacco monopoly, this being an article which, if not 
 hurtful to all, is certainly not indispensable, whilst 
 by its voluntary consumption, every day more and 
 more spreading among all classes, it is fitted to 
 yield an abundant revenue. This revenue in- 
 creases greatly through monopoly, or by other re- 
 strictive measures (as for instance, the prohibition 
 of cultivation, combined with high duties on im- 
 portation) that are best calculated to prevent 
 smuggling ; this being unavoidable when industry 
 is left free at home, and an impost is laid on the 
 soil planted with tobacco, or on the manufacture, 
 sale, or importation of its products. 
 
 The monopoly of lotteries and other games of 
 chance is generally condemned, and is, indeed, 
 already abolished in many countries, notwithstand- 
 ing the considerable, yet always varying revenue, 
 which may be derived from it. It obviously pro- 
 duces grave evils in this, that it is based on the ig- 
 norance and superstition especially of the poorer 
 
106 DERIVATIVE PUBLIC INCOME. 
 
 classes ; it diverts them from useful work and hab- 
 its of thrift, stimulates covetousness, and impels to 
 idleness and dissipation. This happens more in 
 the great lotteries than in the smaller ones, in 
 which there is found a greater freedom and sim- 
 plicity of combinations, which are preferable also 
 by reason of the smallness of the risks, the fre- 
 quency of the drawings, and the greater number 
 of lottery offices. 
 
 In this case, however, all fiscal considerations 
 should yield to the supreme reasons of morality, to 
 which it is revolting that the State, instead of con- 
 trolling as far as possible the wretched passion of 
 gambling, should foment it for base purposes of 
 gain. 
 
 SEC. 3. Imposts on manufacture and sale. 
 
 Imposts on manufacture and on sale, which are 
 much employed in some countries, present serious 
 difficulties in their application. In fact if, on the 
 one hand, it is desirable to tax products at a stage 
 not too far removed from the consumer in order 
 to avoid the trouble and risk of repercussion, still 
 it must happen that the objects to be taxed are 
 collected together in great quantities in the hands 
 of the manufacturer or of the retail dealer. 
 
 Imposts on manufactures (also called excises) 
 are adapted especially for objects whose produc- 
 tion takes place on a large scale, and is naturally 
 concentrated at a few points, so that collection 
 
DERIVATIVE PUBLIC INCOME. 
 
 and supervision is rendered easier and less annoy- 
 ing ; they may be collected either on the raw ma- 
 terials, or on products that have been wholly or 
 partly subjected to the modifications of manufac- 
 turing industry. Such are the imposts on sugar, 
 beer, brandy, and other kinds of spirits ; in 
 some countries, also, on the grinding of cereals, 
 the slaughter of animals, the making of wine, 
 etc. 
 
 The introduction of machines and certain spe- 
 cial instruments (alcoholometers, saccharometers, 
 counters, and weighers) has facilitated the collec- 
 tion of these imposts. 
 
 Imposts on sales are generally applied to objects 
 which by their subdivided production do not admit 
 either of monopoly or of imposts on their manu- 
 facture, and which by the universality, prompti- 
 tude, and variability of the consumption and the 
 ease of concealment do not admit of collection di- 
 rectly from the consumer. Hence, resort is had 
 usually to a duty on the sale (sometimes at retail) 
 of those articles especially which do not serve as 
 raw material and are sold with a certain publicity, 
 and generally at known prices, such, for instance, 
 as wine and meat. But waiving all arguments 
 concerning the nature of such articles, these im- 
 posts are impracticable in countries where the 
 taxed products are made and consumed at home, 
 without having recource to intermediaries. 
 
108 DERIVATIVE PUBLIC INCOME. 
 
 SEC. 4. Internal customs duties. 
 
 Octroi duties (also called duties on consumption 
 in a limited sense) are imposts levied on certain 
 products (usually not manufactured), at the mo- 
 ment when they are introduced into the towns, 
 which are called " closed " because they are fur- 
 nished with barriers and watched by fiscal agents. 
 
 These imposts are in many States one of the 
 principal sources of income for the municipal treas- 
 ury, and are every day extending, and being better 
 arranged in respect of their mode of collection. But 
 they also count many opponents, who have suc- 
 ceeded in some cases in obtaining their abolition. 
 
 These maintain that such imposts restrict com- 
 mercial freedom ; they adduce as objections to 
 them the annoyance which is caused to the in- 
 habitants of the neighborhood of the inclosed 
 towns ; the inequality of treatment between these 
 and the open towns ; the heavy expenses of collec- 
 tion ; the incentive to smuggling ; the injury to 
 certain industries that are taxed on their raw ma- 
 terials ; and they show that on account of the dear- 
 ness of provisions and of labor, industries are pre- 
 vented from being established in the towns which 
 would otherwise be their natural home. 
 
 To this, the advocates of octroi duties reply that 
 the inconveniences complained of can easily be 
 reduced to tolerable proportions, even more so 
 than other imposts on consumption. This may 
 
DERIVATIVE PUBLIC INCOME. IOQ 
 
 be brought about by a careful selection of the ar- 
 ticles taxed ; by the exemption of raw materials 
 required by industries which are not purely local ; 
 by the lowness of the rates, and by combining- an 
 effective supervision with necessary facilities for 
 payment ; and finally, by omitting all vexatious 
 and annoying practices. 
 
 At all events it is inadvisable to abolish an im- 
 post that has already entered into the usage of 
 many countries, at least until another has been 
 found to replace it, presenting actually fewer de- 
 fects, and while other taxes exist which, in respect 
 of the possibility of radical reforms, present a far 
 stronger title to be abolished, or made less onerous. 
 
 SEC. 5. Customs duties. 
 
 Customs duties are levied on certain products, 
 which enter the State, leave the State, or pass 
 through the State ; they are accordingly, divided 
 into duties on importation, on exportation, and on 
 transit. 
 
 These duties, which sometimes have the special 
 economic purpose of protecting national industry 
 against foreign competition, have now in many 
 countries an exclusively fiscal purpose, which latter 
 is the only one we propose to consider. 
 
 Duties on exportation and on transit being ex- 
 ceedingly unfavorable to national industry, are be- 
 coming obsolete, and therefore destitute of impor- 
 tance. 
 
DERIVATIVE PUBLIC INCOME. 
 
 Duties on importation, on the other hand, yield 
 considerable revenue, even in countries that have 
 in principle adopted the system of free trade. 
 
 Fiscal duties on importation are now applied to 
 a small number of products, capable of yielding a 
 large revenue. It is usual to admit free or only 
 to tax lightly the personal effects of travellers, medi- 
 cines, food products of prime necessity, especially 
 cereals, raw materials, and materials important as 
 auxiliaries in manufacturing, and the tools used in 
 carrying on the industries prevailing in the country. 
 On the other hand, it is customary to tax heavily 
 what is sometimes called colonial produce (tea, 
 coffee, cocoa, drugs, etc.), and certain articles of 
 consumption (especially beverages), not matters of 
 the first necessity (sugar, wine, spirits), which are 
 likewise burdened with internal duties in some 
 countries ; also certain manufactured products 
 (yarns, cloth, etc.). 
 
 The tariff or schedule of duties contains an enu- 
 meration of merchandise subject to tax, with a list 
 of the respective rates of duty. 
 
 The experience of customs reform in our day 
 has proved that a few duties with moderate rates 
 yield better returns than many onerous ones, be- 
 cause they allow the cost of collection to be re- 
 duced, and lead to an increase of consumption, as 
 well as to the diminution of smuggling. 
 
 In respect of the graduation of duties, the system 
 
DERIVATIVE PUBLIC INCOME. Ill 
 
 of so-called specific duties, which takes note of the 
 number, measure, and more frequently of the 
 weight of the several articles, is being generally 
 substituted for the system of ad valorem duties, 
 which are so called because based on the declared 
 value of the goods taxed. 
 
 Specific duties, while they are more simple, more 
 readily collected, less likely to vary in amount and 
 less open to controversy or frauds, are open to cer- 
 tain objections when applied to very fine goods, 
 and in general to those that have many gradations 
 of quality and value ; but as a rule, they are pref- 
 erable to ad valorem duties, the boasted equity or 
 proportionality of which, is more apparent than 
 real, by reason of the little reliance to be placed 
 on the declarations of the importers, and because 
 of the lack of knowledge on the part of fiscal agents, 
 and by reason of the variability of the value of the 
 goods ; whilst in their application to articles that 
 are bulky and vary slightly in quality, ad valorem 
 duties are unquestionably defective and vexatious. 
 
 When the lists are simple and are for the use 
 of the Treasury merely, the alphabetic order of the 
 articles is preferable to a systematic arrangement. 
 
 Custom-house procedure, which was formerly 
 complicated, costly and vexatious, has by slow de- 
 grees been improved in the common interest of the 
 Treasury and of the contributors. The object is to 
 provide that the declarations, verifications, pay- 
 
112 DERIVATIVE PUBLIC INCOME. 
 
 ment, and supervision shall be arranged so as to 
 attain their end as far as it is possible to do so. 
 The establishment of entrepots, docks, and bonded 
 warehouses, by means of which (the merchandise 
 being registered) delay is obtained in the payment 
 of duty until it is withdrawn for internal consump- 
 tion, and also the so-called procedure of assignment 
 from one custom-house to another, as well as other 
 facilities accorded for the payment, constitute not- 
 able reforms, which are susceptible of still further 
 improvement. The bonded warehouse is gener- 
 ally taking the place of the free port (free city or 
 free station), which, beside the advantages already 
 mentioned, enjoys also the privilege of forming a 
 territory into which merchandise enters exempt 
 from all custom-house examination, and which ac- 
 cordingly very readily becomes the active seat of 
 smuggling. 
 
 But customs duties, or rather fiscal duties on 
 importation, are by no means free from faults. 
 Among the defects of this mode of taxation may 
 be numbered the obstacles which they put in the 
 way of the free circulation of goods ; obstacles 
 which are the more felt by reason of the rapidity 
 of modern means of transport ; the economic, polit- 
 ical and moral evils of smuggling which is syste- 
 matically practiced on the frontiers ; and, finally, the 
 heavy expense of collection, which increases in pro- 
 portion to the extent and exposure of the frontiers. 
 
DERIVATIVE PUBLIC INCOME. 113 
 
 On the other hand, we cannot seriously enter- 
 tain the proposal which has frequently been made 
 for their complete abolition, because, irrespective 
 of the enormous gap which would be made in the 
 public receipts, we must bear in mind that the 
 abolition of custom-houses should be preceded by 
 that of almost all the other indirect taxes on con- 
 sumption, which display these faults in a higher 
 degree than customs duties, and have other and 
 greater faults of their own. Hence, even in the 
 case of a marked reduction of public expenses, 
 which could be followed by a corresponding 
 diminution of imposts a sufficiently improbable 
 assumption it is certainly not upon the custom- 
 houses that the hand of reform should first be laid. 
 
 SEC. 6. Imposts of immediate collection. 
 
 These imposts are levied directly on the con- 
 sumer, on certain material or immaterial objects 
 which are considered as an indication of a corre- 
 sponding income. 
 
 They partake, however (to outward appearance), 
 of some of the characteristics of direct taxes, be- 
 cause the duration of the objects to which they re- 
 fer enables the collection to take place at fixed 
 periods and on the basis of lists of names. 
 
 They must not be confused with imposts on 
 property, because, although they tax objects that 
 may form a part of it (dwellings, furniture, etc.), 
 they are not founded on property but on consump- 
 
114 DERIVATIVE PUBLIC INCOME. 
 
 tion and expenditure (the houses of others, hired 
 furniture, etc.). 
 
 The immediate collection of imposts on consump- 
 tion is more rational, more easy, and more eco- 
 nomical than the secondary. It is, however, applica- 
 ble only to certain products, the possession of 
 which can easily be verified either by reason of the 
 nature of the object, where it cannot easily be con- 
 cealed, or because of the duration of use, or the 
 slowness of consumption. If it were extended to 
 other objects that can easily be concealed or be 
 rapidly consumed (food, drink, clothes, etc.), it 
 would afford an opportunity for innumerable frauds 
 which it would be impossible to prevent, even by a 
 course of procedure which would be an intolerable 
 annoyance. 
 
 Hence immediate collection is usually applied to 
 imposts on dwellings, on the service of domestics, 
 on private carriages, horses, dogs, and on a few 
 other objects, the use of which is to be regarded 
 as a luxury. 
 
 The most important of these imposts is unques- 
 tionably that on dwellings, being different from 
 the direct imposts on buildings, which taxes the 
 property and the special income from it previously 
 ascertained, but not the expenditure as a sign of 
 the whole income. This injpost, by reason of the 
 form which it now most commonly assumes, is also 
 called the impost on rental value. 
 
DERIVATIVE PUBLIC INCOME. 115 
 
 The impost on dwellings, which can be made to 
 yield a large revenue to both general and local 
 government, commends itself through the ease of 
 the arrangements required for assessment and for 
 collection, and because there really exists a rela- 
 tion between the income and the expenditure in- 
 curred on account of the dwelling. It is, however, 
 plain, upon closer view, that there is no lack of 
 causes of inequality in its operation, such, for exam- 
 ple, as the notable diversities in rental value in 
 different centres of population, and the multiplicity 
 of individual and social circumstances (number of 
 children, vocation, inclinations, tastes, opinions), 
 on account of which expenditure for dwellings fails 
 to increase in exact proportion to the income of 
 the tax-payer. 
 
 These evils are remedied, although only in part, 
 by exempting the smallest house-rents from taxa- 
 tion, and likewise rooms intended to be used for 
 manufacturing ; taking local differences into ac- 
 count by means of the classification of cities and 
 boroughs according to population, and finally by 
 applying the tax at rates increasing with the rental 
 value. When these expedients are adopted in 
 practice the impost tends to become less imperfect. 
 
Il6 DERIVATIVE PUBLIC INCOME. 
 
 CHAPTER XL 
 
 DIRECT IMPOSTS ON INCOME AND ON PROPERTY IN 
 GENERAL. 
 
 GENERAL imposts on income and property, by 
 their essentially subjective and universal character, 
 differ from those direct imposts, whether objective 
 or personal, which have been hitherto considered. 
 By some they are admired as the model method of 
 taxation, which should replace all others ; but by 
 others they are considered as complementary parts 
 of a rational system of taxation, direct and in- 
 direct. 
 
 SECTION i. General tax on income. 
 
 This impost is levied on the total income of the 
 contributors, irrespective of its nature or of its 
 source ; hence the income from personal and real 
 property, from property which is perpetual, fixed, 
 certain, and from that which is temporary, vari- 
 able and uncertain. 
 
 The adherents of this impost recommend it 
 
 i st. From the legal standpoint, as universal, 
 easily graduated, capable of reaching certain in- 
 comes (as the public funds) that escape special im- 
 posts; necessary exemption of the smallest in- 
 comes, thus constituting altogether the simplest 
 
DERIVATIVE PUBLIC INCOME. II? 
 
 and fairest method of requiring the citizens to tul- 
 fill their obligations to the public treasury. 
 
 2d. From the economic standpoint as an impost 
 which, better than any other, can adjust itself to the 
 continuing fluctuations of wealth without produc- 
 ing any injurious repercussion and without re- 
 straining industrial freedom, which is the case with 
 imposts on consumption. 
 
 3d. From the political standpoint as the most 
 natural, most direct and least costly of all imposts. 
 
 The adversaries of this form of taxation oppose 
 it 
 
 ist. In its legal aspect, because once given the 
 existence of a good system of special imposts, the 
 general impost on income becomes merely an un- 
 just repetition ; because the exemption of the 
 smaller incomes leads to the progressive taxation 
 of the greater ; because finally the direct contact 
 of the tax-payers with the collecting officers, and 
 the publicity given to the economic condition of 
 the former, suppose such a condition of knowledge, 
 morality, and disinterestedness as can hardly be 
 found in actual life ; 
 
 2d. In its economic aspect, because its boasted 
 adaptability, which after all belongs also to direct 
 special imposts, implies the existence of safe 
 methods for ascertaining not merely the measure 
 of reduction, but also of increase, in the various 
 parts of the wealth subjected to taxation ; because 
 
I 1 8 DERIVATIVE PUBLIC INCOME. 
 
 freedom of industry can be respected also by direct 
 special imposts ; and finally, because the appre- 
 hended repercussion would not fail to take place if 
 what is superfluous be taxed in equal measure with 
 what is necessary ; 
 
 3d. In its political aspect, because the simplicity 
 of the provisions required for imposing the tax is in 
 contrast with the variety of the sources of income, 
 which should be treated upon different methods ; 
 and because the cheapness of collection is offset by 
 the inconvenience to the treasury of payment by 
 small installments, and the risks of ascertainment, 
 which afford too much opportunity for arbitrary 
 and vexatious proceedings, and for fraud. 
 
 By these various arguments the general income 
 tax is either absolutely rejected or is allowed only 
 in case of extraordinary and urgent needs, in which 
 the consideration of certainty and speediness of 
 payment prevails over every other reason, espe- 
 cially in view of the many difficulties which in such 
 circumstances stand in the way of an increase of 
 the other direct or indirect imposts. 
 
 Yet the problem cannot be solved practically by 
 keeping in view only the advantages or disadvan- 
 tages of the income tax. We must also consider 
 the necessity of its application concurrently with 
 other modes of taxation, and it is equally necessary 
 that intellectual and moral culture, political and 
 social circumstances, should help to spread the con- 
 
DERIVATIVE PUBLIC INCOME. 1 19 
 
 viction of the usefulness of the income tax, and of 
 the duty of all to pay it. 
 
 If such conditions are realized in sufficing meas- 
 ure, an income tax may be imposed at a low rate, 
 even in ordinary times, in order to fill certain gaps, 
 and to compensate certain disproportions in the 
 special imposts. On the other hand, in case of ex- 
 traordinary needs the rate may be raised, in order, 
 if possible, to avoid loans and the increase of other 
 taxes slower in their operation or less safely col- 
 lected. 
 
 In the application of such an impost, beside the 
 problems of graduation of exemption of the smaller 
 incomes, and of the best mode of collection, of 
 which we have already treated in speaking of im- 
 posts in general, and of other direct imposts in par- 
 ticular, serious difficulties present themselves con- 
 cerning : 
 
 ist. Taxation of the different sources of income, 
 as a whole, or under separate heads. 
 
 2d. Discrimination between, or the equal treat- 
 ment of, incomes of like amount, but of different 
 origin and duration. 
 
 In respect of the former question, we observe of 
 the special taxation of. single incomes at their 
 source, namely, in the hands of those who earn 
 them (as the tenant, the manufacturer), without 
 considering into whose hands they may fall, and in 
 what manner they are subsequently distributed, 
 
120 DERIVATIVE PUBLIC INCOME. 
 
 that if on the one hand it may seem to disturb the 
 unity and simplicity of the collection, on the other 
 hand it corresponds better with the essentially 
 varying nature of the several kinds of income and 
 to the exigencies of practical life, which require 
 that methods of collection should be modified ac- 
 cording to the nature of individual. cases, and do 
 not authorize the abandonment of the safer methods 
 (as for example, the method of retention), for the 
 mere reason that they cannot be applied to all in- 
 comes. Nor should it be forgotten that, by the 
 method of special taxation, many frauds are avoided, 
 and, moreover, secrecy is observed as to the eco- 
 nomic condition of the contributors. 
 
 Far more difficult is the question concerning the 
 application of equal or varying rates to incomes, 
 which differ in their origin (incomes from labor, or 
 from capital, or mixed incomes), or as to their dura- 
 tion, perpetual or temporary, and the latter either 
 certain or uncertain. 
 
 The advocates of the system of the so-called dis- 
 crimination of such incomes maintain that in order 
 to apply the impost equitably to them, we should 
 take into account the foregoing differences ; and 
 they thereupon propose various expedients in order 
 to reduce the total income to a taxable income, so 
 that the burden of the impost may actually be pro- 
 portional to the real condition of the single con- 
 tributors. 
 
DERIVATIVE PUBLIC INCOME. 121 
 
 In support of the system of discrimination, it is 
 particularly to be observed that it has nothing in 
 common with that of progressive taxation, because 
 the latter requires the application of a rate differing 
 as regards the amount of income, whilst the former 
 predicates the need of different treatment of incomes 
 on account of their different character or deriva- 
 tion. In addition to this, it would be unjust to tax 
 in equal measure incomes that are different as to 
 their origin, duration and certainty ; the tempo- 
 rary incomes should, on the contrary, be equalized 
 with the permanent ones, by capitalizing them for 
 the purpose of comparison. It is to be observed, 
 lastly, that account should also be taken of the 
 smaller need for saving, which the recipients of in- 
 comes derived from capital have in comparison 
 with those who only live by the produce of their 
 labor. The latter, in order not to fall sooner or 
 later into distress, must provide for the possible 
 event of illness, slackness of work, or incapacity 
 for work, by saving a considerable part of their in- 
 come. 
 
 On the other hand, the advocates of the equal 
 treatment of incomes see in the system of their 
 adversaries a tendency of hostility toward capital, 
 and an erroneous idea of taxation. In their opin- 
 ion, taxation should not alter the natural distribu- 
 tion of wealth ; and they maintain especially that 
 there is no difference between permanent and 
 
 6 
 
122 DERIVATIVE PUBLIC INCOME, 
 
 temporary incomes, so far as the tax is concerned, 
 because if the impost is permanent for the one, it 
 is temporary for the other, and to capitalize the in- 
 come without also capitalizing the impost in the 
 same sense, reduces itself to an arithmetical soph- 
 ism. They also lay stress on the fact that the in- 
 come of capital frequently embraces a charge for 
 replacement, which the adherents of discrimination 
 should take into account. They observe, finally, 
 that the latter method is exposed to insurmountable 
 difficulties in its application ; that it inevitably 
 proves arbitrary, because it lacks a safe rule for the 
 reduction of the total income into taxable income, 
 as is proved by the never-ending controversies 
 among the advocates of discrimination. 
 
 SEC. 2. General impost on the entire estate of the 
 tax-payer. 
 
 This impost has for basis not the income by it- 
 self, but the material sources from which it is de- 
 rived, to wit, the possessions, the substance, the 
 property (such as lands, mines, quarries, buildings, 
 machines, and implements, merchandise, money, 
 furniture and domestic utensils, etc.). 
 
 This impost on property has many points of 
 analogy with that on income ; it accordingly par- 
 takes of many of the defects and advantages of the 
 latter, and it likewise has the tendency to tax indi- 
 viduals with reference to their economic condition 
 considered in its totality (the debts having been 
 
DERIVATIVE PUBLIC INCOME. 12$ 
 
 of course deducted), that is, after an exact verifica- 
 tion of the property subject to taxation. 
 
 Yet this impost on property differs from that on 
 income, because, 
 
 ist. It taxes also the unproductive part of the 
 property (as parks, furniture, books, pictures, etc.), 
 which is exempt from the tax on income. 
 
 2d. It taxes at equal rates, properties that yield 
 different incomes if they happen to have the same 
 capital value. 
 
