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For the various meanings of the term ‘Finance,’ see Roscher, § I, also Garnier, 1–3. The original idea is that of paying a fine (finare). Unfortunately, in England the word has been used with a wider meaning, as including all monetary and even industrial facts. Thus we have Jevons's Investigations in Currency and Finance, Mr. Patterson's Science of Finance, and Sir R. Giffen's Essays in Finance, all dealing mainly with those wider questions. An English writer is therefore compelled, in order to avoid misapprehension, to limit the word as in the text, when he is treating of what the Germans can without inconvenience call Finanzwissenschaft, or the French Science des Finances. In French there is a convenient distinction between the singular and plural, the former being used in the general sense, as in La haute finance, while the latter is reserved for ‘public finance.’ Prof. Adams has recently employed the term ‘Science of Finance’ to describe ‘an investigation of public expenditures and public revenues.’ Profs. Plehn and Daniels have followed in the titles of their manuals the example of this work.

That is, with Continental writers. In England these topics are generally relegated to works on ‘Constitutional Law’ and ‘Parliamentary Usage.’ Recent American works on Public Finance give considerable space to ‘Financial Administration and the Budget.’ See Adams, Finance, 103–218; Daniels, 315–324, 344–373; Plehn, 325–353.

Leroy-Beaulieu, i. 2, 3.

Cf. the title to J. R. McCulloch's well-known work, Taxation and the Funding System. So strong is the disposition in England and America to limit the subject of finance to taxation, that in the American translation of Cossa's useful Scienza delle Finanze, the title is changed into Taxation: its Principles and Methods.

The statement of Turgot's policy in his Letter to the King (ii. 165): Point de banqueroute, point d'augmentation d'impóts, point d'emprunts, is a striking example. Also cp. Gladstone's remark, ‘Good finance consists more in the spending than in the collecting of revenue,’ West, Recollections of Mr. Gladstone, ii. 309.

The omission of public expenditure as a topic in ‘finance,’ in the case of English writers, was perhaps in part caused by neglect of the economic theory of the ‘Consumption of Wealth’ with which it would naturally be connected.

E.g. Umpfenbach, 1–22; Roscher, § 5; Cohn, §§ 4–7; Wagner, i, 16–20.

The works of J. S. Mill, Fawcett, and Shadwell may be given as examples.

The treatises of Rau, Roscher, Wagner, and Cohn on Finance are all in name sections of works on ‘Political Economy.’ The collection of monographs on financial questions in the Schönberg Handbuch is another instance.

Examination of the works referred to in the preceding note will support the statement in the text. The financial sections of the treatises there mentioned are in fact independent, and may be studied quite apart from the other sections.

The determination of the comparative advantages of raising supplies by loans or by fresh taxation, the choice between different methods of levying taxes, and the need in certain cases of resorting to issues of inconvertible paper are instances.

French financial history affords the best possible illustration. M. Stourm in his valuable work, Les Finances de l'ancien Régime et de la Révolution, has shown conclusively that the modern French system is developed from that existing before the Revolution. Stourm, passim, and especially ii. 501–2.

On this subject see Wagner, iii. 199, and his article in Conrad's Jahrbücher, 1886, i. 197 sq.; Dunbar in Quarterly Journal of Economics, i. 1 sq.; Marshall, Principles of Economics, Bk. i. ch. 5; also J. N. Keynes, Method and Scope of Political Economy.

Cairnes's Logical Method (2nd ed.), 60 sq. The varying use of the term ‘induction’ by logicians has helped to increase the confusion as to the real relation of the inductive and deductive methods. Cf. J. S. Mill, Logic, Bk. ii. ch. 4, § 5; and Bk. iii. ch. 2, which contains his controversy with Whewell on this point.

For this loose use of experiment, cf. Jevons's ‘Experimental Legislation’ in Methods of Social Reform, 253 sq.; also Newmarch, Address to British Association (section F), 1861.

It is interesting to notice that one of the earliest attempts to apply mathematical methods to social questions was in regard to the theory of taxation by Canard in his Principes d Économie Politique, Paris, 1802.

See for good examples of the method, Cournot's inquiries in his Recherches Mathématiques; Auspitz und Lieben, Untersuchungen über die Theorie des Preises; M. Pantaleoni, Teoria della traslazione dei tributi; and Fleeming Jenkin, ‘The Incidence of Taxes,’ Collected Papers, ii. 107–121. Prof. Edgeworth's brilliant researches on ‘The Pure Theory of Taxation,’ Economic Journal, vii. 46–70, 226–228, 550–571, may be specially noticed.

The parts of the Theodosian Code dealing with administration are our principal source of information as to the financial system of the later Roman Empire. See, for a lucid exposition of the mechanism of Roman finance, Humbert's Essai sur les Finances et la Comptabilité publique chez les Romains (Paris, 1886, 2 vols.). The standard work on Athenian finance is Boekh, Staatshaushaltung der Athener (3rd ed. by Fränkel, 1887). A considerable amount of information respecting the tax system of Egypt has been obtained, and much more may be expected, through recent investigations. See Wilcken, Griechische Ostraka aus Ægypten und Nubien.

E.g. Tacitus, Ann. 13, 31; Pliny, Pan. 37.

See De Coulanges, La Cité antique, Bk. iii. ch. 18, for a powerful statement of the classical ideas respecting the relations of the individual and the State.

For the causes hindering the rise of economic science, see Ingram, Hist. of Pol. Economy, 7–9; for Roman ignorance of the principles of taxation, cf. Merivale, Romans under the Empire, viii. 356; and for the obstructive effects of the methods employed by the Empire, Guizot, Civilisation in France, Lect. 2; Clamageran, Histoire de l’ Impót en France, i. 89 sq.

The Dialogus de Scaccario in Stubbs's Select Charters, 168–248, shows the processes of the English Exchequer. See also H. Hall, Antiquities of the Exchequer.

For one example of mediæval city finance, see Schönberg, Finanzverhält nisse der Stadt Basel im 14. und 15. Jahrhundert. For some features of Florentine finance, see Seligman, Progressive Taxation, 22 sq., 70. The most remarkable Florentine writers were Palmieri, Guetti, and Guicciardini the historian.

The fullest account of Bodin is in Baudrillart's Jean Bodin et son Temps (Paris. 1853). His views on taxation are described by Clamageran, ii. 314–330. For English readers, Hallam, Literature of Europe, Part ii. ch. 4, § 2, may be noticed as giving a convenient summary.

Such was the work of Antoine Montcrétien, Traicté d’ Économie Politique (1615), a series of counsels addressed to Louis XIII.

