For the statement is beyond dispute, that the attempt to subst.i.tute corporate responsibility for personal responsibility ends in no responsibility at all. Above all things it is necessary to remember that all the progress yet made from the starvation and degradation of barbarism has been by organized interest of the whole community in protecting first individual life, second individual liberty, and third individual property, as the foundation of universal welfare. Yet society holds all these rights of individuals subject to the same higher law of welfare by restricting the purpose of individuals when possible, and action always, if it opposes the total welfare.

Chapter XXVIII. Economic Machinery Of Government.

_Resources of government._-All expenditures of government are as subject to economic laws with reference to consumption of wealth as are those of individuals. Actual result in welfare is the only reason for such expenditure. Hence the same tests of economy are applied. Government makes but few expenditures for the immediate purpose of reproducing and increasing wealth. So far as its investments sustain productive industry, and the products of that industry enter into the world's market, they are subject to the same economic laws of supply and demand that govern all production of wealth. If in any case they are not, it is because of government monopoly cornering the market, or because of unnatural conditions of government production undermining the market. In general, government is simply expending for the common welfare a part of the wealth produced by individual effort.

Its resources are in small part derived from fees for special services rendered to individuals of the community. Such are fees for registration of deeds and mortgages, and of the same nature, though for convenience of collection paid in a different way, is the revenue from sale of postage stamps and stamped envelopes. Revenue may come from pay for certain special privileges or franchises established by license or patent. These are supposed to be not so much in payment for special service as for sharing in responsibility and cost of protection. Another source of revenue is in the shape of money penalty, or fine, for minor trespa.s.ses upon good order. Such revenues are accidental, and diminish as the government becomes more perfect. Under peculiar circ.u.mstances of opposition by citizens or bodies of citizens to the general order, government confiscates property used in such opposition. A good ill.u.s.tration of this is connected with smuggling, where the introducer of foreign goods opposes government in its revenue laws by fraud or violence, and suffers the confiscation of goods so introduced.

None of the foregoing sources of revenue, unless it be the license, and this is sometimes a mere method of taxation, can serve to any great extent the purposes of government. All government expenditures for general welfare must finally be met by some system of distributing the burden over all the people. This method of distribution is called taxation. The princ.i.p.al revenue is raised by taxation of possessors and producers of wealth, in antic.i.p.ation of current public needs.

If for any reason government expenditures exceed its revenues, the government, like any individual, becomes a borrower. It may borrow by contract to pay at some future time for construction of buildings or machinery, or by issue of scrip in the shape of promises to pay at some definite or indefinite time in the future, or more distinctly still by sale of bonds, which are definite certificates of indebtedness, negotiated like the notes of individuals in great banking centers. Yet all of these are only methods of postponing the taxation which must support the government in its necessary machinery. Government can live upon credit in the same way, and only in the same way, that individuals can. The economic reasons for such credit must be the same as in individual experience.

_Principles of taxation._-Since taxation in general is simply a way of distributing expenses to those for whose benefit expenditure has been made, the first question is one of fairness in distribution. The benefits from government expenditure ought to be universal, but are not necessarily equal. Like all the good things of nature, the benefits of the government are not appreciated by all alike. No one would probably suggest the possibility of distributing the expenditure exactly in accord with advantage received. Wherever the service is distinctly personal, as in the regular mail service, an attempt is made to charge each person the average cost of the service. Even the large miscellaneous mail distribution at less than cost may be fairly borne by those who use the mail for personal advantage, since this is likely to be in proportion to the intelligent activity shown in correspondence. Some few taxes upon special commodities of questionable advantage to the mult.i.tude, like liquors and tobacco, are supposed to be paid by those who gain the only advantage received by anybody in protecting their use.

Some more general principle, however, must be found for adjusting the burden of general expenses so that each individual will bear his share. If the burden belongs to all, it should rest fairly upon all. Hence equality is usually given as the first principle of taxation. But it is evident that in this case equality means equity, not a mathematical division by the number of taxpayers. The interpretation is therefore "according to ability." According to Professor Rogers, the student of economic history, "_Equality of sacrifice is the only honest rule in taxation_." This means, in practice, that any system of taxation should be planned with distinct effort to distribute the common expenses according to the ability of different members of society to meet them.