 3d. It spares personal earnings altogether. 
 
 These differences between the two imposts exist, 
 however, only when they conform to their ideal 
 type. In practice they are often less, because in 
 the case of the income tax the burden is often ap- 
 plied to unproductive property, which is considered 
 as producing a latent revenue (saving of expense), 
 or as capable of yielding a future income, and on 
 the other hand, in the impost on the entire prop- 
 erty, personal income is sometimes taxed by capi- 
 talizing it. 
 
 The advocates of the system of general imposts 
 on the entire property, who are somewhat less 
 numerous than those of the system of general im- 
 posts on income, extol it as possessing a more cer- 
 tain, stable, and evident basis ; they maintain that it 
 is less exposed to frauds, because it avoids the 
 almost insuperable difficulty of a precise ascertain- 
 ment of incomes. They further praise its beneficial 
 
124 DERIVATIVE PUBLIC INCOME. 
 
 influence upon labor and the impulse which it may 
 impart to the conversion of unproductive into pro- 
 ductive property, and the consequent repression of 
 waste and luxury. 
 
 The opponents of the general impost on prop- 
 erty do not acknowledge either its safety, its sta- 
 bility, or its simplicity of collection ; they observe 
 that the physical evidence of the taxable material 
 should not be confounded with the economic evi- 
 dence of its value, that this impost presents no less 
 difficulties of ascertainment than those relating to 
 income, but in some cases even greater ones, as 
 for instance those appertaining to the assessment 
 of personal property possessed by individuals. 
 They further declare that the parity of treatment 
 of productive and unproductive property is in itself 
 unjust ; while under any circumstances the forced 
 conversion of unproductive property into produc- 
 tive would either be illusory or unjust, tyrannical 
 and disturbing. They say, finally, that the exemp- 
 tion of personal earnings is unjust, because this 
 fiscal privilege, which is not always advantageous 
 to the poorer classes, would discourage saving, and 
 prevent that increase of capital at which the system 
 especially aims. 
 
 It seems, therefore, that imposts on the entire 
 property, offering as they do but few advantages, 
 and all the disadvantages of imposts on income, 
 are of inferior merit to the latter by reason of their 
 
DERIVATIVE PUBLIC INCOME. 125 
 
 special and very serious defects from a legal point 
 of view ; and hence should never be applied except 
 in case of extraordinary need, and with due pre- 
 cautions, tending to compensate their deficiencies 
 (in respect of personal earnings), and moderating 
 their rigor by ample exemptions, which sometimes 
 (as in the case of household effects) are required 
 by the methods of collection. A rational combi- 
 nation of the two systems of taxation is not, how- 
 ever, impossible. Some propose, for example, 
 that the poorer classes should pay a tax on income 
 only, but at a higher rate, while the richer should 
 pay in addition a tax on property, which is easier 
 to establish, more equal and exact for the determi- 
 nation of the taxable amount, and which, with re- 
 gard to economic conditions, takes into account 
 the personal element as well as that of real estate. 
 For the success of such a system, however, it is 
 indispensable to have a good political and fiscal 
 administration, conscientious, educated and zealous 
 officials, and moral and enlightened tax-payers.* 
 
 CHAPTER XII. 
 
 COMPARISON OF DIRECT WITH INDIRECT TAXES. 
 
 IN favor of direct taxes is adduced : 
 
 ist. The certainty of their product in ordinary 
 
 * See Note on Taxation of Personal Property, p. 139. 
 
126 DERIVATIVE PUBLIC INCOME. 
 
 times, and the great probability that in abnormal 
 times the proportional increase of the revenue will 
 correspond to the increase of the rates ; 
 
 2d. The economy and ease of collection, the 
 simplicity of superintendence, and the smaller 
 number of controversies ; 
 
 3d. The greater possibility of farming them out 
 on contract, to the local governments or to private 
 individuals, without incurring any considerable risk ; 
 
 4th. The encouragement to production which 
 results from the fixed or less variable character of 
 such imposts, and in particular of certain forms of 
 the same ; 
 
 5th. The greater openness and publicity of a sys- 
 tem which does not depend upon the verification 
 of certain facts, constituting more or less uncertain 
 indications of wealth, but which taxes it directly, 
 and at fixed periods calls for a definite proportion 
 of the wealth itself. 
 
 Against direct taxes may be adduced : 
 
 ist. The insufficiency of their total product in 
 comparison with the needs of modern budgets ; 
 
 2d. The trouble which is caused especially to 
 the smaller contributors by being inexorably re- 
 quired to pay, at fixed epochs, relatively large 
 sums of money ; 
 
 3d. The injustice of a fixed payment at the be- 
 ginning of a fiscal period, notwithstanding the 
 eventual shrinkage of the property taxed ; 
 
DERIVATIVE PUBLIC INCOME. 12? 
 
 4th. The danger resulting from immediate con- 
 tact with fiscal agents in which many contributors 
 are placed, who do not appreciate the equitable- 
 ness of the charge or the usefulness of the purpose 
 for which the impost is levied. 
 
 In favor of indirect taxes may be mentioned : 
 
 ist. Their very great elasticity, which produces 
 a natural equilibrium with every movement of 
 wealth ; 
 
 2d. Their considerable product, being capable 
 of taxing the smaller fortunes, as in justice they 
 should do, to which direct taxes, with their too 
 rigid methods of exaction, are scarcely applicable ; 
 
 3d. Their almost imperceptible, or at least very 
 light burden, the payment being often voluntary, 
 and as it were mingled with the prices of the ar- 
 ticles taxed, which, as a rule, are freely purchased. 
 
 Against indirect taxes may be adduced : 
 
 ist. Their great disproportion to the means of 
 the contributors, notwithstanding the apparent 
 proportion as gauged by certain criteria, which are, 
 however, a very imperfect indication. 
 
 2d. The uncertainty of the proceeds and the 
 slight prospect of an increase corresponding with 
 the raising of the rates in the case of extraordinary 
 needs ; 
 
 , 3d. The expensive, difficult and vexatious mode 
 of collection, which leads to many frauds and very 
 serious controversies ; 
 
128 DERIVATIVE PUBLIC INCOME. 
 
 4th. The greater oppression of the poorer classes, 
 however much it may be sought to exempt neces- 
 saries and to bear heavily on luxuries. 
 
 By weighing these arguments and having regard 
 to practical exigencies, we may conclude that 
 neither of the two types is perfect ; that, although 
 in the abstract direct imposts (always presuppos- 
 ing a satisfactory arrangement of them) correspond 
 better to the general canons of taxation, still it be- 
 comes necessary to resort to the indirect, in order 
 to fill the void left through the operation of direct 
 taxes, and to remedy some of their defects ; and, 
 finally, that we ought to establish a just balance 
 between them, in such manner, however, that any 
 further tax reforms may be turned in the direction 
 of establishing a duly perfected system of direct 
 imposts, as being the principal basis of a true sys- 
 tem of finance. 
 
 CHAPTER XIII. 
 
 COMPARISON BETWEEN THE MULTIPLE TAX SYSTEM 
 AND THE SINGLE TAX SYSTEM. 
 
 THE majority of writers, in accord with the uni. 
 form practice of civilized States, hold a well-regu- 
 lated and complex system of varied imposts to be 
 necessary, as avoiding the danger of a unity which 
 is defective or only apparent, and providing im- 
 
DERIVATIVE PUBLIC INCOME. 1 29 
 
 posts graduated according to the diverse nature of 
 the articles taxed, and thus attaining the purpose 
 of giving them the necessary range and flexibility, 
 and of deriving from them all that is needed for 
 public wants, and by means of their variety render- 
 ing the burden less oppressive to the tax-payer. 
 
 Still, in the past there have been many, and at 
 present there are not wanting some, who, taking an 
 ideal view, and cherishing the belief that a consider- 
 able reduction of public expenses is possible, main- 
 tain that we should substitute a rational and pro- 
 gressive single impost system for the empirical one 
 of multiplied imposts. 
 
 They observe that the single impost, and it 
 alone, is perfectly just, because it asks the contrib- 
 utor once for all for that proportional share of his 
 means which is necessary for the needs of civil 
 society; that in this manner the restrictions on the 
 production, circulation and consumption of wealth 
 are reduced to a minimum, while in the case of 
 multiplied imposts these restrictions are almost 
 insupportable ; that, finally, by means of a single 
 impost we obtain the greatest simplicity and econ- 
 omy in the mode of collection, because we lessen 
 the amount of book-keeping and superintendence, 
 and the staff of officials is reduced, with great ad- 
 vantage both to the exchequer and to the citizens. 
 
 But when they come to the application of their 
 idea, the advocates of the single-impost system are 
 
 6* 
 
ISO DERIVATIVE PUBLIC INCOME. 
 
 not at all agreed. Some, who share an opinion 
 notably entertained in the past, desire that the im- 
 post should fall on the rent of land, while others 
 prefer to tax consumption ; others, the entire prop- 
 erty ; others, and they are the majority, prefer to 
 tax jncome. 
 
 The single impost on landed revenue was at one 
 time advocated as a consequence of the supposed 
 exclusive productiveness of the soil, and therefore 
 of the incidence of every impost on the net prod- 
 uce derived therefrom ; others sought to justify it 
 by adducing a supposed repercussion of the impost 
 on the consumers of agricultural produce. To an- 
 swer these arguments, it is enough to observe that 
 modern science has fully exposed the error of these 
 premises by demonstrating that such an impost 
 would ruin the landed interest, and would accord 
 an unjustifiable privilege to the other social classes, 
 without even yielding, sufficient revenue for the 
 present wants of political societies. 
 
 The systems of single impost on consumption, or 
 on the entire propety, would be equally unjust and 
 impracticable. The former takes no notice of the 
 considerable part of wealth which is saved and put 
 aside in varying proportions by individuals, it be- 
 ing furthermore quite impossible by means of this 
 system to tax all kinds of consumption, or to find 
 any that have even a sufficiently close correspond- 
 ence with individual incomes ; the latter system 
 
DERIVATIVE PUBLIC INCOME. 131 
 
 adds to the defects which it has in common with 
 the single impost generally, as has already been 
 seen, faults of its own, which tend to render it in 
 the highest degree defective. 
 
 Most of the advocates of a single impost at the 
 present day contend for the tax on income. Even 
 in case it be admitted that, given the practicabil- 
 ity of a single-impost system, that upon income 
 answers better than any other to the ideal of a 
 system of taxation, it must not be forgotten that 
 its perfection rests upon the hypothesis of a suffi- 
 cient knowledge of individual incomes ; while, on 
 the other hand, the inequality of the assessment 
 an unavoidable consequence of defective systems 
 of ascertainment would in the case of a single im- 
 post assume such proportions as to render its ex- 
 ecution far from desirable. 
 
 To conclude this comparison of the two systems 
 of single and multiple impost, it is to be observed : 
 
 ist. That supposing a concatenation of circum- 
 stances through which at the same time we should 
 be enabled to obtain a very great reduction of 
 public expenses, and also to know with sufficient 
 exactness the relative amount of wealth of the 
 contributors, in such case a single impost (with the 
 reservation, however, of certain fees, for the re- 
 muneration of special services rendered to the citi- 
 zen), would seem to answer to the ideal of a sys- 
 tem of taxation. 
 
132 DERIVATIVE PUBLIC INCOME. 
 
 2d. That, as the facts stand, present political and 
 social conditions render a single impost impracti- 
 cable. In most States, the necessity of keeping up 
 an armament, and the vastness of the public debt, 
 prevent any considerable reduction of outlay ; nor 
 are honesty, patriotism, intelligence, culture, the 
 spirit of order and economy, sufficiently diffused 
 among the multitude of tax-payers to inspire them 
 with the candor and self-denial which are the neces- 
 sary basis of a system which, laying its tax in only 
 one way and under one head, must needs rely on 
 the punctual payment of very considerable sums. 
 It is therefore necessary to resort to multiple im- 
 posts, seeking to arrange and reform them in such 
 manner as to substitute the most simple and ra^ 
 tional combination possible in the place of com- 
 plexity and disorder. 
 
 3d. That a single-tax system, though it cannot 
 be established under the present conditions of civili- 
 zation, is not altogether devoid of either theoreti- 
 cal or practical value. It in fact constitutes an 
 ideal which, perhaps, may never be attained, but 
 which for all that should not be forgotten, although 
 the optimist, who believes that all ideals should be 
 put in practice, is not less to be blamed than the 
 empiric, who absolutely contemns them all. 
 
DERIVATIVE PUBLIC INCOME. 133 
 
 CHAPTER XIV. 
 
 LOCAL TAXES. 
 
 MUNICIPALITIES and provinces, in order to pro- 
 vide for their needs, incur obligatory expenses, and 
 expenses imposed by their own will. The former 
 meet obligations of general interest imposed upon 
 them by the State for reasons of decentralization, 
 and for the relief of its own finances ; the latter re- 
 late to objects of local concern. The kind and 
 amount of the voluntary expenses are determined 
 by the local authorities, with the co-operation of 
 their own deliberative assemblies, within certain 
 limits fixed by the State, and varied according to 
 the rule of the greater or lesser autonomy granted 
 to the minor political societies. 
 
 Although the receipts of municipalities and prov- 
 inces (ordinary and extraordinary, original and 
 derivative,) are governed fundamentally by the 
 same principles which obtain for the State, it may 
 prove useful to indicate in general certain rules 
 concerning local imposts, which are the most im- 
 portant among their ordinary receipts. 
 
 Local taxes are either called additional to those 
 imposed by the State or entirely different from 
 those. The latter answer correctly to the prin- 
 
134 DERIVATIVE PUBLIC INCOME. 
 
 ciple of autonomy which in free States is enjoyed 
 by minor political bodies, and also to the special 
 nature of the expenses incurred by the local au- 
 thorities, and especially by those of municipali- 
 ties. The latter, in fact, may be said to constitute 
 associations rather than States on a small scale, 
 being based on a joining of interests, mostly of an 
 economic character, which necessarily leads to some 
 modification of the rules relating to the assessment 
 of their taxes. 
 
 In fact, it must be evident that the special advan- 
 tages which landed property derives from munic- 
 ipal institutions justify the existence of distinct 
 imposts on the property itself in addition to other 
 local taxes which are levied on wealth in general. 
 On the other hand, the increased influence of the 
 lower classes in the administration should equitably 
 be balanced by an increase of their relative bur- 
 dens, which can be obtained by means of suitable 
 imposts on consumption, arranged in a manner not 
 to cause too great disturbance of the national pro- 
 duction and circulation. 
 
 The advocates of imposts additional to those of 
 the State (surtaxes) lay stress on the ease of ascer- 
 tainment, and economy of collection, and they 
 plead the inconvenience of radical changes in sys- 
 tems which in many countries have been sanctioned 
 by the custom of ages. On the other hand, the 
 advocates of purely local imposts observe that these 
 
DERIVATIVE PUBLIC INCOME. 13$ 
 
 facilities encourage a tendency to extravagance ; 
 that in the confusion of local with general imposts 
 they deprive the tax-payers of the distinct and ex- 
 act knowledge of the sacrifices which they must 
 make, and that they accordingly lessen the chance 
 of an efficient control over the local budget. 
 
 Financial reform of the provinces and municipal- 
 ities, which above all supposes the execution of 
 corresponding administrative reforms, the reduc- 
 tion of public expenses, and the exertion on the 
 part of the State of a controlling power, vigorous, 
 but entirely compatible with local freedom, must 
 at the same time be consonant with national tradi- 
 tions, and must also take into account the notable 
 difference that exists between the economic condi- 
 tion of cities and that of villages. 
 
 A good system of municipal taxation may be 
 constituted by a special impost (in urban communi- 
 ties on dwellings, in rural, communities on fami- 
 lies) ; by an additional percentage to the land-tax 
 of the State, and by imposts on articles of general 
 domestic consumption, with the eventual final ad- 
 dition of some other imposts on the consumption 
 of articles of luxury. 
 
TAXATION OF MORTGAGES. 
 
 TAXATION of mortgaged land without deduction of the amount of the 
 mortgage, and taxation of the mortgage also, are a crying evil in the fiscal 
 systems of American States. There is great contrariety of legislation 
 and of judicial decision on this subject, and nothing in the whole range of 
 fiscal practice has given rise to more bitter and heated controversy. The 
 origin of this double taxation may be easily traced. Owing to the difficulty 
 of finding and taxing personal property, and especially " moneyed capital " 
 in its modern forms, it is necessary that landed property should supply the 
 largest share of the revenue for local purposes. Revenue must be had some- 
 how, and accordingly the law lays its hand first upon whatever is immovable, 
 and makes the tax the paramount lien upon it. To allow deduction for 
 mortgages is to authorize a lien paramount to the tax, which may swallow 
 the entire revenue and leave the State empty-handed. To forbid this is 
 philosophical, and it cannot be called unjust, since it is a condition that has 
 run with land titles from the beginning, every purchaser having taken account 
 of it and included it in the price he was willing to pay for the land. 
 
 On the other hand, the determination to tax personal property equally with 
 real estate amounts to a frenzy in most parts of the country, and it happens 
 that mortgages are among the few forms of "moneyed capital" that can- 
 not be concealed. In order to be valid security, they must be recorded. The 
 mortgage is property in the hands of the holder. Why, it is asked, should 
 the lender on mortgage not bear his share of the public burdens ? What 
 are his merits, that he should be favored at the expense of all other tax- 
 payers. 
 
 Yet there is a wrong here which ought to be righted, since there is double 
 taxation of the same property, as a very simple illustration will show. 
 Leaving the confusing element of money out of the reckoning, let us con- 
 sider a case where the lender, A, happens to have exactly the kind of 
 property that the borrower, B, wishes to acquire by mortgaging his land, to 
 wit, cattle. B has land worth $2,000, and A has cattle worth $1,000. A 
 transfers the cattle to B and takes B's note, secured by mortgage on the land, 
 
TAXATION OF MORTGAGES. 137 
 
 for $1,000. He might take any other security that he considered satisfac- 
 tory, as, for example, the endorsement of a third person, C, or he might be 
 satisfied with B's unsecured note, in which case the taxing officers would 
 have no prima facie evidence that any such debt existed. The whole 
 amount of property in any case is the land $2,000, and the cattle $1,000, 
 total $3,000. But if a mortgage on land is given to secure the debt, the 
 total property becomes $4,000 in the eye of the law, viz., land $2,000, 
 cattle $1,000, mortgage $1,000, a palpable absurdity, no less than saying 
 that two and one make four. 
 
 The State of New York palliates this absurdity by authorizing the mort- 
 gagor to deduct the amount of the mortgage from the value of his personal 
 property. This is in pursuance of a general provision of the State law that 
 all persons may deduct their debts from the value of their personal property. 
 If all personal property were assessed for taxes in other words, if the ideal 
 system that the New York law contemplates were carried into practice 
 there would be no double taxation to complain of. In the case cited the 
 mortgagor would pay the full tax on the land, but no tax on the cattle. The 
 mortgagee would pay the tax on the mortgage, which represents the value of 
 the cattle. If the borrower on mortgage chooses to erect buildings or to buy 
 other land, i.e., to convert his borrowed capital into more real estate, which 
 is also subject to tax, or to send it out of the State and into the jurisdiction 
 of another taxing power, he does so on the presumption that he can make 
 better use of it than to keep it at home or to invest it in personal property 
 from which the amount of his mortgage debt can be deducted. He makes 
 his election, and he has nothing to complain of. If, after borrowing money 
 on mortgage, he loses it if, in the case cited, his cattle die and he has not 
 sufficient personal property to offset the debt on the assessment rolls there 
 is double taxation, the land being still taxed at its full value and the mort- 
 gage being taxed after the tangible property which it represents has disap- 
 peared. But such cases are rare, and the law cannot provide for them, be- 
 cause it is impossible for the State to keep track of individual losses. 
 
 The New York law I conceive to be perfectly fair in principle. The law 
 of any State which taxes both land and mortgage without allowing 
 deduction of the debt from the mortgagor's personal estate is indefensible. 
 
 The question may be asked, does not the lender of money on mortgage 
 take the tax into consideration and make it a component part of the rate of 
 interest ? Does he not charge a rate high enough to recoup himself for the 
 tax he has to pay, in addition to the prevailing return on capital ? The com- 
 mon belief is that he does. The truth is that he does if he can, but other- 
 wise not. The prevailing return on capital will itself vary with the tax, 
 which is simply one of the expenses of production. The rate obtainable for 
 
TAXATION OF MORTGAGES. 
 
 loans depends first and foremost upon the profit that the borrower can real- 
 ize. If he has to pay a tax, his profits are so much less, and his ability to 
 pay interest on borrowed capital is so much less. Putting a clause in the 
 mortgage requiring the borrower to pay all taxes, as is customary in Penn- 
 sylvania, or passing a law authorizing the mortgagee to add the tax to the 
 rate of interest, as is the case in Connecticut, does not really determine any- 
 thing. It merely prevents subsequent disputes. It does not tell us whose 
 pocket suffers by reason of the tax. The elements of the problem are too 
 many and too variable for dogmatic treatment. My belief is that the mort- 
 gage tax, however laid, falls upon both parties, but the proportions are in- 
 determinable. 
 
 The present law of Massachusetts (Public Statutes, 1882, Chapter n) 
 provides that the mortgagor and mortgagee shall be joint owners ; that the 
 land shall be taxed in the name of the mortgagor for its value, less the 
 amount of the mortgage ; and that it shall be taxed in the name of the 
 mortgagee for the remainder. The assessors are required to give a bill 
 showing the interest of both. The whole tax is a lien on the land, which is 
 promptly sold in case of default. In theory, therefore, if A owns a house 
 taxed for $10,000, subject to a mortgage of $6,000, given to B, a tax bill is 
 to be rendered A for $4,000, and to B for $6,000. In practice, however, 
 no such thing happens ; for the same law exempts from taxable personal 
 property " any loan on mortgage of real estate taxable as real estate." This 
 exempts the debt from taxation ; so all that the mortgagee has to do is to 
 take an agreement from the mortgagor to pay all the taxes on the land, 
 which, being what he always has done, he is perfectly willing to do still. 
 As an additional safeguard against a change of the law, the mortgagor is 
 also made to agree to pay the tax on the debt itself, in case the law should 
 again make it taxable. 
 
 The Maryland Tax Commission in their recent report (January, 1888) 
 recommend that no tax be imposed on mortgages, being convinced that 
 the tax will in every case be shifted upon the mortgagor, and that even if it 
 could be collected from the mortgagee the effect would be to drive capital 
 away from the State which cannot be spared. ED. 
 
TAXATION OF PERSONAL PROPERTY. 
 
 THE taxation of personal property is one of the greatest of all puzzles 
 in fiscal science, and the source of never-ending controversy. The oppo- 
 nents of such taxation rest their case upon two grounds : first, the impossi- 
 bility of finding and identifying the ownership of such property with any 
 approach to equality ; second, the inexpediency of discouraging or driving 
 away movable property whose presence or juxtaposition adds so greatly to 
 the value of real estate. Both of these objections are stated in their great- 
 est force and with the fullest illustration in the two reports of Mr. David A. 
 Wells and his associate Commissioners to revise the tax laws of the State of 
 New York. 
 