Wealth of Nations, 173.

The most remarkable of these writers are Faust, Conring, and Klock. An attempt has been made by Stein (i. 125, and Finanzarchiv, i. 1 sq.) to prove that the last-named was ‘the true founder of the theory of taxation,’ but the bulk of his work seems not above the ordinary mercantile position, and his views on taxation are derived from Bodin. He has been further accused of copying from the earlier work of Faust. See also Roscher, Geschichte, 210 sq.

For Justi, see Roscher, Geschichte, 444–465; for his Finance, 461–465; also Cohn, §§ 9, 71; Meyer, 16–17; Wagner, i. 35–6.

Montesquieu, 108.

See the texts of Vauban and Boisguillebert in Les Économistes Financiers du XVIIIme Siècle (ed. Daire). Also Ingram, 57–9. For Montesquieu, cp. Stein, i. 131–2.

On these minor writers, see Ricca-Salerno, Le Dottrine Finanziarie in Inghilterra; also Vocke, Finanzarchiv, vii. 56.

The most important parts of Steuart's Principles, so far as finance is concerned, are—Book iv. part 4 (Public Credit), and Book v. (Taxes). For a good, but too favourable account of Steuart's financial doctrines, see Hasbach, Untersuchungen über Adam Smith, Book ii. ch. 4, 1st section.

See Physiocrates (ed. Daire), 128, or Oncken's Quesnay, 696, for the Second Problème. Of the Maximes, Nos. 5, 27, 28, 29, 30, relate to finance. For the latest views of Quesnay's position, see S. Bauer, ‘Zur Entstehung der Physiocratie’; Conrad's Jahrbücher, August 1890; and Quarterly Journal of Economics, v. 100 sq.; also Schelle, Du Pont de Nemours (Paris, 1888). The general doctrines of the Physiocrats are described for English readers by Mr. Higgs, The Physiocrats (1897); their theory of incidence is well explained in Prof. Seligman's Shifting and Incidence of Taxation (2nd ed. 1899), 95–112.

See Œuvres de Turgot (ed. Daire); for finance more especially, i. 389–632; ii. 368–432, but financial questions are often noticed by him when treating of other matters. On his differences from Quesnay, see Schelle, 127 sq.

For the influence of the Physiocrats on the financial system of the Revolution, see Stourm, i. 128–130, ii. 2–11; Schelle 319 sq.

Cp. the judgment of Prof. Hasbach, Untersuchungen, 220–98.

Cp. Book i. chap. 6 (22), with Book v. chap. 2, part 2 (347).

Cohn, §§ 11–12; also his Grundlegung, §§ 74–79; Geffcken, in Schönberg, 22; Wagner, i. 40–1; also Ingram, 107–9.

The contrast between the liberal policy pursued by the younger Pitt in the earlier years of his administration and his later measures is very marked. Examples belonging to our subject are the Commercial Treaty with France in 1786 and the consolidation of the Customs Laws.

Ricardo, chaps. 8–18 inclusive. See Wagner, ii. 333, and Cohn, § 248, for recognition of his work in this respect. In another department of finance, R. Hamilton, by his work on The National Debt, developed and added to the arguments of Adam Smith, and was followed by Ricardo. Sir J. Sinclair's History of the Publïc Revenue (1785, 3rd ed. 1803) deserves mention for its careful treatment of facts and the acquaintance shown with foreign literature on the subject.

Among those who may be mentioned are Harl, Krehl, Fulda, and more especially Jacob (Finanzwissenschaft, 1821) and Malchus (Finanzwissenschaft, 1830).

See Roscher, Geschichte, 847 sq.

For fuller examination of the German writers of this period, see Wagner, i. 44–5, ii. 7–9, 11–12; Meyer, §§ 6–9, 13, 17, 18, 19; Vocke, Abgaben, 10–33; Falck, Lehre von der Steuerüberwälzung, 104–144.

Such as the already mentioned work of Schönberg, Finanzverhältnisse der Städt Basel (1879); Schmoller, Die Epochen der preussischen Finanzpolitik; Zeumer, Die deutschen Städtesteuern; Vocke, Geschichte der Steuern der brit Reiche.

Schäffle, Gesammelte Aufsätze, i. 158–183, esp. 167 sq.; Schmoller, ‘Die Lehre vom Einkommen’ (Zeitschrift für Gesammte Staatswissenschaft, 1863).

Especially i, 48–50, ii. 449.

For further details see Cossa, Introduction to the Study of Political Economy, ch. 15; also his Scienza delle Finanze (Bibliographies); Ricca-Salerno, Storia delle dottrine finanziarie in Italia (2nd ed. 1896).

The text-book of the Hungarian writer Béla Foldes appears to be an important one.

Gladstone, Financial Statements, 1853, 1860–64; Goschen, Local Taxation (1872), may be referred to.

Sherman's Speeches and Reports on Finance and Taxation may be referred to as a specimen of the work of American politicians of the better kind.

E.g. by Mr. Spencer, Principles of Sociology, Part ii.

See his Province of Jurisprudence Determined, and for earlier statements of the same truth, Hobbes, Leviathan, ch. 18; Bodin, De Republica, Bk. i. ch. 8.

Political Economy, 543–4 (1st ed).

‘Each public department stands prepared to give the most confident reasons why it is absolutely necessary to keep up the scale of its expenditure to the exact point at which it now is.’ Parnell, Financial Reform, 100.

The events of the closing years of the 19th century both in England and the United States abundantly illustrate this statement.

I.e. allowing only necessary expenses for the individual, anything above being manifestly profit.

Cp. the difficulties of the United States, in the years immediately preceding 1891, with their surplus revenue.

Prof. Adams argues in favour of a deficit (Public Debts, 78–83); but the three reasons which he gives in support of his position are derived from a one-sided view of the financial experiences of the United States referred to in the preceding note. They are wholly inapplicable to other countries. The authority of Peel and Gladstone—so great on all practical matters of finance—may be quoted in support of the rule given in the text. ‘The training I received from Sir R. Peel was that the right and sound principle was to estimate Expenditure liberally, to estimate Revenue carefully, to make each year pay its own expenses, and to take care that your charge is not greater than your income.’ Buxton, Mr. Gladstone as Chancellor of the Exchequer, 157, and cp. the whole chapter.

Marshall, Principles of Economics, i. 137.8 (3rd ed.).

Roscher, § 109; Wagner, i. 9–16; Geffcken in Schönberg, 6.

Principles, Bk. v. ch. 1, § 1. Cp. ch. 11, passim.

See Appendix to ch. 8 for a fuller discussion of this point.