It is evident that no exact gauge of ability is at hand. If the actual income of every citizen could be distinctly known, and the burdens of a dependent household clearly expressed, a basis for equal sacrifice, so far as wealth is concerned, might be reached. But no such basis has been or can be actually found. If found, it would not give an accurate gauge of sacrifice, because the actual wants for comfort of different individuals are so widely varied. Two distinct approximations toward this equity are found. The first is in the total annual consumption of the individual taxpayer, especially of such articles as meet wants above the mere maintenance of healthy existence. In this the government a.s.sumes that all will spend according to their ability. The second is in a total acc.u.mulation of property. In this the government a.s.sumes that every man saves for future consumption all that he gains above his present needs.

Both a.s.sumptions are untrue in individual cases, and only approximately true anywhere. In many instances the expenditure of a given year upon more continuous wants than ordinary, like a home or farm buildings, will count also as wealth laid by. So, in any combination of the two systems of taxation, the more thrifty and far-seeing will bear a double burden. Yet even this combination may not transgress the rule of equity, since such foresight is itself proof of ability.

To this first principle of equity we may add others, less fundamental, but equally important in practice. _Taxes must be sufficiently definite to be understood and provided for by every taxpayer._ This is needed for maintaining the interest of every citizen in both the necessity and the economy of public expenditures. _Taxes must be so levied and collected as to be conveniently paid._ This means that private enterprise shall be hindered as little as possible in making a.s.sessments, and that times and places of collection shall be suited to the convenience of taxpayers. _The collection of taxes must be by such methods as will involve least outlay, either in salaries of officials or in machinery of the collecting process._ These four principles of taxation were announced by Adam Smith more than a hundred years ago, and have commended themselves to students of the subject ever since. It is evident that the last three are more explicit methods for carrying out the first. Most briefly stated; they imply equity, definiteness, convenience of paying, and economy in collecting.

Most legislation with reference to taxes shows some effort to carry out one, if not all, of these requirements. It is evident that a tax may be conveniently paid in connection with ordinary expenditures, and at the same time be very indefinite and quite inequitable. Many taxes upon articles of every-day use in the home are of this nature. A very equitable tax may be so inconvenient from its interference with private interests, and require so many officials for collection, as to make it a serious burden to all. Such a tax would be one levied upon net income, supposing it possible to discover the exact facts for such a levy. Taxes levied without consideration of these principles are defended as means of checking extravagance or vice, as equalizing other conditions of welfare, or as correcting inequalities from other existing methods of taxation.

Even these last a.s.sume the necessity of equity in the entire system or group of systems.

_Direct and indirect taxation._-For convenience of study, taxes are spoken of as either direct or indirect; that is, a tax may be levied upon one whose property or earnings must be reduced by the amount of the tax, or a tax may be levied upon one whose property when sold, or whose service when rendered to another, will be worth as much more as the burden of the tax he has paid. A poll tax, an income tax, a tax on the farm, or a tax on household goods and jewelry, is a.s.sumed to be paid by the owner or user, without reimburs.e.m.e.nt. But a tax on stock in trade-like the farmer's live stock-or upon the machinery of production or service-like railroads, insurance companies and banks-is a.s.sumed to be transferred as an additional expense to the one who finally enjoys the wealth.

It is easy to see that such a distinction is difficult. Every owner of wealth will consider taxes connected with its possession a part of the cost of such wealth, and wherever possible in the conditions of the market will count a tax in the selling price. It is impossible to judge from the form of wealth or the nature of the service when the tax can be transferred to a final user. A farmer's wheat may be the source from which he pays the total cost of raising it, including taxes upon the land employed. If, in the condition of the wheat market, he has still a profit upon his management, he will a.s.sume that the wheat buyers have paid the taxes. If the market price is so low as to not cover the cost, he will emphasize the fact that he pays the taxes. Yet probably the fact is the same in both cases, that the owner of the land has his profits diminished by the actual amount of the tax. More strictly, the tax is taken from the rent of his land. In any case of over-production, when land gives no rent, the tax will be paid by the producer out of other income. So far, however, as farm products conform to the principle of cost of production in the tendency of prices, there will be a corresponding tendency to shift the tax upon the final consumer.