 The first criterion of any tax system is justice. It is certainly opposed 
 to justice to allow any kind of property to escape its share of the public 
 burdens. But any criterion that cannot be put in practice is an abstraction 
 and a delusion. The experience of American communities has shown that 
 personal property cannot be taxed equally with real estate. Notwithstand- 
 ing the repeated and ever-renewed attempts to reach those forms of per- 
 sonalty that are grouped under the head of " moneyed capital " in the hands 
 of private persons, little headway has been made. The amount of such 
 property is rapidly increasing, while the public revenue derived from it is not 
 increasing, but in some States is diminishing, and this without any change in 
 the laws applicable thereto. In the State of New York, for example, the 
 amount of personal property on the assessment rolls for the year 1871 was 
 $452,607,732. In 1886 it had fallen to $335,898,389 a decline of $116,- 
 709,343. These figures carry their own comment. 
 
 Two facts conspire to defeat the attempt to tax personal property of this 
 description. These are (i) that the property cannot be found by the as- 
 sessor unless the owner co-operates with him ; (2) that if it is found, and 
 if the tax on it becomes inconvenient, the owner can shift his residence to 
 some community which offers the inducement of exemption, or of low taxes, or 
 of lax administration, in order to attract capital and population to itself. For 
 purposes of residence, there is no choice to be made between the different 
 
140 TAXATION OF PERSONAL PROPERTY. 
 
 States of the Union as regards any of the rights of citizenship. As between 
 adjoining States, there is little difference in the matter of educational, relig- 
 ious, or social advantages. There is no reason why a person should prefer 
 New York as a place of residence rather than New Jersey, or Illinois rather 
 than Wisconsin. But the less wealthy and populous State will be apt to 
 offer advantages in the way of low tax burdens in order to draw people to 
 her own borders, and the State which perceives a drain of this sort setting 
 from herself to her neighbor will either change her own tax law or relax her 
 administration of it. The situation of New York City, lying as a wedge be- 
 tween the States of New Jersey and Connecticut, is such that very slight 
 inducements of a pecuniary sort will determine whether a person doing 
 business here shall make the city his place of domicile and taxation or not. 
 Accordingly a practice has been adopted by the taxing authorities of New York 
 to assess personal property at no higher rate than is considered the equivalent 
 of the cost and trouble of moving to New Jersey or Connecticut. For this 
 practice the law furnishes facilities by not requiring the tax-payer to return 
 any schedule of his personal property. A deputy tax commissioner of the 
 city of New York, while giving testimony in a lawsuit a few years ago, ex- 
 plained the method of arriving at the value of personal property. The City 
 Directory, he said, was first examined in order to find the names of persons 
 to be assessed, and an estimate of each one's property was inferred from 
 the nature of his business and his place and style of residence. " Our rule 
 is, then," he continued, "to let the amounts remain from two to three years ; 
 that is, everything under $20,000. Larger amounts we do not crowd up much, 
 unless we have specific information about persons, but on $20,000 or $25,000 
 we do not often increase ; but if an amount is smaller than that, once in about 
 three years we increase it from say $10,000 to $12,000. A person assessed 
 $1,000 we should not increase to $3,000, but we would increase one from 
 $3,000 to $5,000 after it had stood two or three years." In other words, 
 personal property in New York City, other than that of banks and incorpo- 
 rated companies, is practically exempt from taxation. 
 
 Nor can we see any injustice in this fact as applied to cities, since the 
 value of real estate depends altogether upon the accumulation of personal 
 property upon it. The advance in the values of building ground is caused 
 by the growth of population, which is made possible by the growth and 
 concentration of capital. It is not unjust, therefore, that building ground 
 should bear the chief burden of taxation. It would not be unjust if per- 
 sonal property were exempted from municipal taxation altogether. But the 
 case is widely different as regards agricultural land. The accumulation of 
 personal property and the growth of population in New York add nothing 
 to the value of farms a few miles away from the city. Flour and beef can 
 
OP THE 
 
 TAXATION OF PERSONAL PROPERTY. 14* 
 
 be brought hither from Dakota, and vegetables from Norfolk and Savannah, 
 almost as cheaply as from Long Island. But building lots cannot be im- 
 ported from either place. In other words, town and city lots have a monop- 
 oly character, which farms have not. 
 
 The question recurs, Is it worth while to make a pretence of taxing a 
 kind of property that we cannot tax with any approach to uniformity, and 
 that we do not tax even so far as we might, lest it take to itself wings and 
 flyaway? Is the first criterion of taxation, i.e., justice, satisfied by laws 
 that are not enforced? We think the answer must be in the negative, and 
 that it would be better to abandon all attempts to tax movable and intan- 
 gible things and look for revenue, for State and local purposes, exclusively 
 among those things that are fixed and ascertainable. 
 
 It cannot be admitted, however, as an economic truth that taxes on 
 land diffuse themselves over the community so that personal property pays 
 its share in an indirect way. A tax on land is paid by the land-owner 
 alone. He cannot shift a penny of it upon anybody else, for the reason 
 that he can add nothing to the rental value of land or to the selling price of 
 farm products by reason of the tax. These are governed by the law of sup- 
 ply and demand. Suppose that A's building lot or B's farm is taxed $100 
 this year. If the tax is raised to $200 next year, A cannot get any higher 
 rent (population remaining the same), nor can B get any better price for 
 his wheat and bacon. Both must accept the market value quite irrespective 
 of the tax. In the case of agricultural products, the market value may be, 
 and generally is, fixed by transactions taking place in foreign lands many 
 thousand miles distant, and over which the producer has no more control 
 than he has over the phases of the moon. Building ground is space to 
 dwell and work in. Its rental value is the resultant of competition in the 
 strictest sense. If all taxes were abolished to-morrow, the land-owners 
 would not on that account lower their rents, nor would renters pay more if 
 the taxes were doubled. They would still pay what the competition of 
 bidders for space required. 
 
 It is said, however, that if the land-owner finds that taxation reduces his 
 profits below the customary return on capital in other trades, he will sell 
 out and invest his money in other things, and that thus the land tax will be 
 diffused over the whole community. But the buyer will take the tax into 
 consideration also. The tax will be capitalized and shaved off the price of 
 the land. It will be " diffused " in the pocket of the seller, and nowhere 
 else. 
 
 These remarks do not apply to buildings, which are in their nature per- 
 ishable, requiring repairs and renewal. A tax on buildings is in general 
 paid by the consumer of buildings, i.e., the tenant, because buildings will 
 
142 TAXATION OF PERSONAL PROPERTY. 
 
 not be erected unless the return for the capital employed is sufficient to re- 
 imburse all the charges interest, insurance, repairs, renewal and tax. This 
 principle is not altered by merging the ownership of both building and 
 ground in the same person, although the incidence of the tax is less easily 
 traced in such cases. The land tax is paid by the owner, and the building 
 tax by the occupier. New York Evening Post. 
 
TAXATION OF CORPORATIONS. 
 
 IT cannot be affirmed that the taxation of corporations in the United 
 States is grounded on any well-defined principles. The reason why incor- 
 porated companies are taxed by rules peculiar to themselves is that corpora- 
 tions partake of the nature of both real and personal property. They are 
 like real estate, in the sense that they are immovable, and always within 
 sight and reach of the taxing authorities. On the other hand their prop- 
 erty is to a large extent personal, i.e., movable, circulating. A body of 
 law has grown out of this mixed condition, but it is in a very chaotic state. 
 For example, it is still undetermined whether a tax on capital stock is a tax 
 on the franchise or a tax on the property. The highest courts of New York 
 and of Pennsylvania have come to diametrically opposite conclusions on this 
 point, the former holding that it is a tax on "franchise or business," and 
 the latter that it is a tax on " property and assets." The question is now 
 pending in the Supreme Court of the United States. 
 
 The New York law of 1881 taxing the capital stock of corporations 
 described the impost as a tax on the "corporate franchise or business." 
 If it were really such, it would be immaterial in what part of the world the 
 property was situated, or the business carried on. A great deal of confu- 
 sion and litigation arose under this law, the corporations contending that 
 they were not taxable on that portion of their capital employed in other 
 States. The State Comptroller conceded this point as to certain corpora- 
 tions, and denied it as to others. The Court of Appeals held that it was a 
 franchise tax, and that it applied to the entire capital stock of the Western 
 Union Telegraph Company, although the property of the company was 
 situated in all of the States of the Union, and in several foreign countries. 
 The injustice of such a tax was strongly animadverted upon by the court in 
 rendering the decision. The legislature, accordingly, in 1885 changed the 
 law by limiting the tax to " the amount of capital stock employed" within 
 this State," thus giving a legislative interpretation to the tax different from 
 that given by the court, and different probably from that intended by the 
 
144 TAXATION OF CORPORATIONS. 
 
 legislature of 1881, which passed the act in question. In Pennsylvania, the 
 tax was simply imposed on "capital stock," and the courts in that State 
 have always held that this means " property and assets," as distinguished 
 from franchise, or the right to transact business in the particular way de- 
 scribed in the act of incorporation. 
 
 There is a great variety of taxes in the United States that go by the 
 name of franchise tax, although their legal classification may be more or 
 less open to dispute, viz. : 
 
 1. A premium on the granting of the charter, which is paid in whole or 
 in part before organization. 
 
 2. An annual tax of several kinds : 
 
 a Based on capital stock in proportion to the amount of dividends 
 
 paid or declared. 
 b Based on capital stock according to its actual or market value, when 
 
 there are no dividends. 
 c Based on the earnings, gross or net. 
 
 d Based on total value of property, tangible and intangible, whether 
 represented by capital stock or bonded debt, or both together. 
 This is usually measured by mileage in the case of transportation 
 companies. 
 
 e Based on the business done as in Massachusetts, on the average 
 deposits in savings-banks and trust companies, and on the num- 
 ber of telephones used by telephone companies ; as in Tennessee, 
 on the number of parlor and sleeping cars run by a parlor car 
 company ; as in New York, on the average deposits of foreign 
 banking companies ; as in Pennsylvania, formerly, on each ton 
 of coal mined ; as in Texas, on each telegram sent by a tele- 
 graph company. 
 / Based on the capital, at par, regardless of value, as in New Jersey 
 
 and Massachusetts, for certain classes of corporations. 
 In the year 1879 a Committee of State Railroad Commissioners, consist- 
 ing of Messrs. C. F. Adams, Jr., W. B. Williams and J. H. Oberly, made a 
 report on the taxation of railroads and railroad securities in the United 
 States and in foreign countries. They found almost every conceivable 
 variety of method prevailing in the several States. They found that the 
 States of Michigan and Wisconsin had adopted a very simple and workable 
 plan of taxing the gross receipts of railroad companies, exempting them and 
 their share-holders from all other taxation, either State or municipal, except 
 on their real property not included in their right of way. They accordingly 
 recommended this plan for general adoption, but they added : 
 
 "The apportionment of a levy on gross receipts among the several 
 
TAXATION OF CORPORATIONS. 145 
 
 States through which a single railroad may run is in this country un- 
 doubtedly attended with much difficulty, and the committee have given care- 
 ful consideration to the subject. The conclusion at which they have 
 arrived is that it should be made a matter of mutual understanding among 
 the States, and that, as the levies must be independent, they should be ap- 
 portioned according to mileage." 
 
 Additional force was lent to the last paragraph above quoted by a de- 
 cision of the Supreme Court of the United States rendered in May, 1887, to 
 the effect that all State taxes on gross receipts from interstate or foreign 
 commerce are unconstitutional. It thus appears that what the committee 
 found to be difficult in practice is impossible in law, and that anything 
 which has its foundation on the mutual understanding of the States has no 
 foundation at all. The case before the court was that of the Philadelphia 
 and Southern Mail Steamship Company v. Commonwealth of Pennsylvania. 
 It arose under a law of the State of Pennsylvania, passed in 1877, which 
 taxed the gross receipts of all transportation companies incorporated by or 
 doing business in the State, irrespective of the place where the earnings 
 were made. The Steamship Company pleaded that no part of its earnings 
 was made within the State of Pennsylvania, but that all were made from 
 interstate and foreign commerce. The decision of the court was based 
 upon that clause of the Constitution which gives to Congress the power " to 
 regulate commerce with foreign nations, and among the several States, and 
 with the Indian tribes. " It not only holds that the tax on the gross receipts 
 of this company is unconstitutional, but the argument goes to the point that 
 any State tax on the internal traffic of the country, which traffic crosses the 
 boundary of a State, is unconstitutional. While, in other words, a State 
 may tax the gross income derived from the transportation of flour coming 
 from Buffalo to New York, it cannot tax that of flour coming from Minne- 
 apolis by way of Buffalo to New York. 
 
 That the public authorities of Pennsylvania so understand the decision 
 is evident from the fact that they are now taking steps to abolish the tax on 
 gross receipts of transportation companies altogether, and to substitute a 
 property tax in place of it, estimating the value of railroads by adding to- 
 gether their entire funded debt at par and their capital stock at its actual 
 value, and taxing this aggregate sum in the proportion that the mileage in 
 Pennsylvania bears to the whole mileage operated. This plan, which is 
 already in force in Connecticut, involves the taxation of a company for its 
 debts, and is in reality a mixing together of objective and subjective taxes. 
 A tax on a locomotive is an objective tax. The assessor can ascertain 
 its value, and can seize and sell it, if the tax is not paid. The State is 
 not bound to inquire whether the person using it has paid for it, or whether 
 
 7 
 
TAXATION OF CORPORATIONS. 
 
 he is in debt for it, in whole or in part, or whether the debt is secured by 
 mortgage, or not secured at all. The locomotive, the object, the visible and 
 tangible thing is taxed. 
 
 A subjective tax is a tax on persons and corporations, because they are 
 worth so much money. Of course they are worth only the amount of their 
 possessions, minus their debts. The proposed law of Pennsylvania, like 
 the present law of Connecticut, taxes the railroad subjectively, but upon the 
 presumption that it has objects in use and under its control, worth as much 
 as its debts and capital stock added together. 
 
 This plan seems, at first glance, to be unjust, but it is not necessarily so. 
 If a railroad pays $100,000 per year in taxes it is immaterial whether the levy 
 is made on its gross receipts, or on its capital stock, or on its stock and bonds 
 added together. But when we consider the relative situation of two roads 
 in the same State, and making the same earnings, the one having a large 
 debt and a small capital stock and the other a small debt and a large capital 
 stock, it becomes apparent that they ought to pay the same amount of taxes ; 
 and this would not be the case if debts were deducted. It would be neither 
 wise nor just to tax one more heavily than the other, because its finances 
 have been more prudently managed and because it has pursued the policy of 
 paying its debts as they fall due instead of issuing new bonds to take up old 
 ones. There is nothing easier to create than railroad debts. It is not good 
 policy for the State to encourage such debts by offering exemption from 
 taxes on that portion of the property represented by the bonds. 
 
 That railroads and other corporations of a monopoly character are far 
 from paying their due proportion of taxes, the proportion which real estate 
 and other immovable and ascertainable property pays, there is good reason 
 to believe. Comptroller Chapin, of New York, in a special report to the 
 Legislature, dated March 30, 1886, showed that the New York Central Rail- 
 road was paying a tax of only eight mills on its value, whereas citizens were 
 paying seventeen mills average. " Yet it is admitted," he says, " that this 
 corporation has been exceptionally fair toward the public in its construction 
 of the tax law, and has paid proportionately much more than other corpora- 
 tions/' The Maryland Tax Commission are extremely indignant at finding 
 that the railroad corporations of the State, which are taxed on the basis of 
 their gross receipts, really pay for State taxes only one-half what a private 
 citizen would pay on the same value. ED. 
 
TAXATION OF "LAND VALUES." 
 
 THERE has been so much political agitation during the past year on the 
 subject of the taxation of " land values" that this work would not be com- 
 plete without some notice of it. The doctrine espoused by the United 
 Labor party of New York, under the leadership of Mr. Henry George, is 
 stated in the platform adopted by the Syracuse Convention, August I2th, 
 1887, as follows : 
 
 " What we propose is not the disturbing any man in his holding or title, 
 but, by abolishing all taxes on industry or its products, to leave to the pro- 
 ducer the full fruit of his exertions, and by the taxation of land values, ex- 
 clusive of improvements, to devote to the common use and benefit those 
 values which, arising not from the exertion of the individual but from the 
 growth of society, belong to the community as a whole." 
 
 We observe, in the first place, that neither land nor land values ever pay 
 taxes. Things do not pay taxes. Taxes on land are paid by land-owners, 
 as has been shown on a preceding page. The proposition therefore is, that 
 land-owners shall pay all the taxes for the support of government, both gen- 
 eral and local, and that nobody else shall pay any taxes ; with the further 
 proviso that, if anything in the way of " land values "is left over, that shall 
 be taken also and applied to the common use and benefit. 
 
 The assumption that land values arise from the growth of society is a 
 half truth, the other half being the fact that the growth of society is made 
 possible by the cultivators of the soil, who are in this country mainly the 
 land-owners. It is certain that land does not produce wealth, except in very 
 limited quantity, without labor. Of the two sources of wealth, land and 
 labor, the latter counts for everything that the former would not yield spon- 
 taneously, such as grass, nuts, wild fruit, wild animals, etc. If we were to 
 agree that all these spontaneous products or their equivalent, as nearly as it 
 can be ascertained, should be applied to the common use through the 
 medium of taxation, how far would they go toward the support of modern 
 governments? Would anything be left over to apply to the abolition of pov- 
 erty in private circles ? 
 
 But we are told that rent exists nevertheless, that it has not been pro- 
 
148 TAXATION OF "LAND VALUES." 
 
 duced by the land-owner, and that it ought to belong to the whole people. 
 Economic rent is the price that is, or might be, obtained for the use of un- 
 improved land. It is measured by the yield of some particular land over 
 and above the yield of the poorest land in use, i. e., land that yields nothing 
 but ordinary wages and ordinary interest on the capital employed in tillage 
 or other improvement. Accordingly rent does not exist absolutely but rela- 
 tively. 
 
 The relations which cause rent to exist are those of peculiar fertility or 
 situation. Land A may be more fertile than land B, or it may be nearer to 
 market. In either case it will yield more rent unless other circumstances 
 counteract this tendency. If all the land in a country is of equal fertility, 
 and the supply is still unexhausted, rent will only arise from differences of 
 situation. If, in such case, differences of situation could be neutralized by 
 cheapness and quickness of transportation rent would not exist at all. 
 
 We are speaking now of agricultural rent, looking at the practical bear- 
 ings, if any, of the proposed exaction of the whole State revenue from land- 
 owners, and a general prosperity fund besides. 
 
 Higher fertility counts for little in this country at present, as a factor in 
 producing rent. In the older States the original fertility has long since been 
 exhausted, and either replaced by artificial fertility or not replaced at all. 
 In the newer parts of the country economic rent does not exist, because land 
 can be had for the trouble of occupying and cultivating it. Difference of 
 situation is the only rent-making element worth taking into account, and 
 even this is so insignificant as regards agricultural land that the most fav- 
 orably situated farms in the New England States, where the population is 
 densest, can hardly be rented at all, even with the improvements that have 
 been made upon the soil. Good, unimproved agricultural land within forty 
 miles of the city of New York has been offered without takers, free of rent, 
 for many years, to any person who would take it and cultivate it. Great 
 quantities of land in the Adirondack region have been sold for taxes and 
 abandoned by the owners, of late years. The quantity of land falling into the 
 State's ownership in this way has become so important in some places that a 
 serious deficit has arisen in the local taxes, making it necessary for the State 
 in some cases to pay local taxes on its own land, which it does by remitting 
 to the counties in which the land is situated a corresponding amount of their 
 dues to the State. (See Laws of 1886, chapter 280.) 
 
 I have heard an eminent professor in a New England college say that 
 he had been looking all his life for a case of economic rent in the agricul- 
 tural districts of the New England States, but had not yet found one. In 
 other words, the present tax on farming land there exhausts the economic 
 rent, and fully realizes the platform of the United Labor party. If any 
 
TAXATION OF "LAND VALUES." 149 
 
 heavier tax is imposed the farms will be abandoned to the State. The 
 cheapness of transportation from the more productive lands of the West is 
 the cause of the disappearance of agricultural rent in New England, and 
 also of the great shrinkage of rent in old -England. There are probably 
 places where agricultural rent can be found in the Central and Western 
 States, but when the capital value of improvements attached to or embodied 
 in the soil is deducted, the residuum of purely economic rent must be ex- 
 tremely small, and must continue small so long as there is any considerable 
 amount of arable land in this country or in Canada unoccupied. 
 
 When cheap transportation has so far neutralized advantages of situa- 
 tion that economic rent has ceased to exist in the most populous parts of the 
 country, where it ought to be most flagrant and conspicuous, where are we 
 to look for the "land values" that shall yield such a gushing revenue that 
 nobody but land-owners need pay any taxes ? Perhaps the answer will be 
 that we shall find it in town and city lots. 
 
 If we take the city of New York as a pre-eminent example, we find that 
 the taxes imposed for State and local purposes in 1887 amounted to $32,370,- 
 696.78. Of this sum the owners of real estate, land and buildings together, 
 paid $27,097,022.93, while banks, corporations, and the owners of personal 
 property together paid only $5,273,673.85. But if the owners of real estate 
 should pay the whole it would not exhaust rent. There would still be 
 something left over. 
 
 It is customary to say that this something left over is the common herit- 
 age of all mankind. Although the land-owner may have paid its just value, 
 although he may pay five-sixths of the entire cost of supporting the govern- 
 ment, and its educational and charitable institutions, that is, promoting 
 the "growth of society" year after year, yet it is contended that he has 
 stepped into the heritage of other people and that he ought to be dispos- 
 sessed. If we ask how you know that lots in New York are the heritage of 
 all mankind, or of that particular portion of mankind who choose to dwell 
 here, the argument takes a theological, or teleological, turn at once, and we 
 are asked whether the Almighty can be supposed to have sent anybody into 
 the world disinherited, or without some share in the land. This is a hard 
 question. We cannot penetrate the divine mysteries, but we can say with 
 considerable confidence that it is quite as likely the Almighty intended that 
 some people should not have land, as that he intended that they should take 
 it away from other people without compensation, after having agreed in 
 writing that they would not do so. ED. 
 
TAXES ON CONSUMPTION. 
 
 THE revenue of the United States Government is derived almost wholly 
 from taxes on consumption, customs duties yielding $217,000,000, and inter- 
 nal revenue, or excise duties, $120,000,000. The author of this treatise 
 declines to enter into the discussion of protectionism, as not being a fiscal 
 question. It will, therefore, not be introduced as a note. But the great 
 preponderance that taxes on consumption bear in our system of national tax- 
 ation requires some comment. 
 