Supra, Intr. chap. ii. for the effect on financial theory.

Strictly true only of England, and in a much less degree of France.

Wealth of Nations, 286.

Ingram, History of Pol. Econ. ch. 5.

See specially the latter's Theory of Legislation (’Principles of the Civil Code’).

Principles, Bk. v. ch. 1, § 2.

Principles, Bk. v. ch. 11, § 7.

Liberté du Travail.

Principles of Political Economy, Bk. iii. ch. 2. Elements of Politics, ch. 10.

Theory of the State (Eng. Trans. 2nd. ed.), 320–1. Cp. also Wagner, i. 76, Cohn, §§ 34 sq.

Voyage of the “Beagle,” 229–230.

Cp. Cohn, Book i. chaps. 1, 2, for a general view of the financial aspects of social development. Also Vocke, Abgaben, &c. Part i.

Principles, Bk. v. ch. 11, § 16.

Wealth of Nations, 289, cp. 296.

See tables at end of this chapter.

This statement is amply confirmed by the growth of expenditure in the past ten years. But cf. the view of Adams, Finance, 56–7.

See infra, Bk. i. ch. 8, § 1. Cp. Wagner, i. 417, sq. Roscher, § 119.

In some cases Adam Smith saw clearly enough that division of labour was not always desirable. Cp. Wealth of Nations, 217 with 327.

Bk. xiii. ch. 17.

See Wagner, i. 427, for a full list.

Cairnes, Political Essays, 199–255. On this point his judgment is for once supported by the agreement of Cliffe Leslie [Essays (1st ed.), 128–47], whose opinion is the more valuable, as it was formed after personal study of the Prussian system, and was in opposition to his earlier belief.

Supra, ch. i. § 2.

Geffcken in Schönberg, 53.

Leslie, Essays (1st ed.), 143. See Wagner, i. 426, for a directly opposite view.

This plan has been advocated by Sir C. Dilke, Problems of Greater Britain, 380.

Though naval expenditure is usually much less than that required for military purposes, yet the English naval estimates for each of the five years, 1895–1900, exceeded those for the army, as the subjoined table shows. This was of course due to the peculiar situation of the British Empire, with its territories spread over the various regions of the globe. The South African War has for the time removed this anomaly, but the return of peace may recreate it.

Giffen, Growth of Capital, 145. Cp. ‘Wie die produktive Technik des Jahrhunderts ihre Kehrseite hat in der Technik der Zerstörung, so wird die erstere tributär gemacht für die letztere, und je ergiebiger sie ist um so mehr muss sic abgeben..... Die hiermit gebotene Aussicht ist nicht erfreulich; sie ist aber auch nicht so trostlos, wie sie meist dargestellt wird,—unter der Voraussetzung nicht, das bei jeder betheiligten Nation der Fortschritt des Militärausgaben von der fortschreitenden Productivität der Volkswirthschaft begleitet ist wie bisher.’ Cohn, § 390. For the supposed stimulus to industry, see Sir F. Abel's presidential address to the British Association at Leeds, Report (1890), 25.

Bk. ii. ch. 3, ‘The Industrial Domain.’

Leslie, 140, who adds some striking instances.

Cairnes, ut sup. 223.

Leslie, 141.

i. 416 sq.

For an admirable statement of the evils of war see the essay on ‘The Evolution of Peace,’ in Lawrence, Essays on International Law, 234 sq.

Giffen, Essays in Finance (1st Series), 1–55, gives an estimate of the cost of that war.

See Note at end of Chapter.

The exemption of private property at sea from capture is the most obvious and desirable reform in this direction.

Farrer, State and Trade.

Maine, Ancient Law, ch. 10; Early Institutions, chs. 9 and 10; Jenks, Law and Politics in the Middle Ages.

Cp. Maine, Early Law and Custom, 185 n.

If the fees were so large as to leave a surplus after paying salaries and other expenses, ‘Administration of Justice’ might have to appear in Book ii. as one of the departments of ‘State Industry.’

The statement in the text does not exclude the levying of fees for various legal acts. This side of the question is considered infra, Bk. II. Ch. iv., and Bk. IV. Ch. viii. The most important field for levying legal fees is in connexion with Commercial Courts. Traders as a special class may not unfairly be required to defray the expenses of the tribunals that they use.

Promotion on the Continent is said to be from the bench to the bar, a complete reversal of English ideas.

Thus we find ‘Police of commerce,’ ‘Police of grains,’ and even the ‘Police State,’ for a system of paternal legislation. See Dictionary of Political Economy, Vol. III., Art. ‘Police,’ for a full account of the different uses of his term.

See Du Cane, The Punishment and Prevention of Crime, chs. 1–3.

For theories of punishment see Bentham, Theory of Legislation; also T. H. Green, Philosophical Works, ii. 486–511; Bosanquet, Philosophical Theory of the State, 275 sq.

E.g., the restraints so forcibly criticised in Turgot's Éloge de Gournay could not exist now. Turgot, i. 266–270.

Farrer, State and Trade, and Cunningham, Economics and Politics, both describe this movement, but with divergent sentiments.

For the United States, see Bryce, American Commonwealth, ch. 91. For the English Colonies, Dilke, Problems of Greater Britain, 508.

Farrer and Cunningham, as above. For vigorous protests against the tendency, see H. Spencer, State and Man; the recent work, A Plea for Liberty; and the publications of the Liberty and Property Defence League; also Léon Say, Socialisme d'État.

For a statement of these causes, Goschen, ‘Laissez faire and Government Interference,’ Addresses, 59–84.

Ricardo, Works (ed. McCulloch), 58–9; Malthus on Population (8th ed.), 428 sq.

‘Every society, upon arriving at a certain stage of civilisation, finds it positively necessary for its own sake ... to provide that no person ... shall perish for want of the bare necessaries of existence.’ Fowle, Poor Law (1st ed.), 10, who regards this as the ‘general principle’ and ‘cause’ of poor-law legislation.

Sidgwick, ‘Economic Socialism,’ Fortnightly Review, Sept. 1886.

Bk. I. ch. 3, § 6.

Political Economy, 526.

See J. E. T. Rogers, Economic Interpretation of History, 487.

In an interesting article on ‘Old Age Pensions’ (Economic Review, iii. 475–85), Mr. Phelps shows the effective working of private charity in supplementing and modifying the rigour of the legal provision.

Droit au Travail, quite different from the Droit du Travail.