Thus direct and indirect taxes are not always distinguishable; but in the tax systems of the United States most state and munic.i.p.al taxes are a.s.sumed to be direct, because levied upon persons and more permanent forms of property, while the taxes of the general government are by the Const.i.tution indirect, unless levied upon the states according to population. They are in the form of customs or excise, in which some article of commerce or some service rendered gives a value upon which the tax may be transferred. Thus the state, the county, the city and the school district levy upon a.s.sessment of property and enumeration of polls.

The United States collects upon imported goods of various kinds, upon special articles of manufacture, upon persons or corporations carrying on particular business, and upon commercial transactions of various kinds.

_a.s.sessment of direct taxes._-a.s.sessment implies an enumeration of property in the possession of supposed owners and an apprais.e.m.e.nt of its value. The officer making the a.s.sessment is under constraint of an official oath to give a fair valuation. The market price is supposed to control his judgment, and is usually explicitly named in law.

In actual practice in various states of the Union a.s.sessed valuation often falls as low as one-third or even one-fifth of a fair estimate at market value. This is brought about by several causes. Each a.s.sessor fears over-valuation, lest his district will bear too large a share of more general expenses; and his successor is inclined rather to lower than raise the standard of value, from neighborly interest. Even if the a.s.sessors of an entire county agree upon terms of valuation, they are together under the same influence with reference to state and special taxes. A more definite cause of under-valuation is the practice of exempting a certain limited amount of property from all taxes. If personal property worth $200 is exempt from taxation for every householder, the smaller the a.s.sessment for his total property, the larger in proportion is the exemption.

Specific taxes at a fixed rate, for state or school or improvement purposes, operate in the same way to force down the valuation of property in the entire state or district. In a.s.sessment of real estate even greater violence is sometimes done to equity. In newly settled portions of the country the valuation of land held in the name of non-resident owners is notoriously high. Often in cities the a.s.sessor is subject to political influences and social connections in such a way as to destroy all equity in taxation. The official oath attached to such a.s.sessments is a sham.

If all property of stated kinds were equally and fairly valued, the burden of taxation would be most fairly distributed as regards property owners.

Any tendency to undervalue is sure to oppress the weaker part of these property holders. If the price of a horse is fixed at twenty dollars, when the average price is sixty, the more wealthy owner of horses whose average value is above the general average has a larger part of his property exempt than the poorer owner whose horses are below the average. In the same ratio all household goods and even farms and buildings are under-estimated.

In this connection it is proper to mention the exemption of certain property devoted wholly to public welfare and contributing alike to the good of all citizens. In every state there are mult.i.tudes of schools, created and sustained by gifts of benevolent men. These supplement and extend the work of the state for general enlightenment, and are wisely encouraged by exemption from the burden of taxation, because their entire income is devoted to the same ends which the state serves. Public libraries and churches, devoted to such general enlightenment and moral growth, are wisely included in this exemption. n.o.body suffers, but everybody gains, by the use of private property for such purposes. If in any way these inst.i.tutions serve the private ends of individuals, those individuals become themselves property owners, subject to the same taxation as others. Such exemptions may extend even to art collections made by private funds, and to extensive grounds laid out in parks, provided they are open to the public and serve as a means of wholesome recreation and culture.

In general, however, specific exemptions of private property from any taxes lead to abuse of privileges, jealousies and popular dissatisfaction, which result in danger to government and harm to the people. Exemptions of property used for particular purposes, like a farmer's team, may be thought of as a bounty upon such means of production. But the effect is almost always to the disadvantage of the weak, and the practice gives a general encouragement to the disposition to escape taxes. Farmers, of all cla.s.ses of people, are most interested in a fair and painstaking a.s.sessment of all forms of property. Their influence is most widely extended and far-reaching in its effects. The whole community should be led to realize the absolute necessity of fair taxation and prompt meeting of individual responsibility. Fraud in the treatment of taxes is a crime against society, whether it involves false swearing or not. It partakes of the nature of treason, and may well be subjected to severe penalties.