 In the first place, let us remark that taxes on property and on income, at 
 a period not very remote, yielded by far the larger part of the internal rev- 
 enue. In the year 1866, the following sums were received from taxes, 
 which have since been repealed : 
 
 From manufactures, other than liquor and tobacco. . $127,528,610 
 
 " incomes 61,071,932 
 
 " stamps 15,044,373 
 
 " gross receipts 11,262,430 
 
 " licenses other than liquor and tobacco 14,011,132 
 
 " sales 4,002,283 
 
 " salaries - 3.717,395 
 
 " legacies and successions i, 170,979 
 
 " billiard tables, carriages, pianos, etc 1,693,123 
 
 " banks, railroads, etc 12, 109,420 
 
 " miscellaneous . 4,440, 290 
 
 $256,051,967 
 Internal taxes still remaining yielded in 1866 : 
 
 From distilled spirits $29,198,578 
 
 " fermented liquors 5,115,140 
 
 " tobacco, snuff and cigars 16,514,333 
 
 " licenses, liquor and tobacco 4,026,966 
 
 $54.855,017 
 
 The internal revenue at the present time (January i, 1888) is made up of 
 taxes on the following articles, viz. : 
 
TAXES ON CONSUMPTION. !$! 
 
 FISCAL YEAR, 1887. 
 
 Distilled spirits $65,829,321 
 
 Fermented liquors 21,922,187 
 
 Tobacco 30,108,067 
 
 Oleomargarine. 723,948 
 
 National bank-notes 2,385,851 
 
 $120,969,374 
 
 It is stated in the text that taxes on consumption are justifiable on two 
 grounds : first, because the budgets of modern times cannot be balanced 
 without them ; and second, because they are the only means of reaching the 
 working classes, who ought not to enjoy all the advantages of government 
 without contributing anything to its support. Professor Cossa did not have 
 in view a country which derives its national revenue wholly from taxes of 
 this kind. Nor did he have in view a country whose budget might easily 
 be balanced without any taxes on consumption, if that policy were desirable. 
 
 The total expenses of the government for the fiscal year 1887, other than 
 for interest and sinking fund, were $220,190,602. It appears, therefore, 
 that taxes exceeding by $36,000,000 the whole ordinary expenses of the gov- 
 ernment have been repealed since the year 1866, and that these have been 
 mostly taxes on property. Taxes on income, gross receipts, corporations, 
 legacies, occupations, sales and stamp duties are paid by the persons out of 
 whose pockets they first come. There is no repercussion here. And in 
 general it may be assumed that a tax falls on the first payer unless the con- 
 trary can be clearly shown, as it can be in the case of customs duties and 
 the excise tax on liquors and tobacco. Everybody knows that the importer, 
 the distiller and the tobacconist merely advance the tax to the government 
 and collect it back from the consumer, together with interest on the amount 
 advanced. 
 
 How far the internal tax on manufactures, while it lasted, was a tax on 
 consumption, it is difficult to say. The increase of customs duties, which 
 was made simultaneously, was intended to convert it into a tax on consump- 
 tion by enabling the manufacturer to add the amount of the tax to the price* 
 of the article produced. Probably it did not have this effect in all cases. 
 When the internal tax was repealed the corresponding customs duties were 
 left unrepealed, except in a few cases. The effect of this was to enable the 
 manufacturer of articles subject to foreign competition to recoup himself 
 very speedily, even if he had not done so while the internal tax was in force. 
 
 In the year 1776 Adam Smith stated four rules of taxation, which have 
 been accepted by the whole civilized world, and by all governments in it, 
 as the maxims of justice applied to that matter. The first of these rules 
 
I5 2 TAXES ON CONSUMPTION. 
 
 says that " the subjects of every State ought to contribute to the support of 
 the government as nearly as possible according to their respective abilities." 
 This means, of course, that the man whose income is $5,000 ought to pay 
 ten times as much as the one whose income is $500, and so on. Nobody 
 denies the truth of this maxim except some writers who contend that the 
 man whose income is $500 or less ought not to pay any taxes. I think that 
 he ought to pay something and ought to know that he pays it. 
 
 Since our national taxes are levied on consumption it is evident that 
 the people of the United States are not paying taxes " according to their re- 
 spective abilities," but according to their respective needs. The man with 
 $5,000 income is not paying ten times as much as the man with $500, as 
 everybody knows that he ought to. They are each paying according to 
 their consumption. The man with $5,000 income does not consume ten 
 times as much of dutiable goods as the man with $500 income. He may 
 consume a little more, but not much more. The things he buys may be of 
 superior quality, but it does not follow that he pays any more tax on that 
 account. On anything that is taxed by the pound, the yard, or the gallon 
 and most things are so taxed the poor man pays as much as the rich man, 
 whatever be the quality or style of the things used by them respectively. It 
 results that Adam Smith's first rule is not followed in this country. It re- 
 sults that the very opposite course is pursued. It results that people do not 
 pay taxes according to their means, but according to their wants, which is 
 the very opposite criterion. 
 
 Our State and local taxes are paid principally by assessments on property. 
 These amounted in the year 1880 to $302,000,000. They may now reach 
 $350,000,000, or about the sum collected by the national government by 
 customs and excise duties. It is a question for statesmen and philanthro- 
 pists, as well as for trade-unions, to consider, whether one-half of the entire 
 burden of government in all its departments, national, state, and municipal, 
 should be paid by taxes on consumption, which are, in a rough way, taxes per 
 capita, since all -are consumers. Taking into account all the public contribu- 
 tions which support civilized society in this country, I consider that Adam 
 Smith's first rule is grossly violated, and that the wage-earners and the tax- 
 payers of small incomes bear an undue and disproportionate share of the 
 burden of taxation. I consider, further, that the solution of what is called 
 the " social problem" should begin by lightening the taxation of the wage- 
 workers ; that is, by the reduction or repeal of taxes on consumption. The 
 first thing to be done for the working man is to let him enjoy what he earns. 
 When this is done, and when good education, technical and other, is offered 
 to him and his children, the social problem will be solved, so far as govern- 
 ments can deal with it. ED. 
 
PART IV. 
 
 THE RELATION BETWEEN PUBLIC RECEIPTS 
 AND EXPENDITURES. 
 
 CHAPTER I. 
 
 GENERAL ID EAS. 
 
 THE proper relation between public receipts and 
 expenditures is that of equilibrium or equalization ; 
 because, as a rule, it is not permissible to take 
 from the national resources either more or less 
 than is necessary to meet the public expenses of 
 the current fiscal period.* 
 
 In order to obtain the desired balance the re- 
 ceipts must be regulated by the expenditures, so 
 that the one may coincide with the other, both as 
 to their amount and as to the periods of collection 
 and disbursement. 
 
 * The Secretary of the United States Treasury in his annual report, Dec. 
 5, 1887, said that there was at that time a surplus in the Treasury, over and 
 above all requirements, of $55,258,701.19, and that it would probably 
 amount to about $140,000,000 on the soth day of June, 1888. He said also 
 that the requirements of the sinking fund of the public debt for the current 
 fiscal year, amounting to $46,817,785.48, had all been met, except a very 
 small fraction, prior to Nov. I, 1887. 
 
 7* 
 
154 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 In practice, however, the relation frequently hap- 
 pens to be abnormal that is, a want of equilibrium 
 exists, which can take place : 
 
 ist. Through a surplus that is, an excess of re- 
 ceipts over expenditures ; and this may be kept in 
 reserve, invested, or better, be eventually applied to 
 the payment of previously contracted debts, or to 
 the partial or total abolition of onerous taxes ; 
 
 2d. Through a deficit that is, an excess of ex- 
 penditures over receipts. The deficit may be tem- 
 porary, if it is owing to the accidental delay of 
 certain receipts or to the anticipation of certain 
 disbursements ; or it may be permanent, if it is due 
 to financial disorder which defies all efforts at ob- 
 taining a balance. 
 
 A deficit may be owing to an increase of ex- 
 penses, or to a diminution of receipts, caused by 
 war, by revolution, or by scarcity or any other eco- 
 nomic crisis, or by extraordinary public works (as 
 by the construction of railways). 
 
 The deficit may be met either by prudently re- 
 ducing expenses, whenever it is possible, or by 
 discovering new sources of revenue. The latter 
 may be obtained : 
 
 ist. By the sale of the fiscal domain, which, un- 
 der the circumstances already mentioned, will but 
 seldom yield any profits ; 
 
 2d. By resorting to the treasury reserve that 
 is, to the surplus accumulated in times of pros- 
 
PUBLIC RECEIPTS AND EXPENDITURES. 155 
 
 perity a plan which has been largely followed in 
 the past, but which has the inconvenience of with- 
 drawing too long from the channels of industry 
 considerable amounts of capital, and in the pres- 
 ent day can only be allowed as an exception and 
 within strict limits ; 
 
 3d. By means of anticipations, to be reimbursed 
 in successive financial periods, or by raising the 
 rates of pre-existing taxes, or by introducing new 
 ones ; 
 
 4th. By using the public credit that is, by con- 
 tracting debts an expedient which in the present 
 day is generally preferred, and which therefore re- 
 quires more minute consideration. 
 
 To the avoidance of deficits nothing contributes 
 more than the compilation of the exact balances 
 (estimated and ascertained) of the public receipts 
 and expenditures to be submitted in free States to 
 the approval of the deliberative assemblies. In 
 the opinion of many the annual discussion of the 
 budget would gain in importance if it were lim- 
 ited to only one part (the variable), while for the 
 other part (the permanent) an examination re- 
 peated at longer intervals should suffice. 
 
156 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 CHAPTER II. 
 
 THE PUBLIC DEBT. 
 
 THE public credit that is, the faculty of con- 
 tracting debts on relatively favorable conditions 
 depends, as' does the credit of the individual, on 
 the circumstances which influence the purpose, 
 and the possibility of fulfilling the obligation con- 
 tracted. In particular it depends on the political 
 and administrative arrangements, on the financial 
 conditions that is, on the system of taxation, on 
 the amount of pre-existing debts ; and finally, on 
 the economic condition that is, on the state of 
 the national wealth. 
 
 Public loans have been greatly extolled by many 
 writers in the past ; but later, by an exaggerated 
 reaction against abuses in practice, and through a 
 false conception of the action of the State, to which 
 all economic competence is denied, they have been 
 absolutely condemned, or only tolerated as a neces- 
 sary evil. 
 
 With regard to their legitimacy, it is to be ob- 
 served : 
 
 ist. That ordinary expenses must be covered by 
 ordinary receipts, and especially by taxation ; 
 
 2d. That extraordinary expenses may, according 
 
PUBLIC RECEIPTS AND EXPENDITURES. 1 57 
 
 to circumstances, be met by means of either taxes 
 or loans. 
 
 In respect to the different sorts of extraordi- 
 nary expenses, public loans are especially admissi- 
 ble when in support of public works that is, of 
 the productive employment of capital by the bor- 
 rower. Recourse may also be had to public loans 
 when extraordinary expenses are incurred on ac- 
 count of war, revolution, famine, etc. that is, in 
 the case of an employment of capital only indi- 
 rectly productive to the public authority (includ- 
 ing reforms of the armament or of the administra- 
 tion), in so far as it brings an advantage to society 
 which is not limited to the financial period in 
 which the expense is incurred. 
 
 From the economic point of view that is, in re- 
 gard to their effects on private wealth public 
 loans, which always import a subtraction of exist- 
 ing capital from the national resources, and not at 
 all an imaginary and absurd anticipation of future 
 capital, seem preferable to an increase of taxation, 
 when the latter happens to be badly distributed, 
 and when the loan is contracted with foreign cap- 
 italists, or, if contracted with home capitalists, 
 when the loan absorbs only the surplus capital, 
 without having recourse to that which is already 
 well invested in industrial enterprises, upon which 
 otherwise serious injury might be inflicted. 
 
 From the political point of view the advantages 
 
158 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 and disadvantages of loans, which are frequently 
 exaggerated, offset each other ; for if, on the one 
 hand, they directly interest a class of numerous and 
 powerful capitalists, in the maintenance of public 
 order and the preservation of peace, on the other 
 hand, it is not less true that they excite the discon- 
 tent of the tax-payers who are charged with the 
 payment of the interest, and at the same time in 
 relations with foreign countries they lead to a kind 
 of dependence of the indebted State on that to 
 which its creditors belong. 
 
 In respect to the advantages promised to the 
 creditor, public loans are divided into productive, 
 to wit, interest-bearing, and unproductive, non- 
 interest-bearing. The former are now the rule, 
 the latter the exception. 
 
 In respect of the guarantee given to the creditor, 
 they are to be distinguished as : 
 
 i st. Loans secured by the pledge of certain 
 revenues set apart before all for the payment of 
 interest and for the reimbursement of the principal. 
 These loans, much in vogue in the past, sometimes 
 also under the form of temporary transfers to the 
 creditors of certain public receipts, are no longer 
 suited to States which enjoy regular financial ar- 
 rangements, except in the not unfrequent case of 
 loans contracted for the execution of public works, 
 and hence made a charge on the revenue derived 
 from their operation. There are also instances, 
 
PUBLIC RECEIPTS AND EXPENDITURES. I $9 
 
 seen in recent times, when States in contracting 
 loans have offered to their creditors the formal 
 guarantee of other richer and more powerful States ; 
 
 2d. Unsecured loans, which are based, merely, 
 on the personal credit, so to speak, of the debtor. 
 
 In respect to the source of the borrowed capital, 
 are to be distinguished : 
 
 ist. Foreign loans, the evidences of which are 
 held by foreign capitalists ; 
 
 2d. Internal loans, the evidences of which are 
 owned by home capitalists. 
 
 Formerly internal loans were decidedly preferred 
 to foreign ones, because of the fear entertained 
 touching the exportation of money caused, in the 
 latter case, by the payment of interest and the re- 
 imbursement of the capital. Now, however, for- 
 eign loans are in great favor because they do not 
 deprive national industry of the capital it requires. 
 
 In respect of the legal character of the opera- 
 tion, loans are divided into voluntary and forced. 
 Forced loans, which form as it were a connecting 
 link between taxes and voluntary loans, must in 
 general be condemned both on account of the un- 
 avoidable injustice of their distribution, as also for 
 the injurious withdrawal of capital from private in- 
 dustry which they occasion. They can only be 
 admitted in cases of urgent need, arising under 
 .circumstances that do not admit of contracting a 
 voluntary loan on tolerable conditions. 
 
l6o PUBLIC RECEIPTS AND EXPENDITURES. 
 
 In respect to the manner of contracting, a dis- 
 tinction is to be noted between loans negotiated : 
 
 i st. Directly that is, through public agents ; 
 
 2d. Indirectly, through capitalists who interpose 
 between the debtor and the creditor. 
 
 Finally, in respect of their various methods of 
 arrangement, particularly in respect of the condi- 
 tions of repayment, we must distinguish between : 
 
 ist. Loans constituting the floating debt ; 
 
 2d. Those forming the consolidated or funded 
 debt. 
 
 CHAPTER III. 
 
 FLOATING DEBT. 
 
 THE floating (fluctuating, unfunded) debt com- 
 prises those loans which, not being definitely regu- 
 lated, continually vary in amount. 
 
 In normal conditions the floating debt, which 
 often becomes an abuse, is distinguished from the 
 consolidated debt by its purpose (which is that of 
 filling a temporary deficit in the treasury), by the 
 shorter term of payment, and by the power of 
 terminating it at any time, which belongs to both 
 parties. 
 
 SECTION i. Classification of the floating debt. 
 
 The floating debt assumes various forms, the 
 
PUBLIC RECEIPTS AND EXPENDITURES. l6l 
 
 more important of which it may be useful to indi- 
 cate here. 
 
 Debts having their origin in the carrying on of 
 State industries (running account, etc.) are now 
 unimportant, both by reason of their amount, and 
 because the range of the industrial operations of 
 political bodies tends in general to diminish. 
 
 Debts arising in the course of the performance 
 of political functions, as deposits in court (which, 
 strictly speaking, should not be touched), official 
 bonds (of accountants, contractors, etc.), the de- 
 posits in savings-banks, which sometimes are ad- 
 ministered either directly by the State, or indi- 
 rectly by institutions depending on it (offices of 
 deposit and of loans), all these constitute a part 
 of the floating debt, which, however (especially the 
 deposits in savings-banks), in times of economical 
 and political crises may cause serious embarrass- 
 ments. 
 
 Also accidental arrears of expenses, caused by 
 postponing payments (salaries, pensions, interest 
 and annuities, the capital of matured loans, etc.), 
 may sometimes in the larger States constitute a 
 not inconsiderable class of debts, the state of which 
 should be always kept clear and evident by means 
 of a good system of accounts. 
 
 The more conspicuous part of the floating debt, 
 however, arises from large unforeseen expenditures, 
 from expenditure anticipated, or by the failure or 
 
1 62 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 delay of the ordinary revenues. Among these are 
 comprised : 
 
 i st. Loans of immediate payment, obtained by 
 the emission of convertible legal-tender notes 
 (paper money in the improper sense) ; 
 
 2d. Loans at very short terms of payment, ob- 
 tained from banks, that frequently are required to 
 make them in return for the privileges granted to 
 them. They consist of loans on account current, 
 or in advances upon pledges of public revenue, or 
 of other evidences of debt ; 
 
 3d. Interest-bearing obligations created in order 
 to realize in advance the revenue from future taxes, 
 a system which may become dangerous if the obli- 
 gations are continually renewed instead of being 
 extinguished when the need of them has passed 
 away ; 
 
 4th. Treasury notes or bonds (exchequer bills), 
 which constitute the typical form of the floating 
 debt. 
 
 These consist of interest-bearing obligations at 
 very short dates (as three, six, seven months, 
 a year), emitted by the treasury to provide 
 for extraordinary wants of the current fiscal 
 period. 
 
 The rate of interest on treasury notes is usually 
 very low in rich countries, but it continually varies 
 according to the conditions of the public credit 
 (the needs of the debtor, and the confidence he 
 
PUBLIC RECEIPTS AND EXPENDITURES. 163 
 
 enjoys) and those of the money market so called, 
 to wit, the quantity of loanable capital. 
 
 Treasury notes and other analogous forms of 
 floating debt, while they afford to private individ- 
 uals the means of conveniently investing certain 
 sums that are for the moment disengaged and held 
 in the expectation of better employment, are useful 
 and even necessary in the best-administered States, 
 which in case of urgent need can obtain the neces- 
 sary means on easy terms from lenders who are al- 
 lured by the certainty of prompt repayment, with- 
 out having recourse to the more complicated and 
 cumbersome form of consolidated debt. 
 
 But treasury notes can certainly become a seri- 
 ous abuse if allowed to grow beyond measure by 
 continued renewals in time of peace ; for in times 
 of crisis they cause serious trouble by competing 
 injuriously with industrial enterprises, and with in- 
 stitutions of private credit, whose capital they ab- 
 sorb, and because, when it is impossible to meet an 
 increasing and imperative demand for reimburse- 
 ment, resort is too easily had to the calamitous ex- 
 pedient of legal-tender notes. 
 
 The use of treasury notes should therefore be 
 confined within narrow limits, rigorously fixed by 
 the law, and the administration must be prudent 
 and be guided by the rules that are usually fol- 
 lowed by the best- regulated institutions of private 
 credit. 
 
1 64 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 SEC. 2. Paper money. 
 
 To the floating debt belongs also paper money, 
 endowed with the privilege of forced circulation, by 
 which everybody is compelled to receive it in pay- 
 ment without the right to immediate reimburse- 
 ment in metallic money (inconvertibility). 
 
 In a financial sense inconvertible paper money is 
 a forced non-interest-bearing loan made by the 
 State, with an uncertain and indefinite term of pay- 
 ment, and distributed among citizens without any 
 regard to their economic condition. 
 
 Paper money is one of the most ruinous expedi- 
 ents to which the public finances resort in moments 
 of grave emergency, when an increase of taxation 
 seems to be impossible and when it is desired to 
 avoid, in whole or in part, the high rate of interest 
 which, under such conditions, must be paid on a 
 voluntary loan. 
 
 Paper money, the value of which is inevitably 
 liable to strong and continual variations, because 
 it is generally issued by weak governments and to 
 an excessive amount, so as to cause the expulsion 
 of metallic money, besides presenting very serious 
 economic inconveniences, damages the treasury 
 itself in its purchases at home and abroad, decreases 
 the income from taxes, and gives a great shock to 
 the public credit, the evidences of which fall in 
 value when the interest is paid in paper, while new 
 loans that may eventually become necessary -can 
 
PUBLIC RECEIPTS AND EXPENDITURES. 165 
 
 only be negotiated on conditions that grow con- 
 stantly worse.* 
 
 The withdrawal of paper money must be effected 
 resolutely, but with all the caution necessary to 
 avoid or at least diminish new economic perturba- 
 tions of an effect the reverse of those that took 
 place at its introduction. 
 
 When the paper money has not been too greatly 
 depreciated it seems more just and convenient that 
 its withdrawal should take place at its nominal 
 value (at par), thus avoiding the injustice of giving 
 it a less value than that of its original issue. Still 
 it is due to the tax-payers, who have to furnish the 
 necessary means toward the re-establishment of 
 the normal circulation, that the process should be 
 slow, in order to diminish, if possible, the fluctua- 
 tions of the premium and the speculations of the 
 last holders of paper money, as well as to obtain 
 the gradual rise of the current value of the paper 
 until perfect coincidence with its nominal value is 
 secured. 
 
 Bank-notes are relatively less injurious than gov- 
 ernmental paper money that is, bank-notes is- 
 
 * Mr. H. C. Adams, in his very valuable work on Public Debts (p. 131), 
 shows that the cost to the tax-payers of our late war was swelled by the enor- 
 mous sum of $869,000,000 by bad methods of financiering, in which depre- 
 ciated paper money bore a very large part. This sum is the difference be- 
 tween the face value of the obligations issued and the gold value received by 
 the Treasury, and is about equal in amount to the bonds now outstanding 
 less cash in the Treasury. ED, 
 
1 66 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 sued by an institution of credit, to which the State 
 concedes the privilege of legal tender (forced cur- 
 rency, cours force), in compensation for a loan 
 made, either gratuitously or at very low interest, 
 of a part of its notes. The reason of this is be- 
 cause such notes have a double guarantee, the prin- 
 cipal one of the bank, and the subsidiary one of 
 the government, and because, also, this system af- 
 fords greater resistance to the over-issue of paper 
 money. 
 
 CHAPTER IV. 
 
 CONSOLIDATED DEBT. 
 
 THE debt which is called consolidated (funded) 
 comprises loans which have been definitely regu- 
 lated, and the service of which (interest and 
 redemption) figures among the ordinary debits of 
 the balance-sheet. 
 
 The consolidated debt of the State is also some- 
 times called inscribed debt, because its accounts 
 have been registered in the so-called Ledger 
 (Great Book) of the Public Debt. 
 
 The consolidated debt is divided into redeemable 
 and irredeemable. 
 
 SECTION i. Redeemable debt. 
 