Mr. C. Booth's Endowment of Old Age contains the best statement of the case for old-age pensions. See especially chap. vi. for the financial aspects of the subject. Mr. Booth contemplates calmly the reimposition of the sugar duty, increased taxation on tea and ‘drink,’ 3d. additional on the income-tax, with ‘an adjustment of death duties in reserve.’ It may be fairly asked what resources would remain for use in case of the outbreak of war, with its inevitable pressure on the national earning power. The additional inquiries by the Commission on ‘The Aged Poor’ (1895) and the Departmental Committee on pension schemes, also the evidence taken by Mr. Chaplin's Committee, appear to establish the immense difficulties in the way of any general pension scheme. The effect on the British finances of the South African War proves the justice of the criticism made in this note on Mr. Booth's proposals.

Addresses, 113 sq.

The attitude of the Physiocrats on the subject of education is remarkable, and helps us to understand their general conception of state policy. It was not so much interference, as injurious interference that they opposed; but they felt that all state action had elements of evil in its disturbance of voluntary action, and in its expense. Turgot, ii. 502–551, Mémoire sur les Municipalités, said to be the composition of Du Pont de Nemours. Cp. Schelle, 362 sq.

Wealth of Nations, 329–30. An argument also urged by Malthus, Essay On Population (8th ed.), 437 sq.

Provision of this kind was made for Ireland in the Intermediate Education Act, 1878.

Secondary education is likely to become an increasing charge on the State, owing to the general desire to ‘organise’ it and supply it to all who may desire to obtain it.

‘The improvements which in modern times have been made in several different branches of philosophy, have not the greater part of them been made in Universities.... The greater part of Universities have not been very forward to adopt those improvements after they were made, and several of those learned societies have chosen to remain ... the sanctuaries in which exploded systems and obsolete prejudices found shelter and protection after they had been hunted out of every other corner of the world.’ Wealth of Nations, 323.

Cp. Cohn, § 150. The donations of Mr. Carnegie and such bequests as those of Mr. Rhodes are recent instances of this tendency.

See his quotation from the latter (History of England, ch. 29), whom he describes as ‘by far the most illustrious philosopher and historian of the present age.’ Wealth of Nations, 331.

‘The revenue of every established church ... is a branch, it ought to be observed, of the general revenue of the State, which is thus diverted to a purpose very different from the defence of the State.’ Wealth of Nations, 341.

‘Congress shall make no law respecting an establishment of religion.’ First Amendment to U.S. Constitution. Some State constitutions contain a similar provision. Bryce, American Commonwealth (2nd ed.), ii. 570–1.

Introduction, chap. 2.

Wealth of Nations, Bk. v. ch. i. part 3, art. 1, 303 sq. Cp. Turgot's statement of Gournay's views in the ‘Éloge,’ i. 279.

Bk. ii. ch. 3; Bk. iv. ch. 8.

E.g. the Indian and Canadian Posts and most of the Continental state railways.

Book iv. ch. 7.

The fact that the Anglo-Indian Government has adopted a policy of nonintervention, so far as trade and commerce are concerned, is the more remarkable, since if ever there were a case where rulers might be supposed to be fitted by superior wisdom and insight to direct their subjects, this would be one. But cp. Bk. ii. ch. 3, § 3, for the treatment of industry.

Wealth of Nations, 213.

See Quarterly Journal of Economics, Oct. 1890, 44–69 (‘A Century of Patent Law,’ by Chauncey Smith), for the effects of the United States patent laws.

On the economic effects of exhibitions, see Cherbuliez, Précis de la Science Économique, ii. 31–33; Droz, Essais Économiques, 454–7.

This seems more properly to belong to the subject of the ‘public domain,’ as it usually gives a surplus. See Bk. ii. ch. 2, §§ 8, 9.

The depression in agriculture has led to increased state assistance in most European countries. Denmark and Würtemberg are noticeable instances. The Irish ‘Department of Agriculture’ and ‘The Congested Districts Board’ are attempts of a similar kind.

H. C. Adams, Public Debts, 317–342.

Cp. Fawcett, Indian Finance. For a vigorous defence, see Strachey, The Finances and Public Works of India (1869–1881).

For the position of the King's revenues, infra, Bk. ii. ch. 2. Cp. Roscher, §§ 9, 117; Wagner, i. 401 sq.

A comparison of the cost of the English Monarchy and Parliament with that of the United States President and Congress shows that the latter is on the whole more expensive. This curious circumstance is the consequence of the non-payment of the members of the English Houses. Admirers of the American system would remark that British peers and M.P.'s obtain indirect rewards that are still less to the advantage of their country.

Leroy-Beaulieu, i. 267 sq.; Wagner, iii. 432–4, 607–10.

Supra, Bk. i. ch. 4, § 4.

‘Es ist vor allen Dingen der Reichthum historischer Veranlassungen und historischer Besonderheiten, welcher diese Verschiedenheiten erklärt.’ Cohn, § 115. Cp. Thorold Rogers, Economic Interpretation of History, ch. 22.

Tocqueville, Ancien Régime, Livr. ii. ch. 2 (Eng. Trans. 40 sq.).

The correspondence between Trajan and the younger Pliny instructively illustrates this dependence. See Bury, Student's Roman Empire, 440–2.

For the division of expenditure between the state treasuries and the towns see Humbert, Essai sur les Finances, i. 209, 389–401, 411–417.

Roscher, § 156; also his Ackerbau, §§ 5 sq.

Local Taxation, 190.

Finance Statistics of the American Commonwealths, 108.

The prominence that the question of municipal trading has assumed is a good illustration.

Rules limiting expenditure, and so raising a barrier against abuses, are in such cases very useful, and seem to be growing in favour both in the United Kingdom and the United States.

The number of new towns that have sprung up in England, Germany, and above all in America, during the last fifty years, makes this point important.

The Harbour and Dock Boards, very common in England, elected under special franchises and with power to levy tolls, are a good example.

Every one knows that Parliament will do neither of the things mentioned in the text, but the limitations on its action are moral, not legal, and consist in the fear of exciting opposition on the part of the people, and in its own sentiments, i.e. they are external and internal. Cp. Dicey, Law of the Constitution, Lect. ii.

‘No new State shall be formed or erected within the jurisdiction of any other State, nor any State be formed by the junction of two or more States or parts of States, without the consent of the legislatures of the States concerned as well as of the Congress.’ Constitution of U.S., Art. iv. section 3. Cp. Art. 78 of the German Constitution for an analogous provision.

See the instructive articles on ‘Local Government in Prussia,’ by Professor Goodnow, Pol. Science Quarterly, iv. 648–666, and v. 124–158; and the same writer's Administrative Law, Bk. iii. ch. 7.