Usually, however, a penalty in the shape of additional taxes and forfeiture of property by sale for taxes, with room for redemption at considerable expense, are sufficient to secure a proper a.s.sessment and collection, if the community are really in earnest in resisting the fraud.

_Indirect taxes._-The methods of indirect taxation by excise and custom duties have been familiar for ages. They are usually favored by politicians who dread the opposition of the people to taxation, because the collection is so incidental to ordinary expenditures as scarcely to be realized and never clearly measured. Few users of tobacco or strong drink have any distinct idea what portion of the cost represents the government revenue. Still less in drinking the cup of coffee, or sweetening it with sugar, does the person benefited weigh the tax he pays. It is doubtful if most of those who read this, actually know that sugar pays a tax, while tea and coffee do not, in our country.

So convenient is this mode of taxation that it forms the favorite mode of discrimination in favor of productive industries. A tariff of 50 per cent upon imported cloth may actually increase the price of similar cloths manufactured at home by nearly that amount, thus fostering cloth-making by a premium on the product, while only a few discover the added burden of the tax. Yet these modes of taxation are usually costly to the people.

Even if free from complications with either preventing vice or fostering industry, they require a separate body of officials from those provided for direct taxation. They involve investment by every wholesale and retail dealer of extra capital in taxes, upon which extra interest and profit is expected. The actual consumer bears this extra burden with only partial realization of its bulk. If duties are high, the temptation to smuggling and fraud becomes great, and a force of officials must be stretched around the borders of a country to prevent it.

_Custom, or duty._-Duties are said to be either specific or ad valorem.

Specific duties are a definite sum upon every pound, ton, yard or other unit of measure, applied to the article taxed. They are easily a.s.sessed, and misrepresentation or fraud is scarcely possible. Ad valorem duties are a certain rate per cent upon the invoice value of the goods. In these, frauds are abundant, and experts are required to prevent them. Specific duties are relatively heavy upon the consumers of goods of cheaper quality. A tax of 25 cents on each yard of cloth worth a dollar is five times as heavy as the same tax on cloth worth five dollars. Equalization is frequently attempted by combination of specific duties upon all goods of a certain character with ad valorem duties upon all such goods above a certain quality.

_Excise collections._-The same difficulty is experienced in adjusting taxes by excise under our internal revenue system. Such revenues are largely collected through a sale of stamps, though the dealer himself may be required to pay a license fee, to secure the necessary inspection.

Here, too, the tax is specific and bears most heavily upon the users of the poorest grade of goods. If attempt is made to grade it by quality, expensive machinery for preventing fraud is necessary. This is well ill.u.s.trated in the list of officials required in connection with distilleries and bonded warehouses. Both the manufacture and the sale of alcoholic liquors must somewhere be under the inspection of an expert officer. All this necessary expense of collecting must be borne by the consumers. The bonded warehouse itself must not be mistaken for a part of this machinery, though it is essential to the collection. It is simply a device by which the holder of manufactured liquors subject to sale can avoid the payment of a tax until the time of actual delivery. His warehouse, being under bonds to the government, is open only in the presence of the revenue officer, who carries one of the keys necessary to its opening. Without this the tax would have to be paid at time of manufacture, and interest on that amount, to greater or less extent would finally be paid by the consumer. While this system protects essentially against fraud on the part of the owner alone, it does not protect against the weakness or wickedness of officials, and the temptation is sometimes enormous.

_Peculiar taxes._-Aside from these general forms of taxation, peculiar devices are common. The stamps required on official papers or commercial transactions, involving checks, notes, mortgages and deeds, have been familiar at various times in our country, and are a.s.sociated with the history of the world. These differ little from the practice of affixing stamps to patent medicines, cigars and other articles of trade; but instead of being attached to the article transferred they are affixed to the check or note or deed or bond employed in the transaction. These bear unequally, being proportionally heavy upon the people of small means, and are generally annoying in active business. They are frequently favored, however, as being felt most by those who deal most in commerce.