 The redeemable debt comprises loans which the 
 debtor has obligated himself to repay, entirely or 
 
PUBLIC RECEIPTS AND EXPENDITURES, 1 6? 
 
 partly, at certain periods, and under certain rules 
 previously stipulated. 
 
 Such an obligation does not, ordinarily, at least, 
 exclude the right of returning the capital before 
 the stipulated time by purchasing at market price 
 the securities that represent it. 
 
 The redeemable debt, by assuring repayment to 
 the lender, frequently secures better conditions for 
 the borrower, and incites the latter to economy in 
 order that he may have the required means in 
 hand when payment is due. 
 
 This form of loans, however, is not the most 
 acceptable either to the lenders, who prefer to 
 make permanent investments of their capital, or to 
 those who desire to speculate on the changing price 
 of the securities, and who accordingly prefer those 
 liable to more frequent changes of value. On the 
 other hand, political bodies which possess a high 
 credit can find money on good terms even by means 
 of an irredeemable debt, whilst those with inferior 
 credit, and in hard times even the former, will be 
 obliged later to contract new loans on worse terms, 
 in order to extinguish the old ones. 
 
 Redeemable debts comprise various kinds of 
 loans, distinguished by the various conditions of 
 repayment. The principal ones are those with 
 fixed terms of payment, prize loans and annu- 
 ities. 
 
 In loans at fixed terms of payment, the interest 
 
1 68 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 is paid regularly and the principal at one or more 
 fixed periods. This may also be done by dividing 
 the several obligations into series, and by drawing 
 lots for those to be paid off. 
 
 In prize loans, or lottery loans, which are sus- 
 ceptible of the most various combinations, the cap- 
 ital is repaid at fixed predetermined periods and 
 by lot, with the difference that the interest (either 
 the whole, or, more often, a part of it) is not paid 
 regularly, as in the case of other loans, to all the 
 holders of the obligations, but is distributed to 
 those among them who hold the particular ones 
 whose numbers are drawn by lot. 
 
 These loans present, although in much less 
 degree (as only the interest or part of the interest 
 is gambled for), the objections which make against 
 lotteries. They tend to divert people from the 
 legitimate rewards of labor and of saving, arousing 
 the hope of considerable and exceptional gain due 
 to the favors of fortune ; they are, moreover, of 
 little advantage to the debtor, who is unable, under 
 such a system, to secure the general co-operation 
 of serious capitalists, and must also forego the 
 eventual benefit of conversion (refunding), by 
 which he might extricate himself in times of pros- 
 perity from the oppressive conditions to which he 
 had submitted at a time of crisis. 
 
 In the system of annuities, also called termina- 
 ble rentes, the capital is reimbursed, little by little, 
 
PUBLIC RECEIPTS AND EXPENDITURES. 169 
 
 by paying every year a fixed sum, which com- 
 prises the interest and a portion of the principal, 
 which gradually increases. 
 
 Annuities may be for a fixed time or for life. 
 
 In annuities, at fixed time (as of 30, 50, 90 
 years), the amount of principal can be exactly 
 determined, which, added to the interest, consti- 
 tutes the sum to be paid annually. 
 
 In life-annuities, both the period of reimburse- 
 ment and the amount to be reimbursed are con- 
 tingent, uncertain elements, which depend on the 
 greater or less duration of the lives of one or more 
 persons, usually upon the life of the creditors. 
 
 In simple life-annuities the debt is extinguished 
 by the death of the creditor; in the tontine, 
 which consists of a society of creditors, the debt 
 is not extinguished until the death of the last 
 creditor, the condition being that the survivors 
 shall receive the annuities which would have be- 
 longed to the other creditors had they lived. 
 
 Against the policy of fixed-time annuities, still 
 in much favor in certain countries which are in 
 good financial condition, it is to be observed that 
 they encourage the conversion of capital into tem- 
 porary income, and encourage unproductive con- 
 sumption rather than production; whilst in hard 
 times the gradual reimbursement, both in this and 
 in other forms of redeemable debt, is only nom- 
 inal, since new loans must be negotiated, and not 
 
PUBLIC RECEIPTS AND EXPENDITURES. 
 
 always advantageously, to obtain the means of 
 paying the old ones. 
 
 Against life-annuities (and especially against 
 tontines) not only may the same objections be 
 made that are advanced on moral and material 
 grounds against annuities in general, but also 
 those that are made against the lottery loans. It 
 is also to be noted that the embarrassments are 
 much greater than those proceeding from fixed- 
 time annuities, because a higher rate must be paid 
 for the relatively short duration of the probable 
 life of the creditors than is paid in the case of an- 
 nuities running for a long term. For this reason 
 life-annuities, as a form of public loans, are every 
 day becoming more rare. 
 
 SEC. 2. Irredeemable debt. 
 
 Irredeemable debt, which in present extent far 
 surpasses the redeemable, comprises loans for 
 which the debtor (almost always the State) as- 
 sumes only the obligation of punctual payment of 
 the interest to the holder of the securities. But 
 the debtor is not deprived of the right of paying 
 off the principal by purchase at market price ; for 
 it seems repugnant to common sense that a debtor 
 should obligate himself never to extinguish his 
 debt. 
 
 The irredeemable debt is acceptable to the 
 debtor, because its administration is more simple, 
 and because it frees him from the obligation to re- 
 
PUBLIC RECEIPTS AND EXPENDITURES. I /I 
 
 imburse the capital, which is often embarrassing 
 and onerous. It is also acceptable to the creditor 
 himself, because in the better class of irredeemable 
 debt he finds a safe investment ; because he avoids 
 the untimely and often unexpected reimbursement 
 of the redeemable debt ; and because he is not led 
 into a trap by the bait of a premium, and because 
 in any event, by selling his obligation on the Ex- 
 change at an opportune time, he can recover his 
 capital. 
 
 Perpetual rente, namely, the interest charge of 
 an irredeemable debt, has its origin in two differ- 
 ent methods, and hence comprises two forms of 
 loans, which dispute the field, both in theory and 
 in practice. 
 
 In the first system the debtor indicates in his 
 obligations the exact amount of capital received 
 and the corresponding interest, whence (in the 
 very act of stipulation) there is a coincidence be- 
 tween the principal sum and the nominal and real 
 interest. This does not prevent the coincidence 
 from disappearing afterward. If, for instance, a 
 loan of 100,000,000 francs is made at 8 per cent., 
 and later the securities rise to 1 20 or fall to 80, the 
 real interest in the former case will be reduced to 
 6^, and in the latter will rise to 10 per cent. 
 
 This is the most ancient, simple, and honest 
 form of using the public credit ; and it does not 
 close the door to repayment, for in case of an im- 
 
172 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 proved condition of the public credit no difficulty 
 can arise from having acknowledged a greater debt 
 than the capital received. 
 
 In the second system, the debtor calculates the 
 interest, not in relation to the capital which he has 
 obtained, but in relation to a nominal capital, in- 
 dicated in the obligations, and which, as a rule, is 
 greater than the amount actually received. There 
 is, therefore, at the time of borrowing a dispropor- 
 tion between the interest and the principal, nom- 
 inal and actual. If, for instance, securities of 100 
 francs are put into circulation, bearing the nomi- 
 nal interest of 5 per cent., but for which only 6^ 
 francs has been received, the real interest will be 8 
 per cent. 
 
 This method, first practiced in England and later 
 common in other States, enjoyed for a time the 
 highest favor among theorists because it produces 
 a saving in interest ; it simplifies the administra- 
 tion and does not multiply the classes of loans ; it 
 puts into circulation securities that are most 
 sought after by speculators, as more adapted to the 
 speculative combinations of the Exchange, and less 
 liable to the eventualities of future conversions, in 
 which the State would be obliged to repay a greater 
 capital than had been received. 
 
 Now, however, the contrary opinion prevails 
 among writers, because the difficulty of the con- 
 version is reputed an injury rather than an ad- 
 
PUBLIC RECEIPTS AND EXPENDITURES. 1/3 
 
 vantage, whilst the probable rise of the market 
 price closes the door to redemption ; and because 
 it is not always true^that the loss which the State 
 suffers by the increase of the nominal capital is 
 compensated by the advantage derived from a sav- 
 ing in the interest. 
 
 CHAPTER V. 
 
 ADMINISTRATION OF THE PUBLIC DEBT. 
 
 THE most important questions in regard to the 
 administration of the public debt relate to the ne- 
 gotiation, extinction and conversion of loans. 
 
 SECTION i. Negotiation. 
 
 Public loans may be negotiated directly, that is, 
 between the debtor and the creditor, or indirectly 
 by the assistance of intermediaries. 
 
 Direct negotiation may be made either by sell- 
 ing new obligations on the Exchange, or by open- 
 ing a public subscription. 
 
 The former method, which is not applicable ex- 
 cept in small amounts, causes the debtor and his 
 agents to join in a speculation, and too easily lends 
 itself to illegal issues. 
 
 By the method of public subscription, namely, of 
 loans that are sometimes called national and pa- 
 triotic, the debtor announces the conditions of the 
 
1/4 PUBLIC RECEIPTS AND EXPENDITURES, 
 
 loan (the price and interest) ; he receives all the 
 subscriptions offered which do not exceed a certain 
 minimum ; he reduces them in case of excess of 
 offerings either proportionally or with a prefer- 
 ence in favor of the smaller subscriptions. 
 
 This system, which for a quarter of a century 
 has prevailed in France, dispenses with the always 
 onerous co-operation of intermediaries ; it avails 
 itself of the patriotism of the citizens, and, as ex- 
 perience has proved, it is fertile of the best results 
 in countries which have abundant capital, and 
 where the purpose of the loan is not only of real 
 utility, but is also generally appreciated. 
 
 In default of such conditions, the gain obtained 
 by the saving of the cost of intermediaries is over- 
 balanced by the injury suffered by industry, which 
 the competition of loans at a high rate of interest 
 deprives of a part of the capital which it needs. 
 Sometimes, however, the splendid result of such 
 loans is in part at least more apparent than real, 
 because speculation can hardly be avoided, the 
 banking-houses, of course, ranking foremost and 
 strongest among the subscribers. 
 
 In the case of loans negotiated through interme- 
 diaries the obligations are sold to them wholesale, 
 and they sell again at retail in the hope of gaining 
 a difference in price. 
 
 The intervention of bankers is necessary when 
 the conditions of success by public subscriptions 
 
PUBLIC RECEIPTS AND EXPENDITURES. 1/5 
 
 are wanting, and is especially useful when capital 
 is found in large aggregations which are in great 
 part foreign. Still, it is certain that operations 
 tending to cause a rise of the price of the securi- 
 ties result in general to the injury of bona-fide in- 
 vestors. 
 
 When resort is had to intermediaries the debtor 
 may apply at once to single banking-houses, in 
 which he has confidence, after obtaining the neces- 
 sary information and appropriate guarantees, or he 
 can put up the loan at auction, handing it over to 
 the one who makes the most advantageous offer 
 coupled with the required security. 
 
 By auction sale the benefits of competition are 
 obtained as well as of publicity, and the suspicion 
 of favoritism and of venality, on the part of the 
 agents charged with the negotiation of the loan, is 
 at least in part avoided. But it is a system which 
 does not always yield good results, especially in 
 poor countries, in hard times and in case of urgent 
 needs. 
 
 Public securities are made payable either to 
 order or to bearer. The latter class, by reason of 
 the greater ease of transfer, are now preferred to 
 the former, which, however, by reason of the 
 greater security, are especially suited to minors, and 
 in general to trusts, and to persons under bonds to 
 the public authorities. 
 
 The payment of the interest should be punctual 
 
I?6 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 and convenient to the parties as to time, place and 
 manner. It is sometimes made by means of cou- 
 pons, which are detached from the obligations, and 
 which indicate the number, the date and maturity, 
 and the amount to be paid. When one sheet of 
 coupons is exhausted another is furnished on the 
 presentation of the original obligation, or a certifi- 
 cate (talon) annexed to the same. 
 
 SEC. 2. Extinction. 
 
 The public debt may be extinguished in two 
 ways, one illegal, by which the debtor disengages 
 himself arbitrarily from his responsibilities by a 
 total, open or disguised bankruptcy, sacrificing the 
 rights of his creditors to the convenience of the 
 tax-payers ; the other legal, by which the debtor 
 pays his obligation in whole or in part, and does so 
 in the manner provided by the conditions explicitly 
 or impliedly agreed upon with his creditors. 
 
 The gradual and systematic extinction of the pub- 
 lic debt raises the credit of the State and improves 
 its financial condition ; it permits the reduction of 
 taxes or the incurring of fresh expenses, and it 
 facilitates the negotiation of new loans should the 
 occasion for them arise. 
 
 Yet this extinction is not useful if it is not real 
 but only apparent. To this end the actual surplus 
 of receipts over expenditures, and the proceeds of 
 the sales of public property made at opportune 
 times, should be applied. On the other hand, it 
 
PUBLIC RECEIPTS AND EXPENDITURES. 
 
 will prove of no avail to increase the burden of 
 taxes, or to contract new loans on hard conditions 
 in order to pay off old ones. 
 
 There are also conclusive objections to a system, 
 which has found some supporters, of converting the 
 public debt into a private debt, by apportioning it 
 among the contributors according to their total 
 property, or in proportion to their landed property. 
 Neither extraordinary imposts, nor voluntary sub- 
 scriptions avail for this purpose ; because they re- 
 solve themselves into expedients either contrary to 
 equity or practically illusory or at least insufficient, 
 and because on the most favorable hypothesis they 
 would produce a merely nominal conversion of the 
 debt, accompanied by a very serious crisis, and by 
 an enormous displacement of capital. 
 
 Nor have the so-called " sinking funds," with a 
 separate administration, and an annual charge for 
 their benefit inserted in the budget, answered the 
 expectations that were entertained at the begin- 
 ning. Created for the purpose of gradually extin- 
 guishing the public debt, by the purchase of obli- 
 gations in the open market, they take advantage 
 of compound interest ; by applying to such pur- 
 chases, also, the progressively increasing yield of 
 the securities so held, until the moment when the 
 destruction of them becomes possible through the 
 redemption of all the obligations. 
 
 The complexity of the system, the expenses, the 
 
 8* 
 
i;8 PUBLIC RECEIPTS AND EXPENDITURES. 
 
 application of the funds for other uses, which is 
 inevitable in economic or political crises, and the 
 need of fresh loans, have almost always neutralized 
 the advantages that were expected to result from 
 this much-extolled automatic extinction of the pub- 
 lic debt. 
 
 SEC. 3. Conversion. 
 
 The conversion of the public loans may be 
 either forced (and hence illegal) or voluntary, and 
 may refer to the kind of debt (conversion of float- 
 ing into funded debt, etc.) as well as to the 
 amount ; it usually refers to the interest, and hence 
 it is called " conversion of the rente." 
 
 In the conversion, the debtor offers to his credi- 
 tors the alternative of a reduction of interest or 
 the repayment of the principal. 
 
 This operation, which some, especially in the 
 past, considered contrary to equity, is now ap- 
 proved of by the majority of writers, because the 
 State impliedly, if not always explicitly, reserves to 
 itself the right of paying at pleasure the principal 
 of its debts, and because it is the duty of the State 
 to enable the tax-payers to share in the improved 
 economic and financial conditions, which actually 
 cause the rise in the market price of public securi- 
 ties, and the fall of the rate of interest on private 
 loans. 
 
 Conversion will only be successful when the 
 majority of the creditors, failing to find safer or 
 
PUBLIC RECEIPTS AND EXPENDITURES. 1/9 
 
 more profitable investments in private industry, 
 prefer the reduction of interest to the repayment 
 of the principal. Such a state of affairs presup- 
 poses a condition of great economic and financial 
 prosperity, and the existence of public loans con- 
 tracted at par, or not far below par, and which may 
 therefore rise in the market to such a point that 
 the conversion is rendered practicable.* 
 
 * The annual interest charge on the public debt of the United States in 
 the year 1865, when the debt had reached its maximum ($2,381,000,000), 
 was $151,000,000. The present charge is about $40,000,000, on about 
 $1,000,000,000 of principal. As 58 per cent, of the debt has been re- 
 deemed, it appears that of the reduction of $111,000,000 in the annual in- 
 terest charge, $64,380,000 is in consequence of payments of the principal, 
 and $46,620,000 is due to conversions. Among the documents embraced 
 in the census of 1880 is a compilation of The National Loans of the United 
 States, from July 4, 1776, to June 30, 1880, by Rafael A. Bayley. The 
 successive conversions of the public debt are there given in detail. ED. 
 
BIBLIOGRAPHY OF THE SCIENCE OF THE 
 FINANCES. 
 
 PART I. 
 
 GENERAL WORKS. 
 
 SECTION I. 
 
 Histories of the Science of the Finances. 
 
 J. Kautz. Die geschichtliche Entwickelung der National Oekonomik. 
 
 Vienna, 1860. 
 L. Cossa. Introduzione allo Studio dell* Economia Politica. 3d edition. 
 
 Milan, 1878. 
 M. Colmeiro. Historia de la Economia Politica en Espana. Madrid, 1863. 
 
 2 vols. 
 W. Roscher. Geschichte der National Oekonomik in Deutschland. Munich, 
 
 1874- 
 
 G. Ricca-Salerno. Storia delle Dot trine Finanziarie in Italia. Rome, 1881. 
 In the Memorie della JR. Accad. dei Lincei, 
 
 SECTION II. 
 Treatises and Compendium* of Political Economy. 
 
 See the works cited by L. Cossa, Primi Elementi di Economia Politica. 
 8th edition. Milan, 1887. Appendix. 
 
 SECTION III. 
 
 Treatises and Compendiums of the Science of the Finances. 
 
 CHAPTER I. 
 
 English and French Works. 
 
 J. R. McCulloch. A Treatise on the Principles and Practical Influence of 
 Taxation and the Funding System. London, 3d edition, 1863. 
 
 J. Gamier. Elements de Finances. Paris, 1856. 4th edition with the title: 
 Traite" de Finances. Paris, 1882. 
 
1 82 BIBLIOGRAPHY OF FINANCE. 
 
 R. Gandillot. Principes de la Science des Finances. Paris, 1874. 3 vols. 
 P. Leroy-Beaulieu. Traite" de la Science des Finances. 3d edition. Paris, 
 1883. 2 vols. 
 
 CHAPTER II. 
 
 German Works. 
 
 L. v. Jakob. Die Staatsfinanzwissenschaft. Halle, 2d edition, 1837. 2 
 
 vols. 
 C. A. v. Malchus. Handbuch der Finanzwissenschaft. Stuttgart, 1830. 2 
 
 vols. 
 K. H. Rau. Grundsdtze der Finanzwissenschaft. Leipsic, 5th edition, 
 
 1864-65. 2 vols. 
 L. v. Stein. Lehrbuch der Finanzwissenschaft. Vienna, 5th edition in 4 
 
 vols., 1885-1886. 
 K. Umpfenbach. Lehrbuch der Finanzwissenschaft. Erlangen, 1859-1860. 
 
 2 vols. 
 
 C. v. Hock. Die Offentlichen Abgaben und Schulden. Stuttgart, 1863. 
 Ad. Wagner. Finanzwissenschaft. Vol. I. Leipzig, 1871-72. (3d edi- 
 tion, 1883.) (Vol. II., 1878.) (Vol. III., 1886-87.) 
 
 G. Schonberg. Handbuch der Politischen Oekonomie. 2d edition, Tubingen, 
 
 1886. 
 W. Roscher. System der Finanzwissenschaft. Stuttgart, 1886. 
 
 CHAPTER III. 
 
 Italian Works. 
 
 P. de Luca. La Scienza delle Finanze. Naples, 1858. 
 A. Marescotti. Le Finanze, etc. Bologna, 1867. 
 
 D. Zeppa. La Scienza Finanziaria, etc. Florence, 1870. 
 
 G. Giovanelli. Delia Scienza Finanziaria, etc. Vol. I. Rome, 1877. 
 
 E. Morpurgo. La Finanza. Florence, 1877. 
 
 G. Boccardo. / Principii della Scienza e dell' arte delle Finanze. Turin, 
 1884. 
 
 F. Marzano. Compendia di Scienza delle Finanze. Rome, 1886. 
 
 CHAPTER IV. 
 
 Works in other Languages. 
 
 J. Lopez Narvaez. Tratado de Hacienda Publica, etc. Madrid, 1856. 
 J. M. Piernas y Hurtado. Manual de Instituciones de Hacienda Publica 
 Espanola. 2 vols. Madrid, 3d edition, 1885. 
 
BIBLIOGRAPHY OF FINANCE, 183 
 
 A. dos Sanctos Pereira Jardim. Principles de Financas. Coimbra, 3d edi- 
 tion, 1880. 
 F. Gorloff. Theory of the Finances (in Russian). St. Petersburg, 1875. 
 
 F. Skarbek. Principles of the Science of the Finances (in Polish). War- 
 
 saw, 1824. 
 L. Bilinski. System of ttie Science of the Finances (in Polish). Lemberg, 
 
 1876. 
 
 V. Mariska. Science of the Finances (in Hungarian). Buda-Pesth, 1871. 
 S. Mattlekovits. Science of the Finances (in Hungarian). Buda-Pesth, 
 
 1876. 
 J. Kautz. Science of the Finances (in Hungarian). Buda-Pesth, 1885. 
 
 G. Sographos, Science of the Finances (in Greek). Vol. I. Athens, 1882. 
 
 SECTION IV. 
 Financial History, Statistics ', and Legislation. 
 
 See the works cited by Ad, Wagner, Finanzwissenschaft. 2d edition. Vol. I. 
 Leipzig, 1877 ; pp. 54-59. 
 
 J. Canga-Arguelles. Diccionario de Hacienda con aplicacion a Espafia. 2 
 vols. London, 1826. Madrid, 1833-34. 
 
 J. Lopez Juana Pinilla, Biblioteca de Hacienda de Espana. 6 vols. Mad- 
 rid, 1840-48. 
 
 L. Ovila y Canales. Diccionario de Hacienda Publica. Santiago, 1880. 
 
 PART II. 
 
 SPECIAL WORKS. 
 
 SECTION I, 
 
 Public Expenditures. 
 
 V. Cz5rnig. Das dsterreichische Budget. 2 vols. Vienna, 1862. 
 
 Ad. Wagner. Ordnung des Osterr Staffs haus halts. Vienna, 1863. 
 
 Ed. Pfeiffer. Vergleichende Zusammenstellung der Europdischen Staatsaus 
 
 gaben. Stuttgart, 2d ed., 1877. 
 R. Gneist. Budget und Gesetz. Berlin, 1867. 
 A. Salandra. La Progressione dei Bilarici negli Stati moderni. Rome, 1879 
 
 (In the Archivio di Statistica, 3d year). 
 G. Arcoleo. // Bilancio dello Stato ed il Sindacato Parlamentare. Naples, 
 
 1880. 
 
1 84 BIBLIOGRAPHY OF FINANCE. 
 
 M. Pantaleoni. Contribute alia teoria del riparto delle spese pubbliche. (In 
 
 the Rassegna Italiana, 1883.) 
 