Bavaria and Würtemberg are the only States that keep an appearance of independence, but in war the allegiance of the Bavarian troops is due to the Emperor, and her contribution towards expenses is compulsory. In Switzerland, though part of the forces are cantonal, the first claim on their services belongs to the Federal Government, and the principal outlay is by it. In 1876 it was about six-sevenths of the whole.

‘It would not be a matter personally indifferent to the rest of the country if any part of it became a nest of robbers or a focus of demoralisation, owing to the maladministration of its police; or if, through the bad regulations of its gaol, the punishment which the courts of justice intended to inflict on the criminals confined therein (who might have come from, or committed their offences in, any other district) might be doubled in intensity, or lowered to practical immunity.’ J. S. Mill, Representative Government, 116.

See Report of the Commission of 1832, 232–260.

Local Government and Taxation, Cobden Club Essays (3rd Series, 1875), 143.

Bk. i. ch. 1, § 2.

Cp. Bk. iii. ch. 6, § 7.

As in the case of municipal gas or water works; Bk. ii. ch. 3.

Roscher classifies duties of local bodies as (a) State, (b) compulsory local, and (c) optional local. § 157. Cp. Wagner, i. 96 sq.

Stein, i. 64, 76–81. Wagner, i. 79, includes the first, but not the second kind of Colonial finance. For the latest treatment on the subject, see Flora, Le Finanze degli Stati Composti.

A good illustration is supplied by the Australian Colonies. Previous to 1901, Victoria and New South Wales were quite separate, and their financial systems could not be scientifically combined. Now they are parts of the Commonwealth of Australia, though it will be some time before the financial arrangements are duly adjusted. A confederation of the British Empire may afford another example on a grander scale.

For the different uses, see Wagner, i. 135 sq; Cohn, §§ 157–9.

The English budget estimate of expenditure for 1889–90 was £85,967,000; the expenditure for that year was £86,083,000; an error of less than one-seventh per cent. Supplementary estimates are, of course, excluded.

The direct cost of the war of 1870–1 to France has been estimated at £234,000,000. Giffen, Essays in Finance (1st Series), 1–55. That of the American Civil War at £1,800,000,000. Wells in Cobden Club Essays (2nd Series), 488. Mr. Bolles gives £1,238,000,000 as actually paid out up to 1879. Financial History of U.S., 241 sq.

‘The amount of revenue raised in time of peace ought to be greater than the expenses for a peace establishment, and the overplus applied to the discharge of debts contracted in former wars.’ Hamilton, National Debt, 7; see Bk. v. ch. 7, § 4.

Infra, Bk. vi. ch. 3.

The theory of public debts and borrowing is treated in Bk. v. chs. 5, 8. In local finance we shall see that borrowing is in such cases the only course open, as otherwise the funds could not be obtained, owing to the restraints on local taxing powers.

See on this point Bk. v. ch. 5. C. Dietzel appears to be the originator of the theory. He is followed by Stein and partly by Wagner.

Wealth of Nations, Bk. ii. ch. 3.

The term ‘productive’ has received such hard treatment, and is so closely connected with the idea of material wealth, that it seems, on the whole, better to use a more distinctive term.

Bk. ii. ch. 3.

Supra, Bk. i. ch. 6, § 1.

Schaffle and Schmoller have both suggested that ‘net income’ is not the only source of public revenue. Cp. Bk. iii. ch. 2, §§ 6, 7.

For Justi see Roscher, Geschichte, 463. See also Hock, 35. Leroy-Beaulieu, i. 127 sq., esp. 133.

Such as those of Sir R. Giffen De Foville, and Pantaleoni, for England, France, and Italy respectively.

Victorian Year Book, 1887–8, i. 203, where a table of comparative taxation is given. In India and Australasia the proportion of tax to non-tax revenue is almost the same (40 per cent.), and the rate per head in India for 1885–6 was 3s., while averaged over the Australasian Colonies it was £2 17s.

Thus in framing the English budget for 1894 the principal points for consideration were: (1) the propriety of increasing the naval estimates beyond the amount required in the preceding year; and, should extra expenditure be decided on, (2) its legitimate amount, which was held to be £3,126,000 out of £95,458,000.

During the Parliamentary Sessions 1880–2, out of 576 financial proposals, 556 were for increase of expenditure, only 20 for reduction.

Budget Speech of 1860 in Financial Statements, 119.

See Léon Say, Les Finances de la France, iii. 1–31, for an admirable statement and criticism of this movement.

There are, however, items of expenses and receipt between the Empire and Prussia which reduce each amount in 1902–3 by 348 million marks.

Roscher, § 110; Umpfenbach, 38.

ii. 159.

The estimated expenditure on the Prussian State Railways in 1902–3 is 883 million marks, besides the part of the total debt due to their purchase. The receipts, however, are estimated at 1,416 million marks.

Supra, Bk. i. ch. 2.

Neymark, Les Dettes Publiques, 89.

The policy of expansion adopted by the United States since the war with Spain will almost certainly bring them under the influences that have affected the finances of European States.

Leroy-Beaulieu, ii. 169 sq.

The contrast between the doctrines of The Radical Programme (ch. 8, ‘Taxation and Finance’) and those of Cobden, Bright, and George Grote is very extreme.

Hermann, Staatswirthschaftliche Untersuchungen (2nd ed.), 465, indicates this very clearly.

C. Kingsley, Cheap Clothes and Nasty.

On this point cp. Prof. Foxwell's article in Claims of Labour, 254. For further observation of state dealings with labour, see Bk. ii. ch. 3, § 20.

The belief that the State should be a model employer is rapidly gaining ground, as the partial adoption of the eight-hour day and the acceptance of the Trade Union rate of wages show.

Wells in Cobden Club Essays (2nd Series), 491. Cp. Adam Smith's remarks on the absorption of ‘more than a hundred thousand soldiers and seamen,’ disbanded at the close of the Seven Years’ War, in the ranks of industry. Wealth of Nations, 196.

‘The golden maxim of M. Say, “that the very best of all plans of finance is to spend little, and the best of all taxes is that which is the least in amount.’ Ricardo, Works, 145.

See Introduction. ch. i. § 2.

Plehn, Public Finance, Part i.

Cohn, §§ 79–91; Plehn, 28–32.

Prof. Nicholson puts this criticism most effectively. Principles, iii. 373.

Even the annual pension grant of £1,200 for literary services has been the object of keen criticism, and in some cases the grants have been quite undeserved.

Adams, Finance, Part i.

Mill, Representative Government, ch. 2.

For further criticism on this point see the reviews of Adams' work by Prof. Seligman (Pol. Science Quarterly, xiv. 134–5); and the present writer (Economic Journal, ix. 435).