The heavy taxes laid upon the consumption of alcoholic liquors and tobacco ill.u.s.trate another device for making so-called luxury bear the heavier portion of taxes. It looks both ways, attempting to check luxurious living or vicious practices by a penalty for indulgence, and at the same time to secure a revenue as the result of such indulgence. Evidently in so far as it prohibits indulgence it is not a revenue measure; and in so far as it secures the revenue it does not prohibit indulgence. It is borne somewhat patiently, because each person feels that he can avoid the payment by ceasing to indulge himself. The universal tendency is to make it purely a revenue measure by fixing the tax just where it will not r.e.t.a.r.d consumption in any material degree, and in some instances will give a quasi dignity to the dealer through his official license.

_Taxation of credits._-A very common device adopted in most of the states is that of a.s.sessing credits as well as property. The majority of farmers favor the a.s.sessment of mortgages upon a valuation equal to, if not higher than, that upon farms. They forget that the ability to pay taxes from year to year comes out of the profit or rent from the farm; and if both farm and mortgage are taxed, the adjustment comes through the interest which the mortgage must bear. To ill.u.s.trate, a father sells his farm, worth $5,000, to his son, taking a mortgage for the entire value. If mortgages are a.s.sessed, the value of that farm for all purposes of taxation is $10,000; and yet the living of both father and son, taxes included, comes out of that farm's production. The two have no more property and no more ability after the transaction than before. Thus the mortgaged farms in every community where mortgages are taxed bear double burden.

In a similar way the taxation of any form of notes or bonds or stock doubles the a.s.sessment in form without increasing the abilities. _The actual property in use will finally bear the burden of both a.s.sessments._ The road-bed and rolling stock of a railway are property whose value is readily estimated. The actual ownership is in a corporation which may be distinctly taxed. Certificates of stock are individual t.i.tles in that corporation whose property has already been taxed. Its outstanding bonds are simply claims against that corporation, to be paid out of that property which has already been taxed. So every note, being evidence of debt simply, is not a representative of property, but simply a claim against property supposed to exist somewhere else. It may be an absolute fiction, in being a claim against property only hoped for. The result of all efforts to treat certificates of indebtedness as personal property are hardship to debtors and apparent fraud on the part of many creditors. Even though the creditor escapes taxation by hiding his possession of a mortgage, the possibility of its being taxed is always counted in his bargain with the borrower as an important element in interest. The experience of those states in which such taxation has been abolished proves that lower rates of interest are sure to follow.

_Income taxes._-A favorite device in some countries, and often advocated in this, is a direct tax upon incomes above a certain amount, graduated so as to give a much larger rate upon large incomes than upon more moderate ones. The most obvious reason for such a distinction against the large incomes is the evident failure of our national system of taxation to distribute the burden according to ability. It is evident that the expenditures of the very wealthy for such articles as bring revenue to the government are not in the same proportion to their income as the expenditures of the poorer people are to their incomes. A further reason is based upon the supposition that large incomes involve a considerable unearned increment, in the shape of rent or extraordinary profits, because of accidental opportunity or the crowding of population. An income tax, carefully graduated, is supposed to cause such extra privileges and opportunities to bear a fair share of government expenses.

There are several difficulties in administering such a tax which have stood in the way of its general and permanent adoption. No one has yet devised a certain or fair method of estimating income. The peculiarities of any business or employment make great variation in the ability given by a certain income in dollars and cents. The business man in a small town, with an income of $5,000, might live in relative luxury, and still have a surplus for investment in his business. The same man, attempting business in a large city, might, even with an income of $10,000, find it barely possible to keep up appearances. The income of farmers is largely in provisions and personal privileges from use of teams, etc., never counted in dollars and cents, while the village mechanic pays from his measured income for all such comforts, or goes without them. The actual, necessary expenses of the business of a professional man in the way of books and travel are as essential to his business as are farm implements and live stock to the farm; yet no one counts such expenses as a subtraction from the income. A teacher promoted to a higher position is at once subjected to extraordinary expenses, and may be less able with a higher salary to meet the requirements of his new life than he was with a lower salary to meet the less expensive requirements.