 S. Francone. // bilancio, la contabilita generate, etc. Naples, 1884. 
 D. A. Wells, Stephen Colwell and S. S. Hayes, Commissioners. Report of 
 
 the United States Revenue Commission. Washington, 1865. 
 D. A. Wells. Reports of the Special Commissioner of the Revenue. 4 vols. 
 
 Washington, 1866-69. 
 
 SECTION II. 
 Fiscal Domain. 
 
 See the works cited by A. Wagner, Finanz-wissenschaft. 3d edition. Vol. I. 
 Leipsic, 1883, passim. 
 
 SECTION III. 
 
 Fees and Charges. 
 
 Al. Meyer. Ueber Stempelsteuern. In the Review, Vierteljahrschnft fur 
 
 Volkswirthschaft. Vol. VII. Berlin, 1864. 
 W. Besobrasoff. Impdts sur les Actes (in the Mem. de FAcadtmie de St. 
 
 Petersburg, 1866-67). 
 R. Friedberg. Zur Theorie der Stempelsteuern. (In the Jahrbiicher f. Na- 
 
 tionalok. und Statist., 1878.) 
 
 SECTION IV. 
 Taxes. 
 
 CHAPTER I. 
 
 Taxation in General. 
 i. English and French Works. 
 
 G. K. v. Hogendorp. Lettres sur la Prospe'rite' Publique. Amsterdam, 
 
 1830. 2 vols. 
 H. Parnell. Financial Reform. London, 1830 ; 4th edition, 1832. 
 
 D. Buchanan. An Inquiry into Taxation. Edinburgh, 1844. 
 
 E. de Girardin. De V Impdt. Paris, 6th edition, 1852. 
 
 P. J. Proudhon. The"oiie critique de i' Impdt. Brussels, 2d edition, 1868. 
 
 L. Walras. The"orie critique de F Impdt. Paris, 1861. 
 
 Cl. Royer. Thdorie de P Impdt ou de la Dime Sociale. Paris, 1862. 
 
BIBLIOGRAPHY OF FINANCE. 185 
 
 E. de Parieu. Trait J des Impdts, etc. Paris, 5 vols., 2d edition (in 4 vols.), 
 
 1866-67. 
 Ed. Vignes. Traite" des Impdts en France. Paris, 4th edition (in 2 vols.), 
 
 1880. 
 
 A. Chargueraud. L'conomie politique et rimpdt. Paris, 1864. 8vo. 
 Th. E. Cliffe Leslie. Financial Reform. London, 1872. (In the Cobden 
 
 Club Essays. 2d series.) 
 V. Bonnet. La Question des Impdts. Paris, 1878. 
 
 2. German Works. 
 
 
 D. Krehl. Das Steuersystem, etc. Erlangen, 1816. 
 
 C. Kroncke. Ueber die Grundsdtze einer gerechten Besteuerung. Heidel- 
 berg, 1819. 
 
 K. Murhard. Theorie und Politik der Besteuerung. Gottingen, 1834. 
 T. G. Hoffmann. Die Lehre von den Steuern. Berlin, 1840. 
 H. L. Biersack. Ueber Besteuerung, etc. Frankf., a. m., 1850. 
 H. Eisenhart. Die Kunst der Besteuerung. Berlin, 1868. 
 
 E. Laspeyres. Staatswirthschaft. (In the Deutsches Staatsworterbuch of 
 
 Bluntschli and Brater.) Vol. X. Stuttgart, 1867 ; pp. 71-152. 
 C. Walcker. Die Selbstverwaltung des Steuerivesens. Berlin, 1869. 
 H. Maurus, Die moderne Besteuerung. Heidelberg, 1870. 
 
 A. Eb. Fr. Schaffle. Die Grundsatze der Steiierpolitik. Tubingen, 1880. 
 
 3. Italian Works. 
 
 G. Cridis. Dei Ttibuti. 2 vols. Turin, 1832. 
 
 G. Borsani. // Sistema del Tributi. Turin, 1850. 
 
 L. Dufour. Delle imposte. Genoa, 1861. 
 
 C. Pallavicino. Teoria sulle imposte. Turin, 1865. (From the Rivista con- 
 
 temporanea, Vol. XL.) 
 M. Pescatore. La Logica delle imposte, etc. Turin, 1867. 
 
 B. Benvenuti. Le imposte. Teoria e pratica. Milan, 1869. 
 S. Zeni. Le imposte, etc. Ferrara, 1869. 
 
 C. Baer. L'avere e Vimposta. Turin, 1872. 
 
 S. Francone. Sulle graduali riforme del sistemi tributarii. Naples, 1875. 
 G. Alessio. Saggio sul sistema tributario in Italia. Vol. I. Turin, 1883. 
 
 4. Works in other Languages. 
 
 F. Gallardo Fernandez. Origen, progresos y estado de las rentas de la corona 
 
 de Espana, etc. 7 vols. Madrid, 1806-1832. 
 
1 86 BIBLIOGRAPHY OF FINANCE. 
 
 Tourguenieff. An Essay on Imposts (in Russian). St. Petersburg, 2d edi- 
 tion, 1819. 
 
 V. Delecourt. Disputatio ceconomica-politica de tributis ac vectigalibus. 
 Louvain, 1829. 
 
 L. M. Pastor. La ciencia de la Contribution. Madrid, 1856. 
 
 N. G. Pierson. Belasting naar den Welstand. Amsterdam, 1879. 8vo. 
 (From the Review : De Gids.) 
 
 N. G. Pierson. Belastinghervorming. Amsterdam, 1881. (Ibidem.) 
 
 CHAPTER II. 
 
 Rules and Classification of Imposts. 
 
 G. Schmoller, Die Lehre von Einkommen in ihrem Zusammenhange mit 
 
 den Grandprincipien der Steurelehre (in the Zeitschr. f. d. ges. Staatsw., 
 
 1863.) 
 G. Fauveau, Considerations mathe'rnatiques sur la The'orie de VImpdt. 
 
 Paris, 1864. 
 
 Fr. J. Neumann. Die progressive Einkommensteuer, etc. Leipsic, 1874. 
 H. v. Scheel. Die progressive Besteuerung. (In the Zeitschr. f. d. ges. 
 
 Staatsw., 1875.) 
 J. Lehr. Krittische Bemerkungen iiber, etc. (lx\.\h.JahrbucherfurNational- 
 
 okonomie, 1877.) 
 G. Ricca-Salerno, Dell imposta progressiva, etc. (In the Giornale degli 
 
 Economisti, Padua, 1878.) 
 Ad. Held. Zur Lehre von der Ueberwdlzung der Steuren. (In the Zeitschr. 
 
 f. die ges. Staatswiss., 1868.) 
 
 H. Schmidt. Die Steuerfreiheit des Existenzminimus. Leipsic, 1877. 
 Th. Forstemann. Die directen und indirecten Steuern, etc. Nordhausen, 
 
 1868. 
 
 Rob. Meyer. Die Ptincipien der gerechten Besteuerung, etc. Berlin, 1884. 
 J. Prince-Smith. Die Ahwolzung. Berlin, 1866. 
 
 Jos. Kaizl. Die Lehre von der Ueberwolzung der Steuern. Leipsic, 1882. 
 V. Falck. Kritische Ruckblicke auf Entwicklung der Steueruberwalzungs- 
 
 lehre seit Ad. Smith. Dorpat, 1882. 
 
 M. Pantaleoni. Teoria della traslazione dei tiibuti. Rome, 1882. 
 Fr. J. Neumann. Dei Unterscheidung directer und indirecter Steuern. (In 
 
 Schmoller, Jahrbuch, etc., 1882.) 
 
BIBLIOGRAPHY OF FINANCE. l8/ 
 
 CHAPTER III. 
 
 Particular Imposts. 
 I. Imposts on the Produce of Landed Property. 
 
 E. Nasse. Bemerkungen uber das preussiche Steuersystem. Bonn, 1861. 
 Fr. J. Neumann. Ertragssteuern oder Staatssteuern ? etc. Frieburg in Br., 
 
 1876. 
 J. R. A. v. Helferich. Die Reform der directen Steuern^ etc. (In the 
 
 Zeitschr. f. d. ges. Staatsw., 1873.) 
 A. D. G. Coffin ieres. Etudes sur le Budget et spe'cialement sur I'lmpdt 
 
 fancier. Paris, 1848. 
 Kries. Vorschlage zur Regelung der Grundsteuer, etc. Berlin. 1855* 
 
 F. H. V. Noizet. Du Cadastre et de la Delimitation des Heritages. Paris, 
 
 1863. 
 Dr. Vocke. Uber Besteuerung der Landwirthschaft, etc. (In the Zeitschr. 
 
 fur die ges. Staatswiss, 1873-74.) 
 
 A. Scialoja. Dei tt ibuti diretti, etc. (In the Nuova Antologia, 1867-68.) 
 M. Minghetti. Dell' ordinamento delle imposte dirette, etc. (Ibidem, 1-869.) 
 L. Tegas. Sulla perequazione Fondiaria. Pinerolo, 1875. 
 
 G. Sonnino. // catasto e la perequazione deli' imposta fondiaria. Florence, 
 
 1875. 8vo. 
 
 A. Nagorny. Imp6ts des Bdtiments, etc. Warsaw, 1865. 
 Dr. \iocke. Uber Hausersteuer, etc. (In the Zeitschrift f. d. ges. Staatswiss ^ 
 
 1875.) 
 K. Th. Eheberg. Die Revision der directen Steuern. (In the Jahrbuch of 
 
 Schmoller, 1881.) 
 F. v. Myrbach. Die Besteuerung der Gebaude und Wohnungen, etc. 
 
 Tubingen, 1886. 
 A. Messedaglia. Relazione sul Titolo I del Progetto di Legge sul tiordina- 
 
 mento dell' imposta fondiaria. 
 
 2. Imposts on the Income of Personal Property. 
 
 E. Nasse, A. Held, etc. Die Personallesteuerung, Gutachten, etc. Leip- 
 zig, 1873. 
 
 J. R. A. v. Helferich. Ueber die Einfiihrung einer Kapitalsteuer in Baden. 
 (In the Zeitschr. filr die ges. Staatsw. Tubingen, 1846.) 
 
 Dr. Vocke. Kapitalrentenbesteuerung, etc. (Ibidem, 1868.) 
 
1 88 BIBLIOGRAPHY OF FINANCE, 
 
 J. Lehr. Kapitalisirungsteuer, Zinsrenstensteuer, etc. (Ibidem, 1877.) 
 K. S. Zacharia. Uber Besoldungssteuern. (In his Abhundlungen, etc.) 
 
 Heidelberg, 1835. 
 Dr. Vocke. Uber Personalbesteuerung, etc. (In the Zeitschr, f. d. ges. 
 
 Staatsw., 1865.) 
 C. H. L. Hoffmann. Die verschiedenen methode der rationellen Gewerbebe- 
 
 steuerung. (Ibidem, 1850.) 
 
 Dr. Vocke. Die Besteuerung der Gewerbe in England. (Ibidem, 1862.) 
 C. Dietzel. Die Besteuerung der Actien-Gesellschaften, etc. Cologne, 1859. 
 
 C. H. L. Hoffmann. Die Zuldssigkeit einer landwirthschaftlichen Gewerbe- 
 
 besteuer, etc. (In the Zeitschr. f. d. ges. Staatswiss, 1884.) 
 
 D. A. Wells. Edwin Dodge and Geo. W. Cuyler, Commissioners. Re- 
 
 forts on Taxation in the State of New York. 2 vols. Albany, 
 1870-1871. 
 
 3. Imposts on Transfers of Property. 
 
 C. v. Czornig. Die Algaben von der Ubertragung unbeweglichen Eigen- 
 
 thums, etc. Trieste, 1869. 
 
 C. v. Czornig. Die Besteuerung der Wechsel, etc. Trieste, 1870. 
 G. A. Nahuys. De Belasting op de erfopvolging. Utrecht, 1869. 
 H. v. Scheel. Erbschaftssteuern und Erbrechtsre form. Jena, 2d edition, 
 
 1877- 
 J. Baron. Zur Erbschaftssteuer. (In t\\& Jahr bite her fur National Oekono- 
 
 mie, 1876.) 
 
 E. Leser. Die Britische Erbschaftsbesteuerung. (In the Zeitschr. f. die ges. 
 
 Staatswiss, 1881.) 
 
 H. Geffcken. Erbrecht Und Erbschaftssteuer. (In the Jahrbiicher fur 
 Gesetzelbung, Verwaltung und Volkswirthschaft, by G. Schmoller, 
 1881.) 
 
 4. Imposts on Consumption. 
 
 E. Eschenmeyer. Ueber die Consumtionssteuer. Heidelberg, 1813. 
 Ferd. Lassalle. Die indirecte Steuerund die Lage der arbeitenden Klassen. 
 
 Zurich, 1863. 
 
 J. H. Geffcken. Die Reform der Reichssteuern. Heilbronn, 1879. 
 S. G. Kerst. Das Salzmonopol, etc. Berlin, 1865. 
 A Schmidt. Das Salz, etc. Leipzig, 1874. 
 C. H. F. Hoffmann. Die angemessene Besteuetung des Tabakgenusses. 
 
 (In the Zeitschr. f. d. ges. Staatswiss, 1852.) 
 
BIBLIOGRAPHY OF FINANCE. 189 
 
 D. J. Creizenach. Die franzosisc he Tabakregie. Mainz, 1868. 
 
 J. Maehrlen. Die Besteuerung des Tabaks, etc. Stuttgart, 1868. 
 
 J. Pierstorff. Altere und neuere Litteratur zur Frage der Tabaksbesteuering, 
 
 etc. (In \b.z Jarhbucher fur Nationalokonomie. Jena, 1878-79.) 
 C. J. Petitti. Del Giuoco del Lotto, etc. Turin, 1853. 
 O. Wolff. Die Mahl- und Schlachtsteuer. (In the Vierteljahrschr. /. 
 Volkswirths., Berlin, 1864.) 
 
 F. Ferrara. La tassa sul Macino, etc. Florence, 1865. 
 
 P. Molroguier. Histoire critique de Vlmpot des Boissons, etc. Paris, 1849. 
 A. Heine. Uber die Branntweinsteuersysteme, etc. (In the Zeitschr. f. d. 
 
 ges. Staatsw., 1872.) 
 V. Ellena. / tiibuti sullo Zucchero e sugli Spiriti. (In the Archivio di 
 
 Statistica, Anno III. Rome, 1878.) 
 R. v. Kaufmann. Die Zucket Industrie. Berlin, 1878. 
 J. Wolff. Die Zuckersteuer. (In the Zeitschr. f. d. ges. Staatsw., 1882.) 
 Villerme fils. Les Douanes et la Contrebande. Paris, 1851. 
 
 G. Cappetlari della Colomba. Le imposte di confine, etc. Florence, 1866. 
 Barillon. Suppression des Octrois. Paris, 1841 ; 2d ed., 1862. 
 
 C. Pallavicino. L'abolizione delle Dogane degli Octrois, etc. (In the Re- 
 vista Contemp. Turin, 1860.) 
 
 M. Chevalier. L Industrie et f Octroi de Paris. Paris, 1867. 
 
 T. Jandalli. Sui dazii locali di consumo. Florence, 1873. 
 
 G. Allessio. L ' Imposta del Dazio consumo in Italia, etc. (In the Annali 
 di Statistical) Series 2. Vol. 17. Rome, 1880. 
 
 G. Hansen. Die normirung der Eingangszolle , etc. (In the Zeitschr. f. g. 
 ges. Staatswiss, 1865.) 
 
 C. F. v. Hock. Betrachttmgen iiber die Aufhebung aller Zolle, etc. (Ibi- 
 dem, 1865.) 
 
 F. Ferrara. Le Dogane moderne. (In the Nuova Antologia, 1869.) 
 
 Ad. Wagner. Article : Zolle in the Dcutsches Staatsworterbuch, by Bluntschli 
 and Brater. Vol. XI. (Stuttgart, 1868), pp. 340-397. 
 
 L. v. Bilinski. Die Luxussteuer, etc. Leipsic, 1875. 
 
 5 Imposts on Income and Property in General. 
 
 B. Sayer. On the Income Tax. London, 1831. 
 
 B. Benvenuto. DeW imposta unica sulla rendita. Turin, 1850. 
 
 C. W. von GraFfenreid. Die Einkommensteuer. Zurich, 1855. 
 
 E. de Parieu. Histoire des Impdts gfofraux sur la Propritte 1 et le Revenu. 
 Paris, 1856. 
 
^ BIBLIOGRAPHY OF FINANCE. 
 
 E. Broglio. DelV Imposta sulla rendita in Inghilterra e sur capitate negli 
 Stati Uniti. Turin, 1856. 2 vols. 
 
 E. Corbetta. L'imposta sulla rendita mobiliare. Milan, 1865. 
 
 N. G. Pierson. De Inkomstenbelasting. (In the Review De Gids, 1871.) 
 
 Ad. Held. Die Einkommensteuer. Bonn, 1872. 
 
 L. Wolowski. L'Impdt sur le Revenu. Paris, 1872. 
 
 S. Glattstern. Die Steuer -von Einkommen. Leipsic, 1876. 
 
 G. Ricca-Salerno. Del? imposta sul Reddito. (In the Annuario delle Scienze 
 
 giuridiche di C. F. Ferrario. Anno II. Milan, 1881, pp. 370-412.) 
 J. F. J. Vuy. Essai sur la Taxe des Gardes. Geneva, 1838. 
 David (du Gers). Nature, etc., de Flmp&tsurle Capital. (In the Journal 
 
 des Economistes, 1850.) 
 C. G. Kries. Ueber die Vermogenssteuer im Staate New York. (In the Zeit- 
 
 schr. f. d. ges. Staatswiss., 1855.) 
 C. Baer. // catasto fiorentino del secolo XV., ovvero Vimposta sul capitale. 
 
 (In the Anlologia Nuova, 1871.) 
 
 Menier. The'orie de I' Application de Vlmpdt sur le Capital. Paris, 1874. 
 M. H. Denis. L'Impdt sur le Revenu. Brussels, 1881. 
 
 F. Chailley. L'Impdt sur le Revenu. Paris, 1884, 
 
 6. Local Taxation. 
 
 E. Serra-Gropelli. Le finanze dei Communio delle Provincie. Modena, 
 
 1870. 
 R. H. I. Palgrave. On Local Taxation. London, 1871. (In the Journal 
 
 of the Statistical Society.} 
 
 G. J. Goschen. Local Taxation. London, 1872. 
 P. Leroy-Beaulieu. L' Administration locale en France, et en Angleterre. 
 
 Paris, 1873. 
 
 T. W. Probyn. Local Government and Taxation. London, 1875. 
 Die Communalsteuerfrage, Zehn Gutachten und Berichte. Leipsic, 1877. 
 Rob. Friedburg. Die Besteuerung der Gemeinden. Berlin, 1877. 
 V. Ellena. La Finanze Communali. Rome, 1878. (In the Archivio di 
 
 Statistica, Anno II.) 
 
 Ad. Wagner. Die Communalsteuerfrage, etc. Leipsic, 1878. 
 A. Salandra. // 1 iordinamento delle finanze comunali. Rome, 1878. (In 
 
 the Nuova Antologia.} 
 
 L. von Bilinski. Die Gemeindebesteuerung, etc. Leipsic, 1878. 
 C. Soro-Delitala. . // Sistema tributotio dei Comuni e delle Provincie. 
 Rome, 
 
BIBLIOGRAPHY OF FINANCE. 19! 
 
 SECTION V. 
 
 Public Debt. 
 
 CHAPTER I. 
 
 Public Debt in General. 
 
 I. English and French Works. 
 
 R. Hamilton. An Inquiry into the Rise and Progress, etc., of the National 
 
 Debt. Edinburgh, 1814 ; 3d edition, 1818. 
 L. C. A. Dufresne Saint Leon. Etude du Credit public et des Dettes pub- 
 
 liques, Paris, 1824. 
 T. B. Yuvigny. Principes e'le'mentaires des Emprunts publics, etc. Paris, 
 
 1839- 
 
 W. Newmarch. On the Loans Raised by Mr. Pitt. London, 1855. (In the 
 Journal of the Statistical Society. Vol. XV.) 
 
 E. Capps. The National Debt financially considered, London, 1879. 
 
 Cl. Royer. Des Emprunts et des Contributions de Salut public. (In the 
 Journal des Economistes, 1 866. ) 
 
 D. Baxter. National Debts. London, 1871. 
 
 H. C. Adams. Public Debts. New York, 1887. 
 
 2. German Works. 
 
 F. Nebinius. Der off entlihe credit. Carlsruhe, 1820; 2d ed., 1829. 
 N. Th. v. Conner. Von Satatsschuldcn, etc. 1st vol. Munich, 1826. 
 
 E. Baumstark. Staatswissenschaftliche Versuche iiber Staatscredit, etc. 
 
 Heidelberg, 1833. 
 
 C. Deitzel. Das System der Staatsanleihen. Heidelberg, 1855. 
 Ad. Wagner. Article : Staatschulden. (In the Deutches Staatsworterbuch, 
 
 by Bluntschli and Brater. Vol. X. Stuttgart, 1867.) 
 Ad. Sotbeer. Betruchtungen iiber das Staatsschuldenivesan. (In the Vier- 
 
 teljahsschr. fur Volkswerthsch), etc. Berlin, 1865. Vol. III. 
 O. Michaelis. Ueber ausivartige Anleihen. (Ibid., 1867.) 
 E. Nasse. Steuern und Staatsanleihen. (In the Zeitschr. f. d. ges. Staats- 
 
 miss. Tubingen, 1868.) 
 V. Bohmert. Lotterien und Prdmienanleihen. Berlin, 1869. 
 
 3. Italian Works. 
 
 G. De Welz (Franc. Fuoco). La magia del Credito svelata. Naples, 1824. 2 
 
 vols. 
 
192 BIBLIOGRAPHY OF FINANCE. 
 
 L. Bianchini. Principii del Credito pubblico. Naples, 1827. 2d edition, 
 1831. 
 
 B. V. Zambelli. Del Credito pi ivato e pubblico. Padua, 1850; 2 vols. 
 
 A. Messedaglia. Dei prestiti pubblici e del miglior sistema di consolida- 
 
 zione. Milan, 1850. 
 
 G. Ferroglio. I debiti pubblici. Turin, 1869. 
 
 A. Salandra. I debiti pubblici nell' economia nazionale. Naples, 1877. 
 G. Ricca-Salerno. Teoria generale dei prestiti pubblici. Milan, 1879. 
 
 4. Works in other Languages. 
 
 H. Hooft Graftland. Die Staatsschulden, etc. Utrecht, 1851. 
 
 N. Bunge. The Theory of Credit (in Russian). Kiew, 1852. 
 
 T. T. Weevering. Handleiding tot de geschiedenis der Slaatschulden. Am- 
 sterdam, 1852. 2 vols. 
 
 L. M. Pastor. La Ji losofia del Credito. 2d edition, Madrid, 1858. 
 
 A. Hernandes Amores. Nociones elementales de Credito publico. Murcia, 
 1859. 
 
 CHAPTER II. 
 