Principles of Pol. Economy, III. chs. 15, 16.

Introduction, ch. i. § 2.

Supra, Bk. i. ch. 8, § 4.

Though each is simply the House of Commons sitting under a special name.

Supra, Bk. i. ch. 1, § 7.

Thus Blackstone (i. 281–337) gives twenty-one different rights as composing the ‘ordinary’ revenue of the King, from which enumeration taxes are excluded. Cibrario describes twenty-four heads of revenue in mediæval Italy. Economia Politica del medio aevo, Lib. iii. cap. 6. For the diverse Egyptian revenues, see Wilcken, Griechische Ostraka.

Justi and Sonnenfels both speak of ‘accidental revenue’ (Zufällige Einkünfte), but they can hardly be credited with a theory of ‘fees’ as distinct from ‘taxes.’

This is the course followed by Stein and Roscher; the former (i. 138 sq.) speaks of ‘economic’ income; the latter of ‘whole or half private economic State receipts.’ Bk. i. chs. 4, 5 (§§ 18–24).

Umpfenbach, who substitutes the term ‘Fiscal prerogative rights’ (Varrechte) for ‘regalia,’ takes the former course: 78; Wagner, i. 487 sq., ii. 33, the latter. In recent discussion, ‘contributions’ (Beiträge) have been brought in as an additional section of revenue by some writers.

This is the case with regard to Cohn (see e.g. § 107), who declines to discuss the question of state property, as being economic rather than financial.

Cp. Wagner, i. 474–5. For the regalia, cp. Sax: ‘Die Regalien gehören der Wirthschaftsgeschichte und dem positiven öffentlichen Rechte an, die volkswirthschaftliche Theorie ... hat mit ihnen nichts zu schaffen.’—Staatswirthschaft, 480.

§ 18. This confusion is characteristic of the feudal system. Cp. ‘Among the many things which may be said about the system known to us as Feudalism, one of the least doubtful is that it mixed up or confounded property and sovereignty.’ Maine, Early Law and Custom, p. 148.

See for further discussion of this point, Bk. ii. ch. 3, § 9 n.

Bk. i. ch. 6, § 2.

For the view of taxation as an occasional resource, Neumann, Progressive Einkommensteuer, 1, 2, and the references there given. Also Blackstone, Bk. i. ch. 8, and contrast Mr. Dicey's view. ‘We may therefore, putting the hereditary revenue out of our minds, direct our whole attention to what is oddly enough called the extraordinary, but is in reality the ordinary or Parliamentary revenue of the nation.’—Law of the Constitution (1st ed.) 316.

Though the root-idea of the analysis can be traced back to the Physiocrats, yet Adam Smith originated its form and applications.

The text-books of General Walker, Dr. Sidgwick, and Prof. Marshall are instances. The separation between capitalist and entrepreneur is made both by J. B. Say and Rau.

‘The Classification of Public Revenues,’ Quarterly Journal of Economics, April 1893, vii. 286–321, now forming ch. 9 in his Essays in Taxation, to which work the references are made.

Cp. Seligman, Essays, 265–6, with Book ii. ch 1, § 3 supra.

Principles of Science, 679–80.

Darwin, Origin of Species, ch. 14.

Professor Plehn has distorted this statement into the assertion that ‘Professor Bastable claims that the sole consideration in the choice of a classification in such subjects as “grammar, jurisprudence, legislation, and finance” is convenience for the immediate purpose in hand.’ Political Science Quarterly, xii. 84. Contrast with this supra Book ii. ch 1, § 3. ‘The merits of any particular classification depend partly on the end in view.’

Professor Seligman's tabular arrangement, Essays, 302, would seem to give ‘fines and penalties’ even a higher rank. They result from the ‘penal power,’ and are opposed to special assessments, fees, and taxes, which are due to exercise of the taxing power; but this is comparatively unimportant.

Essays, 268.

Jurisprudence, i. 237.

Professor Plehn tries to meet this objection by referring to the change of meaning in the terms ‘value, rent, wages’ made by economists. But his own explanation shows that there is no real parallelism in the two cases. ‘A word adopted from daily life by science must,’ he says, ‘be deprived of some of its “extension” for the purpose of giving it a perfectly clear “intension,”’ Political Science Quarterly, xii. 85. The term fee has not been treated in this way. Its ‘extension’ has been enormously increased, and, as a necessary consequence, its ‘intension’ has been reduced, and, judging from the somewhat dreary disputes on the matter, has lost, not gained, in clearness. It may be remarked that if ‘Gebuhr’ is to be translated into English, ‘due’ is the least inappropriate equivalent.

Essays, 275.

Cp. infra, Bk. ii. ch. 4, § 10.

The few European instances are not prominent enough to attract attention.

See the excellent study entitled Special Assessments, by the latter.

This is Professor Seligman's expressed belief. Essays, 292.

Seligman, Essays, 286.

See on this point the following American cases: Matter of Church, 92 N.Y. 6; Allen v. Drew, 44 Vt. 174; N. Indian Railway Co. v. Conelly, 10 Ohio, 159.

It is also possible, and actually happens, that taxation is by constitutional provisions confined to proportional charges.

‘Special assessments are paid once and for all.’—Seligman, Essays, 289. Cp. Rosewater, Special Assessments, 129.

Ricardo's plan for paying off the National Debt may be given as an instance. See his Works, 545–6; and cp. Cannan, ‘Ricardo in Parliament, Economic Journal, iv. 421–3.

On this point Prof. Plehn is a supporter of the view taken above, though he regards it as partly based on an entire misconception.

Pol. Science Quarterly, xii. 82–92.

In addition to the references given above, see Mr. Montague’s article in the Dict. of Pol. Economy, i. 303.

Pol. Science Quarterly, 84.

See Bk. ii. ch. 4, §§ 7–10.

39. Plehn, pt. ii. ch. 11.

Cp. the statement ‘Provincialia prædia usucapionem non recipiunt.’ Caius, Institutes, ii 46.

The distinction between the property of the ruler as a private person and that which accompanies his office is now of little interest. It was emphasised in the Roman Empire—res privatæ opposed to res fiscales—(Humbert, i. 187 sq.), and was of much importance in Germany in the case of mediatised princes, who naturally tried to stretch the private element as far as possible. In practice the same end is reached by different means in modern States, as in the cases of Baden and Würtemberg, noted by Roscher, § 9.

The net receipts in the year 1900–1 were £500,000, or less than one-half per cent. of the total receipts. The revenues of the duchies of Lancaster and Cornwall should in strictness be added with a corresponding item of expenditure for the sovereign's support. Bk. i. ch. 6, § 5.