Another princ.i.p.al difficulty is the unpopularity of such a tax from its necessary interference with private business. The country will be almost certainly more divided along lines of wealth over an income tax than over anything else. On the part of the wealthy it seems an effort of the people to take from them actual property rights. On the part of the poorer cla.s.ses it fosters the a.s.sumption that the more wealthy are unjustly so.

In the nature of the case, it is an arbitrary adjustment without the possibility of establishing exact reasons for any distinctions made.

Finally, since such distinctions are liable to be varied from time to time, an income tax requires some nice adjustment as to the nature of the income. An income from the sale of property is entirely different in character from the income made by interest on the same property. One is a part of permanent investment, the other is the result of productive investment. One destroys the princ.i.p.al if consumed, the other adds to the princ.i.p.al. Yet no one could arrive at the actual, natural income, without a most intricate system of book-keeping open to public inspection. For without public inspection the temptation to fraudulent returns, under the feeling that the tax is unjust, is so strong as to be demoralizing.

_Inheritance taxes._-A device much employed for making large acc.u.mulations of wealth bear a larger portion of the community's burdens is a heavy tax upon inheritance. Since such inheritance requires the guardianship of law for security of transfer, government is suffered to take a liberal fee for such transfer. Moreover, the inheritor is a.s.sumed to have no such property interest in what has been acc.u.mulated by another as to claim that he can be wronged if government takes a portion. It is defended also by socialists on the ground that large estates are dangerous to the general welfare.

Some facts bear upon the opposite side, and are worthy of consideration. A large estate is the acc.u.mulation of enterprise and industry on the part of a man of more than ordinary abilities. The presumption is in favor of following his judgment in making that useful after his death. Most frequently it is employed in some huge industrial machine, which the public cannot manage, but can destroy by even taking a portion from it.

One of the main stimulants to all acc.u.mulation is the provision for the future wants of a family. If the state takes the acc.u.mulation, it also takes the responsibility for the successors in the family line. Wherever it is applied, it is felt to be a heavy burden upon the community at large. If the state interferes with the freedom of a testator, the chances are that few estates will be acc.u.mulated, and wasteful methods of expenditure, diminishing the power of the entire community, will surely follow. Moreover, evasions of the inheritance tax are comparatively easy, and are likely to be adopted extensively by the holders of large estates.

The very rich can give away a large portion of their property before death without material suffering. Only the moderately wealthy are obliged to hold on to their possessions until death. Any wealthy man can dispose of his wealth during his lifetime, and still retain its income, by giving it away, subject to an annuity. To prevent this the law would have to be extended with intricate inspection to cover all transfers of property. Let no one be deceived into feeling that this is a simple and easy way of saddling government expenses upon the rich.

_Special taxes._-A mult.i.tude of minor devices are worthy of brief consideration. An occupation tax on business men is easily levied, but bears unequally upon the original payers, and in the end falls most heavily upon the poorest. A house tax, measured by the number of rooms, or the number of windows, or the number of fireplaces, has been supposed adjustable to actual income of the possessors. But it bears very heavily upon men in certain professions requiring house-room, and forces the poor into narrow and crowded quarters. The rent of the poor is necessarily a larger proportion of their living expenses than that of the well-to-do. It is a serious hardship when a tax is levied upon that which a man cannot possibly save.

A tax upon retail dealers and peddlers is frequently advocated, as tending to prevent the increase of unnecessary middlemen and wasteful compet.i.tion.

Yet this, too, bears heavily upon the poor, since it crowds out also those who are satisfied with small profits and deal in small sales. Even a tax upon p.a.w.nbrokers, whose profits are supposed to be extraordinary, gives occasion for a sharper grinding of the poor. A study of all these devices will lead one to the conclusion that a tax upon property only, based upon a fair valuation and paid by the controller of the property, is fairest to the whole community and leads to truest conceptions of the relation of property to public expenditure. It is certainly best for rural welfare.