 Special Questions Concerning the Public Debt. 
 i. Floating Debt and Paper Money. 
 
 Ad. Wagner. Die Ordnung des Oesterreichischen Staatshaushalles. Vienna, 
 
 1863. 
 Fr. Ferrara. // corso forzato dei biglietti di banco in Italia. (In the Nuova 
 
 Antologia, 1866-68.) 
 
 Ad. Wagner. Die russische Papiertviihrung. Riga, 1868. 
 R. Busacca. Studii sul Corso forzato, etc. Florence, 1870. 
 Minghetti e Finali (Romanelli). Relazione sulla circolazione cartacea. Rome, 
 
 1875- 
 Th. Hertzka. Wdhrung und Handel. Vienna, 1876, 
 
 C. F. Ferraris. Moneta e corso forzoso. Milan, 1879. 
 
 S. Piperno. Le cagioni deW aggio. Rome, 1880. (In the Archivio di 
 Statistica. Anno V.) 
 
 2. Conversion of the Rente. 
 
 I. Lafitte. Reflexions sur la Reduction de la Rente, etc. Paris, 1824. 
 L. Bianchini. La conversions delle renditi del debito pubblico. Naples, 
 1836. 
 
BIBLIOGRAPHY OF FINANCE^IJ^Y 
 
 G. Savarese. Saggio sulla liduzione del debito pubblico. Naples, 1836. 
 
 F. Nebenius. Uber die Herabsetzung der Zinsen der dffentlichen Schulden. 
 
 Stuttgart, 1837. 
 H. Labeyrie. Thforie et Histoire des Conversions de Rentes. Paris, 1878. 
 
 G. Ricca-Salerno. Di alcune questioni relative al debito pubblico. (In the 
 
 Annuatio delle Scienze giuridiche of C. F. Ferraris. Anno III. 
 
 Milan, 1882 ; pp. 41-86.) 
 Cucheval-Clarigny. Essai sur F Amortissement et sur les Emprunts d 'Etats. 
 
 Paris, 1886. 
 
 L. Luzzatti. Convertire e ammortizzare. (In the Nuovo Antologia, 1885.) 
 J. Polo de Bernabe y Borras. Arreglo o Bancarrota, etc. Madrid, 1874. 
 
 MISCELLANEOUS. 
 
 See works cited by J. R. McCulloch in Literature of Political Economy. 
 
 London, 1845, Chapter XIX. Revenue and Taxation. 
 Gustav du Puynode. Les grandes Crises Financieres de la France. Paris, 
 
 1876. 
 John Sherman. Selected Speeches and Reports on Finance and Taxation, 
 
 from 1859 to l8 7 8 - New York, 1879. 
 
 Charles Tennant. Taxation as it is, and as it ought to be. London, 1872. 
 Stephen Dowell. History of Taxation and Taxes in England. 4 vols. 
 
 London, 1884. 
 A. S. Bolles. Financial History of the United States. 3 vols. New York, 
 
 1879-1885. 
 Edward G. Bourne. History of the Surplus Revenue of 1837. New York} 
 
 1885. 
 
APPENDIX. 
 
 THE EXISTING SYSTEMS FOR THE ASSESSMENT AND 
 COLLECTION OF STATE TAXES IN NEW YORK AND 
 PENNSYLVANIA, AND THE RATES OF TAXATION 
 THEREIN. 
 
 SYSTEMS and rates of taxation in the several States of the Union are so 
 diverse and changes are made so frequently by statute and judicial decisions, 
 that only an expert can tell what is the law in any particular State. Mr, 
 Julien T. Davies, in his Compilation of Constitutional Provisions, Statutes 
 and Cases Relating to the Assessment of Taxes in the State of New York, 
 has occasion to make no less than six hundred and twenty-three references 
 to judicial decisions arising under the tax laws of this State, or throwing 
 light upon the same. The Auditor-General of Pennsylvania, in his annual 
 report for 1886, says : " It is in many cases difficult to determine what the 
 law is upon a given subject. For fifty years acts have been repealed and 
 others have been amended until too frequently no one can tell what act is 
 in force and what is not. Others have been drawn in great haste and 
 amended when almost on final passage, and at times the amendments con- 
 tradict the terms and intent of the original bill." It has been deemed a 
 useful addition to this treatise to present, in a reasonably compact form, the 
 existing laws and systems of the two largest States of the Union. It is be- 
 lieved that as great accuracy has been attained as is possible under the try- 
 ing conditions mentioned in the foregoing quotation, which, it may be 
 added, is as applicable to New York as to Pennsylvania. 
 
 State taxes, measured by the amount of the collections, are relatively un- 
 important as compared with city, town and county taxes, but since all have 
 their origin in the State law it is here that we must seek the ideas upon 
 which they are based. 
 
 The distinguishing feature of the Pennsylvania system is that the State 
 revenue is derived wholly from personal property including corporations, 
 
196 APPENDIX. 
 
 but real estate pays most of the local taxes. In that State the Auditor- 
 General computes that the total tax paid by personal property including 
 corporations, but not including collateral inheritances, is $5,962,344 and 
 by real estate $30,395,350. I have made a calculation that in New York 
 the total tax paid by personal property including corporations, but not 
 including inheritances, is $7,391,467 and by real estate $51,381,478. In 
 other words, personal property, including corporations, pays 16.6 per cent, 
 of all the taxes in Pennsylvania, and 12.6 per cent, in New York. 
 
 NEW YORK. 
 
 There are three different systems of taxation in the State of New York : 
 
 FIRST. Real and personal property is taxable at uniform rates, through 
 the medium of the local authorities, for local and State purposes. Valuations 
 of all real and personal property, not specially exempted by law, are made 
 by local assessors and returned by them to the county boards of supervisors. 
 These boards may add to or subtract from the total valuations of the real 
 estate in any town, but may not diminish the aggregate valuation of the 
 county. The county boards of supervisors transmit to the State Comptroller 
 the aggregate assessments of real and personal property ; the State board of 
 equalization, from the figures thus transmitted to the comptroller, equalize 
 the assessments in the various counties by adding to, or subtracting from, 
 the total valuations of the real estate in any county, but they cannot diminish 
 the aggregate valuation in the State. From the data so obtained the legis- 
 lature fixes annually the rate of tax for State purposes which shall be col- 
 lected from real and personal property. The State Comptroller determines 
 the quota of the State taxes to be collected by the several counties and paid 
 to the State treasurer. The sum so fixed must be paid by the counties, 
 whether collected from the property or not. 
 
 Speaking generally, all real and personal property is subject to assess- 
 ment. That property of religious bodies and of incorporated educational 
 and charitable institutions and of public libraries, which is used exclusively 
 for their own purposes, is exempt from taxation ; also cemeteries, the 
 personal property of clergymen (and their real estate, if occupied by them), 
 to the amount of $1,500 each. 
 
 All property exempted from taxation under the Constitution of the 
 United States is also free from assessment in this State. This provision 
 excludes federal bonds, imported goods in their original packages, and 
 property in the course of transmission from one State to another, and the 
 
APPENDIX. 197 
 
 gross receipts of transportation companies arising from inter-State business. 
 It does not, however, exclude from taxation the property, as property, of the 
 transporter which is engaged in the inter-State business. Property exempted 
 by law from execution is also exempt from taxation. Deposits in banks for 
 savings, and the accumulations of the life insurance companies, held for the 
 exclusive benefit of the insured, are not liable to taxation ; though the real 
 estate and other taxable property of the corporation are liable. The owner 
 of stock in an incorporated company in this State, liable to taxation on its 
 capital, cannot be taxed for his shares. Vessels registered in this State, 
 owned by American citizens or associations or corporations of New York, 
 engaged in ocean commerce between any port in the United States and any 
 foreign port, are exempt from all taxation for State and local purposes, and 
 the corporations themselves are exempt for fifteen years (from 1881) from 
 all taxation for State or local purposes upon their capital stock, franchises, 
 or earnings. Lands belonging to the State, or to the United States, are 
 exempt from taxation, except forest lands belonging to the State in the 
 "Forest Preserve," which may be taxed for local purposes the same as 
 private lands, under the supervision of the State Comptroller and the Forest 
 Commission. 
 
 Individuals are not required to furnish statements of their personal prop- 
 erty, but usually, as a matter of courtesy, are notified of the amount fixed 
 by the assessor, and are given an opportunity to show that it is too high. A 
 banker is, however, required to make a return to the assessor of the amount 
 of the capital employed in his business. 
 
 The debts due by a natural person may be deducted from the assessed 
 valuation of his personal property, though the amount of a mortgage cannot 
 be deducted from the valuation of the real estate mortgaged. Such mort- 
 gage debt may, however, be included in the deductions from the assessment 
 of personal property. Mortgages held by private individuals are taxable, 
 as are also generally all claims due from solvent debtors, secured or un- 
 secured. Mortgages held by savings-banks and life-insurance companies 
 are exempt under the provision already mentioned. 
 
 Personal property is assessable where it has a situs. The presumption 
 of law is that such situs is at the domicile of the owner, which presumption 
 may be rebutted. If tangible personal property is permanently situated 
 without the State, it is not taxable here to a private individual. 
 
 Bonds of foreign railroad companies, and other debts secured on prop- 
 erty beyond the State, are ordinarily taxable here. And generally all debts 
 and obligations for the payment of money due or owing to persons residing 
 within this State, however secured or wherever such securities are held, are 
 deemed, for the purposes of taxation, personal estate within the State, and 
 
198 APPENDIX. 
 
 are assessable as such to the owner or owners thereof in the town, village, 
 or ward in which such owner or owners reside at the time such assessment 
 is made. 
 
 Ships have their situs ordinarily at the place of registration, and are tax- 
 able there. 
 
 Corporations are assessed under this system, for taxation for local and 
 State purposes, as follows : Their real estate is taxable like that of a natural 
 person ; a corporation is obliged to make a return, under oath, to the 
 assessor, showing, among other things, the amount of its capital stock and 
 its value, including its surplus profits and reserve funds, the assessed value 
 of its real estate within or without the State, and all shares of stock in 
 other corporations actually owned by it, which are taxable on their capital 
 stock under the laws of this State. They are then assessed upon the actual 
 value of the whole of such capital stock, including such surplus profits or 
 reserve funds (exceeding ten per cent, of the capital), after deducting the 
 assessed value of the real estate, the shares of stock of other corporations, 
 and other non-taxable property, chiefly bonds of the United States. 
 Whether tangible personal property, located in another State, shall be de- 
 ducted from the total value of the -capital stock is still an open question, 
 though, probably, the better opinion is that it may be deducted. This as- 
 sessment so made against the corporation is supposed to reach all of its 
 property not real, and therefore it is not taxable specifically upon its mort- 
 gages or other personal property. All corporations doing a business for 
 profit are taxable in this manner, excepting national and State banks. 
 
 Under the Federal law, national banks cannot be taxed locally upon 
 their capital as such, but the shares of stock may be taxable, as other 
 moneyed capital in this State. Such shares are assessed against the indi- 
 vidual shareholder, at the place where the bank is situated, for their full 
 market value, less a proportionate amount for the assessed value of the real 
 estate of the bank. No deductions are allowed for holdings of government 
 bonds by the bank. The bank is made liable for the payment out of divi- 
 dends of the taxes so assessed against the shareholder. New York share- 
 holders in corporations of other States are not liable to taxation on such 
 shares in this State, though the holders of bonds or other obligations of 
 such corporations are liable to taxation if such holders are residents of this 
 State. 
 
 Foreign fire-insurance companies doing business in this State are assess- 
 able locally, as other companies, upon their capital stock employed in this 
 State, which shall be taken to be the aggregate value of the securities on 
 deposit in the insurance department of this State, excluding government or 
 other non-taxable securities. 
 
APPENDIX. 199 
 
 THE SECOND SYSTEM OF STATE TAXATION. This is by taxation of cor- 
 porations upon their capital stock, and is chiefly based upon the statute of 
 1880 and its amendments. That imposes, first, a tax of one-fourth of a 
 mill upon the capital stock for each one per cent, of dividends ; or, if the 
 dividends are less than six per cent., then at the rate of one and one-half 
 mills upon each dollar of valuation of the capital stock, as sworn to by the 
 company's officers in a return to the State Comptroller, Formerly, this tax 
 was charged upon all the property of the company, whether situated within 
 or without the State, but is now, by the amendment of 1885, confined to 
 the capital employed within the State. Under this tax, it is immaterial in 
 what the capital is invested : therefore, deductions are not made for govern- 
 ment or other non-taxable securities. 
 
 Savings-banks, life, fire and marine insurance companies, domestic or 
 foreign, banks, manufacturing or mining corporations carrying on manufac- 
 tures or the mining of ores within this State are excepted from the liability to 
 this tax. Gas companies and trust companies are not embraced within the 
 exception. Corporations of New York, owning vessels engaged in foreign 
 trade, are exempt from the payment of this tax for fifteen years from 1881. 
 
 Fire and marine insurance companies of this State are liable to pay as a 
 tax for their franchise or business a tax at the rate of five-tenths of one per 
 cent, per annum upon the gross amount of premiums received from busi- 
 ness done within the State. 
 
 Transportation companies of all sorts are obliged to pay as a tax on 
 franchise five-tenths of one per cent, upon the gross earnings in this State 
 from tolls, transportation, telegraph, telephone, or express business trans- 
 acted within this State. 
 
 A recent decision of the Supreme Court of the United States excluded 
 from the operation of this tax the gross earnings of such companies from 
 inter-State business. 
 
 Banking corporations of other States and countries, doing business in 
 New York, are required to pay a tax of one-half of one per cent, each year 
 on the average amount of their deposits and of moneys received and used 
 on account of such business in this State. 
 
 THE THIRD SYSTEM OF STATE TAXATION. This embraces revenue de- 
 rived by the State for special privileges granted by the State to corporations 
 and others. 
 
 Insurance companies of other States are liable to pay, by virtue of the 
 reciprocal tax law so called of 1875, a tax upon premiums received in 
 this State, at the same rate as that which is imposed by the States from 
 which the foreign companies come, upon New York companies doing busi- 
 ness in those States. (This, at least, is the construction of the statute made 
 
200 APPENDIX. 
 
 by the attorney-general, and it has thus far been acquiesced in by the com- 
 panies.) 
 
 All inheritances exceeding $500, going by will or otherwise, to persons, 
 more distantly related to the decedent than parents, husband, wife, chil- 
 dren or other lineal descendant, brother, sister, son-in-law, daughter-in-law, 
 unless to societies now exempt by law from taxation, are required to pay a 
 tax of five per cent, of the clear market value. 
 
 For privilege of organization, all corporations having capital stock di- 
 vided into shares, not including literary, scientific, medical, or religious 
 corporations, are required to pay a lax of one-eighth of one per cent, upon 
 the amount of capital stock which the corporation, by its charter, is author- 
 ized to have, and a like tax upon any subsequent increase. 
 
 A tax of five per cent, upon the gross receipts for admission on race 
 days to race tracks owned by racing associations for the improvement of 
 the breed of horses shall be paid annually. 
 
 REVENUE OF THE STATE OF NEW YORK 
 FOR THE YEAR ENDED SEPTEMBER 30, 1887. 
 
 FROM GENERAL TAX LEVY. 
 
 For general purposes $3,656,472 
 
 For canals 2,148,928 
 
 For common schools 3.708,384 
 
 $9.513,784 
 
 FROM OTHER SOURCES. 
 
 Tax on corporations $1,239,864 
 
 New franchises 201,663 
 
 Collateral inheritances 561,716 
 
 Fees of public officers 31, 390 
 
 Insurance department fees 132,267 
 
 Fees of notaries 2 9,997 
 
 Income from permanent funds 994,650 
 
 Miscellaneous 412,423 
 
 * State prison earnings (gross) 1,111,823 
 
 114.229,577 
 
 * The State prison expenses for the same period are reported by the 
 comptroller at $1,628,523.45, showing a deficiency of $516,699. 
 
APPENDIX. 201 
 
 There was a surplus in the treasury Sept. 30, 1887, of $3,714,907 
 
 State debt (net) 3,505,816 
 
 Net surplus $209, 091 
 
 City, town and county taxes for the same year are reported at $48,256,- 
 144, in addition to the State taxes. 
 
 NEW YORK CITY. 
 
 Municipal taxes in the city of New York are for the most part additional 
 to the State taxes on real and personal property. They are levied by the 
 authority 'of the Board of Aldermen, but the aldermen have very little dis- 
 cretion in fixing the amount to be raised by taxation. The comptroller of 
 the city prepares annually a statement of ' ' the amount by law authorized 
 to be raised by tax in that year." This amount comprises all the appropria- 
 tions decreed by the Legislature of the State, and the estimates of expendi- 
 ture made by the Board of Estimate and Apportionment, which board con- 
 sists of the Mayor, Comptroller, President of the Board of Aldermen and 
 President of the Department of Taxes and Assessments. All these officers 
 are elected by the people except the last, who is appointed by the mayor. 
 The estimate thus made is the appropriation bill of the city, for although 
 it must be submitted to the Board of Aldermen, they have no power over 
 it or any part of it except to refer it back to the Board of Estimate and 
 Apportionment for one reconsideration. 
 
 The assessment of real and personal property is made by deputy tax 
 commissioners appointed by the Board of Commissioners of Taxes and 
 Assessments. Appeals from assessments are allowed to the Board of Com- 
 missioners, and afterward to the Supreme Court, or any judge thereof. 
 When the assessment rolls are completed, they are delivered to the Re- 
 ceiver of Taxes with the warrant of the Board of Aldermen requiring him 
 to collect from the persons named in the rolls the sums set opposite their 
 names, and pay the same to the chamberlain of the city. 
 
 In addition to the general tax levy the city derives revenue from licenses, 
 market rents, ferry and dock rents, street railroad and elevated railroad 
 franchises, Brooklyn Bridge tolls, Croton water rents, street vault rents, 
 fines and penalties, county clerk's fees v and a large number of other mis- 
 cellaneous sources, amounting in the year 1886 to about $9,000,000, exclu- 
 sive of " special and trust accounts " ($2,128,036). In the same year the 
 general tax levy, including arrears of former years, yielded $31,568,096. 
 This includes the city's proportion of the State tax, viz. : $4,199,606. 
 
202 APPENDIX. 
 
 PENNSYLVANIA. 
 
 The assessment and collection of State tax on personal property is under 
 the supervision of three commissioners in each county, who are elected tri- 
 ennially. In the City of Philadelphia, a Board of Revision performs the 
 duties assigned to the county commissioners in other parts of the State. 
 
 One assessor is elected in each township, ward, or borough, except in 
 the city of Philadelphia, where two are appointed for each ward by the 
 Board of Revision of Taxes, who make out annually complete lists of all 
 taxable persons, and a valuation of all property taxable by law within their 
 respective jurisdictions. 
 
 Blanks are furnished by the auditor-general to the commissioners of the 
 respective counties of the Commonwealth, except in Philadelphia, where 
 they are furnished to the Board of Revision of Taxes, and by such commis- 
 sioners and Board of Revision of Taxes furnished to the assessors, to bs 
 distributed to all taxable persons. These must be filled up by the tax- 
 payers and returned under oath to the assessor. 
 
 Except where otherwise provided by special Act of Assembly, a tax col- 
 lector is elected annually by each borough, ward, or township. In the city 
 of Philadelphia taxes are paid to a receiver of taxes. 
 
 (By the Revenue Act of 1885 it is made the duty of the prothonotaries 
 of the Courts of Common Pleas for the different counties to keep a 
 daily record of the judgments filed in their court, with the names of the 
 parties in whose favor they are made, and to furnish a list of such judg- 
 ments and parties to the commissioners of the respective counties, who in 
 turn are required to furnish a copy of such list to the different assessors ; 
 and it is the duty of the latter to compare such list with the returns made 
 by the various individual tax-payers. The registers and recorders of the 
 several counties are also required to keep a daily record of the mortgages and 
 deeds filed in their offices, with the names of the parties in whose favor they 
 are made, and to furnish a list of the same to the proper county commis- 
 sioners for a similar comparison with the individual tax returns. In case 
 the judgment, deed, or mortgage is in favor of a non-resident of the county, 
 the prothonotary or recorder sends a statement of the same to the commis- 
 sioners at the domicile of the beneficiary, for a comparison with his return 
 there.) 
 
 Revenue for State purposes is obtained from taxes on personal property, 
 including that of corporations ; from licenses ; from bonus on charters (de- 
 fined by the courts to be the price of their chartered privilege) ; gross re- 
 ceipts of incorporated companies ; gross premiums of incorporated insur- 
 ance companies of the State ; from purchase money, and interest, of State 
 
APPENDIX. 203 
 
 lands ; from net income of private bankers and brokers, and unincor- 
 porated banks anH savings institutions ; from logs rafted by boom compa- 
 nies ; from legal instruments ; from loans of counties and of municipal and 
 private corporations ; from the commissions of notaries public ; from collat- 
 eral inheritance tax ; from the gross receipts of incorporated telegraph and 
 transportation companies ; from the tax on the sale of fertilizers ; and from 
 the right of way through the State of the New York, Lake Erie and Western 
 Railroad Company. 
 
 Real estate is not subject to taxation for State purposes, but pays the 
 larger share of local taxation. 
 
 The auditor-general, State treasurer and secretary of the Common- 
 wealth formerly acted as a State Board of Equalization of Taxes on per- 
 sonal property when ad valorem taxes were in force ; but since ad valorem 
 taxes have been abolished they are vested as a Board of Revenue Commis- 
 sioners, with simply the power of adjusting the taxes due from each county, 
 and assigning to the counties their proper proportion of taxes to be raised. 
 Any county not satisfied with their adjustment may appeal to the said Board 
 for a rehearing, and if the same is denied them, or if they are dissatisfied 
 with the action of the Board on such rehearing, they may appeal to the Court 
 of Common Pleas of Dauphin County, whose decision is final. 
 
 The auditor-general, State treasurer and attorney-general are authorized 
 to revise any settlement made with any person or body politic by the 
 auditor-general when it may appear, from the accounts in his office, or 
 from other information in his possession, that the same has been erroneously 
 or illegally made, and to resettle the same according to law, and to credit 
 or charge, as the case may be, the amount resulting from such resettlement, 
 upon the accounts of such person or body politic. Act April, 1869 (P. L. 
 19). While sitting in this capacity they are known as the Board of Public 
 Accounts, which title is, however, not known to the law. 
 
 By the Act of May 14, 1874, churches, burial grounds not held for 
 profit, hospitals, universities, colleges, seminaries, academies, associations 
 and institutions of learning, benevolence or charity, school-houses, etc., 
 were exempted from all local taxation upon all real and personal property 
 actually in use and occupation by them, and from which no income was 
 derived. The application of this act is narrowed by article 9, section I, of 
 the Constitution of 1874, which permits of exemption from taxation of 
 "public property held for public uses, actual places of religious worship, 
 places of burial not used or held for private or corporate profit, and insti- 
 tutions of a purely public charity." Under this section schools and colleges, 
 managed by private corporations, have been held taxable, as not being 
 "institutions of purely public charity." 
 
