Taxation

the process of collecting money to carry out the purposes of the government. There are two ways of looking at taxation. According to one view, taxes are an exaction; according to the other they are a contribution. The worst system of taxation known to the historian is probably that of farming taxes out for collection to court favorites. The Romans and other ancient peoples assigned provinces to tax collectors. The collector was placed under contract to bring a fixed sum into the treasury, and was then turned loose to wring as much more as he could from the oppressed peasantry. The fiscal system of Turkey is based on taxes imposed arbitrarily. The Tudor and earlier Stuart sovereigns of England did not hesitate to exact forced loans from people of property. The officers proceeded on the theory that, if a man lived economically, he could not have failed to save money and was therefore in a position to make his sovereign a handsome contribution. If, on the other hand, he lived extravagantly and ostentatiously, he evidently possessed means and was in position to assist his king. A similar view of taxation was held by the Tudors. A dilemma like the one referred to was known during the reign of Henry VII as "Morton's Fork." According to all such views, it is difficult to draw the line between taxation and plunder. The theory that taxation was an injustice, or at best a misfortune, prevailed throughout the ancient world and has not disappeared entirely even yet. So far as the common people of England have taken part in the several wars of that country, they have been stirred up largely by questions of taxation. The American Revolution was fought to escape English taxation. The French Revolution was an uprising of the common people against the taxation of the ruling classes. Aside from questions of ambition and glory, most wars of conquest have been waged for the privilege of taxing somebody.

According to the second view of taxation, taxes are necessary, but maybe levied properly only by consent of the taxed. This view has been crystallized in the expression "taxation without representation is tyranny."

Adam Smith in his Wealth of Nations has laid down four oft-quoted principles of taxation. In a simplified form they may be stated as follows:

1. Each taxpayer should pay in proportion to his ability. 2. the manner and amount should be made public, and a fixed time for payment set. 3. The time and place of payment should be chosen with a view to convenience of the taxpayer. 4. The expense of collection should be as low as possible.

Some hold that a government should get on by spending the least possible amount; others claim that an enlightened government should aim to do much for the people and that liberal funds should be provided for the purpose. This latter view is often spoken of as paternalism. If the government is to act merely as a policeman to keep order, it is evident that less money is needed than if schools, roads, water supply, and other public necessities are to be maintained by taxation. The most enlightened view of taxation is that of people putting their money together, each according to his ability, to carry out a plan agreeable, if possible, to all; if not, at least to a majority.

Taxes are divided into two general classes, indirect and direct. The indirect tax is a tax paid by one who is expected to collect it in turn from someone else with whom he does business. Although the Constitution of the United States permits Congress to levy direct taxes, this method has been resorted to only in time of war. At the present time the government relies largely upon the forms of indirect taxation known as customs and internal revenue. Merchants are required to pay customs duties on imported manufactures, chiefly of wool, silk, cotton, iron, copper, tin, and on lumber, sugar, fruits, liquors, tobacco, drugs, and chemicals. They are expected to raise the price of their goods correspondingly and thus reimburse themselves from their customers. The federal government also levies taxes on manufactures of tobaccos, liquors, oleomargarine, and playing cards. The makers are expected to repay themselves by raising the price of their goods. In 1909 a law was passed imposing a tax of two per cent on the net earnings of corporations in excess of $5,000. Taxes within the various states are ordinarily direct taxes paid to the proper officers by the owner of property. In many states a percentage tax is levied on the gross earnings of corporations, as railroad companies, telephone companies, express companies, etc. In several states, a poll tax is collected. Every able-bodies male person is required to pay a tax. In the United Kingdom much is made of an income tax.

The opinion of economists is divided as to whether direct or indirect taxes are the more advisable. Direct taxation is believed to educate taxpayers. The indirect method attracts the least attention. It is more in accordance with the advice of Colbert, the celebrated finance minister of Louis XIV, who is reported to have said: "Pluck the goose so as to obtain the most feathers with the least squawking."

See Customs; George; Henry; Socialism; Octroi; Income Tax; Tariff; Unearned Increment; Protection; Assessor