Economic Interpretation of History, 417 sq.

Say, Dictionnaire des Finances, s. v. ‘Budget Communal.’

The most careful estimates place the amount of immovables disposed of during the revolutionary period at £220,000,000, i.e. £120,000,000 for Church and Crown lands, £100,000,000 for those of the émigrés. Stourm, ii. 461.

The estimate for the Austrian domains and forests for 1891 was less than 500,000 florins (net revenue).

For the position of the state serfs, see Wallace, Russia, 105, 473, 553.

‘It is also fruitless to discuss exactly what the Oriental institution of a Land Revenue is, whether a “land tax,” or rent, or what. ... Practically the discussion is a profitless war of words, and we may be content to speak of the “Land Revenue” as a thing per se.’ Baden Powell, Land Revenue in British India, 49.

‘It seems to me that the distinction between a tax and a rent is merely a matter of amount; and that if a land tax is so high as to absorb the rent it becomes in fact rent.’ Campbell in Cobden Club Essays (1st series), 130–1. Cp. Marshall, Principles (3rd ed.), 727 n.

‘Except for the period 1830 to 1840 the lands have been a drain upon our finances. At the end of the financial year 1882–3 the government was out of pocket. ... in the sum of more than $126,000,000.’ Hart, Essays on American Government, 241.

The precise figures are—

The proportion of land revenue to the total receipts in each of the last-mentioned colonies was as follows:—

The idea of state ownership of land, based on an application of the economic theory of rent, first appeared in James Mill's Elements. He was probably led to it by his study of India. J. S. Mill, in the later years of his life, maintained a like opinion, which in later years has been urged with much enthusiasm by Henry George, and in Australia by Mr. Syme.

Wealth of Nations, 347. Cp. the opinion of Burke, ‘A landed estate is certainly the very worst which the Crown can possess. All minute and dispersed possessions, ... which require a continued personal attendance, are of a nature more proper for private management than public administration.’ Speech on Economical Reform (1780), Works, ii. 79.

The Australasian colonies, incorrectly as it seems, have placed sales of land among current receipts; a partial exception is found in Victoria, where a small sum is carried to the Railway Construction Account, Victorian Year-Book (1887–8), i. 140.

The sale of fee-simple estates to European settlers is emphatically one of those exceptions that prove the rule.

Roscher, § 11.

Not even Wagner, cp. i. 540–1.

An interesting description of estate management is given in Escott's England, ch. 3. The following passage bears out the view in the text: ‘The Crown and the Ecclesiastical Commissioners are at the present moment the most extensive land proprietors in England, having the management of properties with a rental of upwards of £400,000, situated in all parts of the United Kingdom. These are administered upon practically the same principles which obtain in the cases of the large landed nobility,’ 37. See also the evidence given to the Royal Commission on ‘Agricultural Depression,’ i. 1–19, 115–121.

For the origin of the Emphyteusis, see Gaius, Institutes, iii. 145; cp. the Aforamento in Portugal described by Laveleye, Cobden Club Essays (1st series), 241.

Thus the Emphyteuta had for his remedy the ulitis actio in rem closely analogous to the Vindicatio or owner's remedy.

The transition to money payments is a mark of advance. This took place in England in the 12th century. See the Dialogue of the Exchequer, Book i, in ch. 7, Stubbs, Select Charters, 193–4.

‘Presque partout le paysan n'aime pas la forêt, dans le Midi il n'aime pas l'arbre; il n'a qu'une faible idée d'utilitéindirecte des choses. Les grandes et les moyennes propriétés, les parcs, auxquels s'attaque la frivolitédémocratique, rendent à ce point de vue de réels services à la communauté.’—Leroy-Beaulieu, État Moderne, 124. The cutting of trees by peasant purchasers in Ireland is a good illustration of this general tendency.

Supra, Bk. i. ch. 6, § 3.

Leroy-Beaulieu, i. 46–66, 91–2; Wagner, i. 571 sq.; Roscher, §§ 16, 17.

Say, Dictionnaire des Finances, s. v. ‘Communes,’ 1120; see also s. v. ‘Alienation,’ 117–8.

Roscher, Handel und Gewerbfleiss, § 180.

On the nature of mining rents see Sorley, Mining Royalties; also Marshall, Principles, i. 491.

Wagner, i. 609.

Jevons, Coal Question, 354 sq. The ‘rings’ formed in the articles mentioned in the text illustrate the danger, but in all cases the originators have suffered heavily.

See Bk. iv. ch. 6 for the salt tax.

‘On ne se fait pas une idée de tout ce que fabrique l'état en France; il fait des tapis (les Gobelins), des porcelaines (Sèvres), des cartes au Bureau d'état major, des gravures (au Louvre), de l'imprimerie (à l'Imprimerie Nationale): il fait des boîtes d'allumettes, des cigarettes, il élève des chevaux et des poulains dans ses haras; il fait du vin à l'école d'agriculture de Montpellier.’—Gide, L'École Nouvelle, 18.

Wagner, i. 623.

The Report of the Committee on ‘War Office Organisation’ (Cd. 580–581) brings out forcibly the difficulties of this question, and particularly those surrounding the system of audit and the estimation of the cost of production. See particularly the evidence of Mr. Harris (pp. 380–7).

This defect in state industrial management is very forcibly exposed in Cobden's last speech in Parliament (July 22nd, 1864): ‘Throughout the inquiries before Parliamentary Committees upon our Government manufactories, you find yourself in a difficulty directly you try to make the gentlemen at the head of these establishments understand that they must pay interest for capital, rent for land, as well as allow for depreciation of machinery and plant.’ Speeches (popular ed.), 301–2. ‘The accounts rendered of this clothing department are most fallacious. I find that about £15,000 a year for fixed charges and interest of money have never been brought into the accounts at all, and that there is no allowance for rates and taxes,’ ib. 304. Cp. ‘Although the victualling and other offices that carry on manufactures produce accounts by way of showing that they make them cheaper than they can be got by contract, this does nothing towards supporting their case, because their accounts are all kept in so imperfect a manner that they cannot be relied on.’ Parnell, Financial Reform, 162–3.

Hunter, Imperial Gazetteer of India, vi. 515–6.

These cautions are particularly important as dealing with the very practical question of the proper limits of municipal trading.

See Bk. iv. ch. 6; and, for particular forms, ‘Taxation through Monopoly,’ Economic Journal, i. 307–325.

The nature and characteristics of these industries are discussed by Farrer, State and Trade, 68 sq.; also cp. H. C. Adams, Relation of the State to Industrial Action, and Science of Finance, 263–4.