204 APPENDIX. 
 
 Personal property is subject to taxation at the rate of three mills on the 
 dollar. % 
 
 The personal property subject to the three-mill tax for State purposes is 
 as follows: All mortgages ; money owing by solvent debtors, whether by 
 promissory note, penal or single bill, bond or judgment ; also all articles of 
 agreement ; accounts bearing interest owned or possessed by any person or 
 persons whatsoever except obligations given banks for money loaned, and 
 bank-notes ; all public loans or stocks whatsoever, except those issued by 
 this Commonwealth or the United States; all money loaned or invested in 
 any other State, and all moneyed capital in the hands of individual citizens 
 of the State ; all stages, omnibuses, cabs, hacks and other vehicles used for 
 transporting passengers for hire, owned, used, or possessed within the Com- 
 monwealth by any person, or persons, or by any corporate bodies or body ; 
 all annuities over two hundred dollars, except those granted by the Com- 
 monwealth or the United States ; all personal property held, owned, used, 
 or invested by any person, company, or corporation, except always such 
 property as is held in trust for religious purposes ; all shares of stock or 
 weekly deposits in any unincorporated savings fund institution. (Tax on 
 household furniture, pleasure carriages and watches was repealed by Act of 
 May 13, 1887, Pamphlet Laws, 1887, page 114.) The tax on personal 
 property is assessed and collected by the county officers as above described. 
 There is allowed on the collection of this tax an abatement of five per 
 centum for prompt payment of the tax, and a commission to the tax collec- 
 tors of two and five per cent., depending upon the time in which the tax is 
 paid. In some counties where special laws are still in existence a commis- 
 sion of five per cent, is allowed the county for collecting the tax. A com- 
 mission of one per cent, is allowed the county treasurer on the amount of 
 money actually paid over by him to the State treasurer on account of State 
 tax on personal property. The county treasurer receives as a compensation 
 for the collection of the tax on county loans and for the collection of licenses 
 five per cent, when the amount collected for State purposes does not exceed 
 one thousand dollars, one per cent, when it exceeds one thousand and does 
 not exceed two thousand dollars, and one-half of one per cent, when it ex- 
 ceeds two thousand dollars. The calculation is made on the gross amount. 
 
 Under the Act of 1885 moneyed capital, including mortgages, is exempt 
 from all local taxes. 
 
 Collateral inheritances are taxed as follows : "All estates, real, personal, 
 or mixed, of every kind whatsoever, situated within the State, whether the 
 person or persons dying seized thereof be domiciled within or out of the 
 State, and all such estates situated within another State, Territory, or coun- 
 try, when the person or persons dying seized thereof shall have their domi- 
 
APPENDIX. 205 
 
 cile within the Commonwealth, passing from any person or persons who may 
 die seized of such estate either by will or under the intestate laws of the 
 Commonwealth, or any part of such estate or interest therein transferred by 
 deed, bargain, or sale made or intended to take effect in possession after the 
 death of the grantor or bargainer, to any person or persons, or to bodies 
 corporate or politic, in trust or otherwise, other than to or for the use of 
 father, mother, husband, or wife, children and lineal descendants born in 
 lawful wedlock, or the wife or the widow of the person dying seized or pos- 
 sessed thereof, shall be and they are hereby made subject to a tax of five 
 dollars on every hundred dollars of the clear value of such estate or estates, 
 to be paid to the use of the Commonwealth." (Pamphlet Laws, 1887, page 
 79.) The collection is made by the Register of Wills. 
 
 Taxes on corporations are payable by the officers of the same directly to 
 the State treasurer. No corporation may go into operation in the State 
 without first having its name, the date of its incorporation, the Act of As- 
 sembly, or other authority under which it was incorporated, the place of 
 business, the post-office address, the names of the president, secretary and 
 treasurer, and the amount of authorized capital and the amount of capital 
 stock paid in, registered in the auditor-general's office, under penalty of a 
 fine of $500. The president and treasurer of every incorporated company 
 doing business in the State (except banks, savings institutions and foreign 
 insurance companies) must make an annual report, stating the total author- 
 ized capital stock of the company, the number of shares of stock, the par 
 value of each share, the amount of each share paid in, the amount of capital 
 paid in, and the date, amount, and rate per cent, of each and all dividends 
 paid within the year, ending with the first Monday in November. When 
 a company fails to declare a dividend during the year ending as above, or 
 when its dividends are less than six per cent, a year on the par value of the 
 stock, the treasurer and secretary of the company must appraise the capital 
 stock at its actual cash value, and submit their appraisement to the auditor- 
 general, with a copy of their oath or affirmation to the truth of the same. 
 The auditor-general and State treasurer may also make a valuation if they 
 are dissatisfied with the one returned by the company. If the company, 
 in turn, is dissatisfied with this settlement, it may appeal to the Court of 
 Common Pleas, as in any other case of appeal from the settlement of ac- 
 counts by the auditor-general and State treasurer. 
 
 In case any company does not make the above return by the 3ist of 
 December in each year, ten per cent, is added to the tax due the Com- 
 monwealth. If the officers of any company intentionally fail for three suc- 
 cessive years to make the above return, the charter of the company is for- 
 feited on the governor's proclamation, although the constitutionality of this 
 
206 APPENDIX. 
 
 law is very generally doubted, it never having been judicially passed upon. 
 All due and unpaid taxes bear interest at the rate of twelve per centum from 
 sixty days after the approval by the State treasurer of the settlement of such 
 taxes, in addition to such penalties as are prescribed by law. 
 
 All taxes are liens upon the property and franchises of corporations, ex- 
 cept the bonus on charters, one-half of which is required to be paid before 
 articles of incorporation are issued. 
 
 If the dividends made by any company within the year ending the first 
 Monday in November exceed six per cent, on the par value of the stock, 
 the tax is one-half of a mill on the capital stock for each one per cent, of 
 dividend declared. If no dividend is declared, or if the dividend does not 
 amount to six per cent, upon the par value of the stock, the tax is three 
 mills upon each dollar of the valuation of the capital stock made as above. 
 That is, if a company has a capital stock of $1,000,000, it pays an annual 
 tax of $3,000 under this law until its dividends are more than six per cent., 
 and then an additional $500 for every one per cent, of dividend. If a com- 
 pany has more than one kind of stock, such as common and preferred, and 
 on one of these a six per cent., or larger dividend is paid, the tax on that 
 part of the stock which pays six per cent, or more is taxed at the rate of 
 half a mill on the dollar, for each one per centum of the amount of dividend 
 paid, and that part of the stock which pays no dividend, or less than six per 
 cent., is taxed three mills on the dollar. When any profit is added to the 
 reserve fund it is treated as having been divided amongst the stockholders, 
 and it subjects the capital stock to taxation as if it were a dividend, unless 
 such profit is expressly set aside for the payment of debts. 
 
 Transportation companies organized as limited partnerships, and all 
 other limited partnerships and joint-stock companies, unless organized for 
 manufacturing or mercantile purposes, are subject to a half mill on each one 
 per cent, of dividend, and three-mill tax as above described. For purposes of 
 taxation interests in limited partnerships are deemed to be capital stock, 
 and any division of profits to the owners of such interests are taxed as 
 dividends. 
 
 [The pra&rce in the beginning was (i) to tax railroad companies incor- 
 porated in Pennsylvania on that proportion of their capital stock which 
 their mileage in the State bears to their total mileage, (2) to tax other com- 
 panies incorporated in the State on their entire capital stock wheresoever 
 invested or employed, and (3) to tax corporations of other States doing 
 business in Pennsylvania only on the proportion of their capital stock 
 invested in the State. As the statute does not in terms authorize such 
 distinctions, and as the Supreme Court of the State, in the case of Fox's 
 Appeal, refused to consider this a franchise tax, but held that it was " a 
 
APPENDIX. 207 
 
 tax on property and assets," the practice now is to tax domestic corpora- 
 tions only on the capital stock employed in the State.] 
 
 Railway and other transportation companies, telegraph, express, palace- 
 car and sleeping-car companies are taxed eight-tenths of one per cent, on 
 their gross receipts. Such companies owning or operating coal mines are 
 required to include the transportation of the coal in their gross receipts, but 
 not the coal itself. 
 
 (The tax on gross receipts, in so far as it touches inter-State or foreign 
 commerce, has been pronounced unconstitutional by the Supreme Court of 
 the United States, as already mentioned in this volume. The question 
 pending in this State now is whether, under the decision of the Supreme 
 Court, the gross receipts of a railroad lying entirely within the State, upon 
 business coming to it through another road into or out of the State, are 
 properly taxable. In other words, whether the ultimate destination of 
 freight through other hands makes it inter-State traffic in their hands, 
 though their own services are performed entirely within the Commonwealth. 
 A large amount of taxes is withheld by companies pending a decision of 
 this point.) 
 
 The shares of banks, savings institutions, trust companies, safe-deposit 
 companies, title-guarantee companies and similar institutions are taxable 
 for State purposes, at the rate of three mills on the dollar. But such com- 
 panies may elect to pay directly to the State treasury a tax of six-tenths of 
 one per cent, on the par value of their shares, in which case they are exempt 
 from local taxation, except on their real estate ; and banks universally elect 
 to pay such six-mill tax. 
 
 The loans and bonded indebtedness of counties, boroughs, cities, towns 
 and incorporated companies, represented by bonds, certificates, or other in- 
 terest-bearing obligations held by citizens of the State, are taxable at the rate 
 of three mills on the dollar of their nominal value. The treasurers of such 
 counties, boroughs, cities, towns and incorporated companies are required 
 to report annually for the year ending the first Monday of November of 
 each year the nominal value of all their scrip, bonds and evidences of in- 
 debtedness, to the auditor-general, and to deduct the tax upon the same 
 from the interest payments falling due to such holders of their scrip, bonds, 
 and evidences of indebtedness. (The payment of this tax is now being re- 
 sisted in the courts on the ground that, being upon the nominal value of the 
 loans or bonded indebtedness, it is unconstitutional in not being uniform, 
 and that the State cannot constitutionally impose the duty of collecting the 
 tax upon the treasurers of such companies.) 
 
 Newly incorporated companies must pay a bonus for their charter privi- 
 lege of one-quarter of one per centum on their authorized capital, or any sub- 
 
2O8 APPENDIX. 
 
 sequent increase thereof, payable one-half on the date of their incorpora- 
 tion, and the other half one year from such date. (The auditor-general's 
 department holds that the words "subsequent increase thereof" means 
 the amount subsequently authorized, and not the amount of actual in- 
 crease.) 
 
 Insurance companies organized under the laws of Pennsylvania pay 
 eight-tenths of one per cent, on their gross premiums received from busi- 
 ness done in Pennsylvania. Foreign insurance companies pay $25 per an- 
 num, and in addition thereto three per cent, on their premiums received 
 from business transacted in the State. 
 
 Private bankers and brokers, and unincorporated banks and savings insti- 
 tutions, pay three per cent, on their net earnings, such earnings to be re- 
 turned by themselves under oath. 
 
 Clerks of courts, registers of wills and recorders of deeds, whose net re- 
 ceipts exceed $2,000 per annum, are required to pay to the State treasury 
 fifty per centum of such excess. In addition thereto, a State tax of $3.50 is 
 imposed on every writ of error issued, or appeal granted, by the Supreme 
 Court of the State, and a tax of fifty cents on every writ issued by the in- 
 ferior courts, and of twenty-five cents on every transcript of a judgment of 
 a justice of the peace or alderman. Recorders of deeds are required to 
 collect for the State fifty cents on every instrument offered for record. Reg- 
 sters of wills collect for the State fifty cents for the probate of each will, 
 and the same amount for the granting of letters of administration. A State 
 tax of $10 is levied on the commissions of inferior officers of cities and coun- 
 ties, such as inspectors of food, health officers, clerks of courts, sheriffs, etc. 
 
 The following license taxes are imposed for the benefit of the State : 
 
 Auctioneers, from $200 to $3,000, according to the amount of their sales. 
 
 Billiard tables and bowling alleys are rated as follows : $30 for the first 
 table or alley, and $10 for each additional alley or table. 
 
 Wholesale dealers in intoxicating liquors, brewers, distillers, rectifiers, 
 compounders, storekeepers and agents having stores or offices within this 
 Commonwealth, dealing in intoxicating liquors, either spirituous, vinous or 
 malt, shall pay for each separate store, brewery, distillery, rectifying or 
 compounding establishment or agency, an annual license, in cities of the 
 first, second and third class [ist class, 600,000 inhabitants or over ; 2d 
 class, 150,000 and less than 600,000; 3d class, 75,000 and- under 150,000; 
 4th class, 45,000 and under 75,000 ; 5th class, 20,000 and under 45,000 ; 
 6th class, 10,000 and under 20,000 ; 7th class, less than 10,000], the sum of 
 $500, in all other cities $300 ; in boroughs the sum of $200 and in townships 
 the sum of $100. Act of May 24, 1887. (Pamphlet Laws, 1887, page 194. 
 
 Licenses for the sale of vinous, spirituous, malt or brewed liquors at 
 
APPENDIX. 2O9 
 
 retail in quantities not exceeding one quart are rated as follows : $500 
 in cities of the first class ; $300 in other cities ; $150 in boroughs, and 
 $75 in townships. In cities of the first class four-fifths shall be paid for 
 the use of the city and county, and one-fifth for the use of the Common- 
 wealth ; in cities of the second and third class two-fifths shall be paid for 
 the use of the city, two-fifths for the use of the proper county, and one-fifth 
 for the use of the Commonwealth ; in all other cities or boroughs three- 
 fifths shall be paid for the use of such city or borough, one-fifth for the use 
 of the proper county, and one-fifth for the use of the Commonwealth ; in 
 townships one-half shall be paid to the township, one-fourth for the use of 
 the proper county, and one-fourth for the use of the Commonwealth. Act 
 of May 13, 1887. (Pamphlet Law, 1887, page HI.) It has not yet been 
 determined how these proportions are to be distributed ; whether the whole 
 tax should be returned to the State treasurer, and by him distributed, or 
 whether the city and county treasurers should make the distribution, the 
 law being silent on this point. 
 
 All stock brokers, exchange brokers, merchandise brokers, and bill 
 brokers are required to pay for the use of the Commonwealth a license 
 equal to three per centum upon the estimated amount of their annual 
 receipts, as fixed by the mercantile appraiser of their county. 
 
 ^eddlers, on foot, $8 ; with one horse and wagon, $40 ; with two horses 
 and wagon, $50. 
 
 Theatres, circuses and menageries, in Philadelphia, $500 for one year ; 
 in Alleghany County, $200 ; in every other county, $50. 
 
 Notaries public appointed by the governor are required to pay for their 
 commissions $25 before the same are issued. 
 
 All persons engaged in the 'sale of goods, wares and merchandise, and 
 who have a store, warehouse or other place for the purpose of making such 
 sales, are rated by the mercantile appraiser of the proper county and required 
 to pay a license to the Commonwealth ranging from $7 to $1,000, in pro- 
 portion to the sales made by them. 
 
 In addition to the foregoing revenues public officers of the State are re- 
 quired to collect for the use of the State fees, as per the fee bills established 
 by law, and pay the same into the State treasury every three months. 
 
 Incorporated boom companies are required to make return to the 
 auditor-general on or before the 3ist December of each year, on oath, the 
 number of logs annually rafted by them, and to pay to the Commonwealth a 
 tax of $100 on each 100,000 of logs rafted by them, as aforesaid. Act of 1870. 
 
 The revenue derived from lands is the purchase money and interest 
 thereon due the Commonwealth on all vacant and unpatented lands. 
 
 The New York, Lake Erie & Western Railway Company are required to 
 
210 APPENDIX. 
 
 pay annually to the Commonwealth the sum of $10,000 for the privilege of 
 constructing a portion of their road through the counties of Susquehanna 
 and Pike in this State. 
 
 Manufacturing companies, except those engaged in making malt, 
 spirituous or vinous liquors, or gas, are exempt from taxation on their capital 
 stock. Revenue Act of 1885, section 20. (P. L. 1885, p. 199.) They are, 
 however, taxable upon their loans and bonded indebtedness as other cor- 
 porations, the corporation being in such case merely the collector of the 
 tax, which tax cannot therefore be said to be "laid upon manufacturing 
 corporations" within the meaning of the Act of 1885, but is rather laid 
 upon the holders of the bonds or loans through the corporation. To come 
 within the exemption of the act corporations must be purely manufacturing 
 companies, and if any portion of the capital stock of a company is invested 
 in the purchase of goods and wares manufactured by others, and sold by 
 such corporation, such portion of capital so invested is taxable. 
 
 REVENUE OF THE STATE OF PENNSYLVANIA 
 FOR THE YEAR ENDED NOVEMBER 30, 1887. 
 
 From State lands '. . . $3,526.21 
 
 Corporation stock 1,702,057.04 
 
 Gross receipts (corporations) '. 776,388.12 
 
 Gross receipts (notarie spublic) 3,015.96 
 
 Gross premiums 42,619.39 
 
 Logs 989.55 
 
 Banks, safe deposits, etc 431,628.14 
 
 Net earnings 81,596.92 
 
 Loans 161,054.75 
 
 Personal property 864,355.36 
 
 Writs, wills, deeds, etc 117,495.89 
 
 Collateral inheritances 763,871.47 
 
 Fertilizers 8,080.00 
 
 Foreign insurance companies 377,571-63 
 
 Tavern licenses 565,163 67 
 
 Carried forward $5,899,414.10 
 
APPENDIX. 
 
 211 
 
 Brought forward $5,899,414.10 
 
 Eating-house licenses 90,989.10 
 
 Wholesale liquor licenses 39,821.29 
 
 Brewers' licenses 15,446.69 
 
 Bottlers' licenses 9, 140. 25 
 
 Retailers' licenses 405,105.00 
 
 Billiard licenses 29,845.98 
 
 Brokers' licenses 20,893.38 
 
 Auctioneers' licenses 9,004.67 
 
 Peddlers' licenses 3,064.76 
 
 Theatre, circus, etc., licenses 14,025.37 
 
 Pamphlet laws 402.60 
 
 Bonus on charters 148,624. 56 
 
 Accrued interest 987-33 
 
 Notaries' commissions I5,575oo 
 
 Alleghany Valley R.R 212,500.00 
 
 United States Government (interest on bonds) 172,000.00 
 
 Commutation of tonnage tax (Pennsylvania R.R.) 460,000.00 
 
 Right of way (N. Y., L. E. & W. R.R.) 10,000.00 
 
 Escheats 1,957.16 
 
 Fees of public officers 61,952.17 
 
 Refunded cash 8,384.67 
 
 Conscience money 82.25 
 
 Miscellaneous 16,931.13 
 
 $7,646,147.37 
 
 The State debt (net) November 30, 1886, was $7,078,235 
 
 Cash balance in the treasury 2, 101,457 
 
 The auditor-general estimates that taxes on real estate for local pur- 
 poses amount to $30,395,350. 
 
 THE PENNSYLVANIA TAX COMMISSION BILL. 
 
 A Revenue Act making material changes in the tax system of the State, 
 more especially in reference to the taxation of corporations, was passed by 
 the Legislature in 1887, but failed to become a law through the accidental 
 omission of the signature of the President pro tempore of the Senate. 
 Prior to the passage of said act, by a concurrent resolution approved Feb- 
 ruary 18, 1887, a commission to consist of five members of the Senate, 
 
212 APPENDIX. 
 
 seven members of the House, the auditor-general, the State treasurer, the 
 President of the Senate, Speaker of the House, and three leading citizens 
 to be selected by the governor, was authorized to revise the revenue laws 
 of the Commonwealth and report by bill or otherwise at the next session of 
 the Legislature. Upon the failure of the bill, which had anticipated their 
 labors, the commission proceeded to prepare a bill, embodying the various 
 laws in existence, and imposing upon corporations, with some exceptions, 
 one uniform tax in place of the three taxes on capital stock, gross receipts 
 and loans and bonded indebtedness, which tax, as was estimated, would pro- 
 duce nearly the same revenue as was derived from the three taxes named. 
 This bill will be presented at the next session of the Legislature, but it is 
 extremely improbable that it will be adopted in its present form, a consider- 
 able reaction of public opinion having been developed in the State against 
 it. The sections of the bill which introduce new matter, or essentially 
 change the existing law, are as below : 
 
 Section 18 provides it shall be unlawful for any person or persons, co- 
 partnership, unincorporated association, limited partnership, bank, or cor- 
 poration whatsoever, in loaning money at interest to any person or persons, 
 whether such loans be secured by bond and mortgage or otherwise, to re- 
 quire the person or persons borrowing the same to pay the tax imposed 
 thereon, and in all cases where such tax shall have been paid by the bor- 
 rower or borrowers the same shall be deemed and considered usury and be 
 subject to the laws governing the same. 
 
 Section 19 provides that the treasurer of every city, county and borough 
 of the State, and of every limited partnership and corporation organized, or 
 incorporated, under the laws of this State, or of any other State, or of the 
 United States, and doing business within this State (except those taxable 
 under the* 26th section of this act), paying interest upon any loan or loans, 
 which are made taxable by law, whether secured by script, bonds, certifi- 
 cates, or otherwise, shall report to the auditor-general annually the amount 
 of such loans and the name and residence of each owner or holder thereof, 
 within this State, and the amount held by each, as nearly as can be ascer- 
 tained. It shall then be the duty of the auditor-general to assess the same 
 for taxation at the rate of three mills on the dollar of the par value thereof, 
 and the officers of said cities, corporations, etc., shall thereupon pay said 
 tax and deduct it from the interest due, or to become due, to the holders of 
 said loans. 
 
 Section 25 provides that every pipe-line company, conduit company, 
 steamboat company, or other company, association, or partnership, doing 
 business in this State by ownership, operation, or lease, to, or from, others, 
 in the way of transporting freight, passengers, oil or gas (except those 
 
APPENDIX. 213 
 
 enumerated in the 26th section of this act), and every telegraph or telephone 
 company, express company natural-gas company, electric-light company, 
 palace-car and sleeping-car company, shall pay a tax of eight mills upon the 
 gross receipts from business done wholly within this State. 
 
 Section 26 provides that in lieu of the taxes imposed in the preceding 
 sections, every railroad company, canal company, slack-water navigation 
 company, and street passenger railway company, shall pay a tax of three 
 mills on the dollar of the actual value of their property, assets and fran- 
 chises, which shall be determined by adding the whole amount of their 
 funded debt at par to their entire capital stock at its actual value. In 
 cases where the lines of such companies are partly within and partly with- 
 out the State, the assessment for taxation shall be in proportion to the mile- 
 age within the State. The stock and bonds of companies paying tax under 
 this section are exempt from taxation in the hands of the holders. 
 
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