_A single land tax._-A brief consideration must be given to a proposed system of taxation, commonly known as the single land tax. The proposition is to tax all lands, including building sites, to such an extent as may be necessary to meet all public expenditures. The lands are to be valued for this purpose at the rent they will bring, independent of all improvements.

The supposition is that such an income is due entirely to the effect of crowding population, and therefore belongs to society as a whole rather than to the individual possessing it. In fact, if the state were to consume the entire economic rent, it would take only, it is said, what already belongs to the community. Other supposed advantages of the single tax system are the reduced expense of a.s.sessment and collection, together with incidental effects in promoting production by removing burdens from capital, in preventing the holding of land unproductive, possibly in equalizing wealth and diminishing greed for landed property, while the poorer, cheaper agricultural lands, having no rent value, would be relieved of all burden. These are essentially the views maintained by the followers of Henry George, the leading champion of such taxation. It is claimed, further, that the poor in crowded cities would be better housed, since buildings would bear no taxation, and holders of city lots would make them productive through construction of buildings without adding to their burden of taxation. It is claimed also that such taxation would be finally distributed, and fairly distributed, among all the consumers of products affected by land possession, as well as all even indirectly making use of the land. Since food and shelter are universal, all would contribute, so far as they are self-dependent, according to food consumed and s.p.a.ce occupied.

These statements are somewhat inconsistent with each other. If rent is of such a nature, as a.s.sumed at the beginning of the argument, that it cannot directly affect all values because it depends upon those values for its existence, a tax levied upon it cannot be distributed but rests wholly upon the landholder. If, on the other hand, a tax on land is distributed among all consumers of its products, there is no economic rent, but the burden rests upon the consumers alone, according to the amount consumed, subjecting this tax to the objection against all indirect taxes that the poor bear the heavier burden.

It is evident, too, that such a tax must bear heavily upon the unthrifty.

The valuation of farms must be made by an expert judge of what farms similarly situated ought to produce. A farm valued at $500 annual rent might, under thrifty management, produce twice as much as under unthrifty management. The tax, under thrifty management, could be easily paid; under unthrifty management, it would ruin the manager. This certainly does not levy the tax according to ability. It also bears heavily upon the enterprising young farmer whose capital is small, as compared with the long-established farmer with acc.u.mulated capital. The man weak in capital would bear as heavy a burden as the strong.

Again, it provides no system of taxation in newly settled communities where land has practically no value except from improvements. Unless a fict.i.tious value be given to such land for purposes of taxation, as sometimes happens with reference to non-resident land-holders, no government could be maintained.

Finally, since under this system government a.s.sumes a control over landed estates, from which it exempts all other forms of property, it tends toward the nationalization of land, which would necessarily destroy the system itself. For if government claims all increment from land production, land ceases to be property and does not pa.s.s from owner to owner at a market value: then government fixes arbitrarily the rental of s.p.a.ce, and taxation is distributed upon a new principle. If a new principle were not to be a.s.sumed, there could hardly be a device conceived more likely to make the rich richer and the poor poorer. Farmers, of all men, are best situated to realize the unequal workings of a single land tax system.

_Government debts._-An important part of government machinery is connected with its ability to make use of borrowed capital. Under the pressure of heavy expenditures in case of war, or in undertaking permanent improvements in a new country, or in carrying on various enterprises for common welfare, the demand for means is greater than the supply from ordinary modes of taxation. Not even the special devices of war taxes can meet at once the burdens of a defensive war. The rightfulness of such expenditures upon the credit of the government depends upon the object to be secured. The expense of the war which defends and preserves the future home of posterity may properly be borne in part, at least, by posterity.

The court house, the water works, or the electric plant, whose benefits will be shared by the people for a hundred years, may properly be so constructed that all the people benefited may share in the burden. Good economy requires the foresight which builds beyond mere present need. The danger is that expenditure made under expectation that others will pay may be wasteful, and often other reasons than actual needs in the interest of private speculation control.