For the position of English municipalities, see the annual Reports of the Local Government Board. For the United States, The relation of modern municipalities to quasi-public works (American Economic Association, ii. No. 6); also Ely, Taxation in American States and Cities, 47 sq. For Germany, Wagner, ii. 160–4; Roschér, § 158. Also Leroy-Beaulieu, État Moderne, 228 sq.; Say, Dictionnaire d' Économie politique, s. v. ‘Eau dans les Villes.’ For an instructive comparison between Berlin and Paris, see Rowe, Gemeindefinanzen, ch. iv. In the last few years there has been a great development of municipal industries, specially in connexion with electric lighting, and very keen controversy as to the expediency of this movement. See the evidence taken by the Committee on ‘Municipal Trading.’

See the articles on the subject by L. S. Rowe, Annals of American Academy, xi. 301–23; and W. S. Lewis, Quarterly Journal of Economics, xii. 209–24.

In addition to the works given in the preceding notes, see James, The Modern Municipality and the Gas Supply; and Farrer, State and Trade, ch. 11.

‘Waterworks are generally owned by our municipalities, and gasworks rarely.’ Ely, 48.

In 1891–2 Berlin obtained the following net profits:—

Making 7,216,506 marks, or over £360,000. Rowe, pp. 87, 90. For 1897–8 the gasworks yielded about 5,000,000 marks.

Leroy-Beaulieu, i. 110.

The city of Berlin owed in 1892 nearly 75,000,000 marks (£3,750,000) on account of its gas and water works. Rowe, 191.

See Bk. v. ch. 8, for an examination of local indebtedness.

Cp. Cohn, § 458.

Wealth of Nations, 344.

Macaulay, History of England, ch. 3.

The reform is described by one of the most sober of English statesmen as ‘a measure of undoubted social and general advantage, but extremely inconvenient in a financial sense.’ Northcote, Twenty Years of Financial Policy, 9. It was opposed at the time by J. R. McCulloch; see his Taxation and Funding, 327–32. For an examination of the use of the Post Office as an agent for taxation, see Bk. iv. ch. 8.

These amounts do not include the telegraph service, or the payments for packets

For the French Post before 1789, Vignes, Traitédes Impôts, i. 476 sq.; Clamageran, ii. 658; iii. 43, 232, 293, etc. For its later history, Leroy-Beaulieu, i. 645 sq.; De Parieu, iii. 287 sq.

Wagner, ii. 142; Cohn, §§ 293–6, also Finanz-Archiv, x. 765–6.

Another side of the Post Office, its dealings with money, belongs to ‘Banking,’ and will be considered under that head. Bk. ii. ch. 4, § 2.

The Bern Convention of 1875, by which the uniform rate of 2½d. per ½ oz. was settled as the international postage charge for most civilised nations, and gradually extended to others, has been a great advance. India and the Australasian Colonies have since the opening of 1891 obtained the same rate with England.

Adam Smith noticed these conditions: ‘The capital to be advanced is not very considerable. There is no mystery in the business. The returns are not only certain but immediate,’ 344; cp. the fuller account of Jevons, Methods of Social Reform, 277–80; also Wagner, i. 654–5.

This combination of different elements in the postal revenue has led to a curious diversity in the classification made by financial writers. Adam Smith considers it under the head of ‘Funds which peculiarly belong to the sovereign. Leroy-Beaulieu (Bk. ii. ch. 12), De Parieu (iii. 285), and Cohn (§ 77) place it under Taxation. Roscher (§ 28) practically follows Adam Smith. Vocke (Finanzwissenschaft, 36) treats it as an ’economic monopoly.' Stein (ii 315 sq.) places it in the list of prerogative rights regalia); while Umpfenbach (§§ 61–3) and Wagner (ii. 141 sq.) regard the postal revenue as being derived from ‘fees’ (Gebühren). These differences are due to the attempt to reduce to simplicity what is in its nature complex, and are therefore necessarily failures. J. S. Mill (Bk. v. ch. 5, § 2) distinguishes, as in the text, between the industrial and tax elements. The question of the true nature of postal revenue is discussed at length in the Memoranda on Classification and Incidence. The prevailing view agreed with that given in the text, but the answers of Professors Sidgwick and Edgeworth suggest the necessity of considering the loss to the society in consequence of the state monopoly through the destruction of ‘consumer's rent.’ (see pp. 100 and 127). Sir R. Giffen and Mr. Cannan argue that the gross postal receipts should be regarded as taxation, but this is obviously incorrect. The former writes, ‘The postage of letters is a tax on letters—taxe des lettres it is called by French economists’ (p. 94). This, however, ignores the fact that taxe, as distinguished from ‘impôt,’ and like the Italian ‘tasse,’ is rather a ‘fee’ or ‘due’ than a ‘tax’ in the English sense. If the gross receipts of the Post Office are to be called taxation, it would follow that the purchase of the English railways by the State would transform railway rates and fares into taxation, and thus nearly double the tax revenue. See for a series of acute but over-subtle distinctions, Seligman, Essays, 295 sq.

‘The present mileage of submarine cables is 152,000 miles, of which 90 per cent. has been provided by private enterprise and 10 per cent. by the various governments.’ Times, July 21st, 1894.

§ 3, supra. A grave oversight was committed with regard to the English telegraph account, by which £800,000 was spent without sanction.

Wealth of Nations, 303 sq.; cp. 379.

According to Professor Cohn, the expenditure of the Prussian Government on waterways for the years 1880–90 shows an annual average of £1,835,000 against annual receipts of £100,000. He declares that ‘thus nearly the entire surplus of the railway administration is swallowed up by the waterways.’ Economic Journal, iv. 544.

Much stress has been laid on the indirect benefits likely to result from the abolition or lowering of dues on waterways by encouraging industry. This claim really amounts to the advocacy of a bounty, and should be judged on that ground. Cp. Bk. i. ch. 6. For the economic and financial position of canals, see De Foville, La Transformation des Moyens de Transport, ch. 7.

For a clear statement of the opposed methods see Cohn, § 437.

For an admirable account of the variations of American and English railway policy see Hadley, Railroad Transportation, chs. 7 and 9.

Tooke-Newmarch, History of Prices, v. 367–9.

Say, Dictionnaire des Finances, 991, s. v. ‘Chemins de Fer’; Stourm, Le Budget, 257.

For French railway policy see Hadley, ch. 10, and the articles ‘Chemins de Fer’ in Say, Dictionnaire des Finances and Dictionnaire d'Economie politique.

For the history of German railway policy, see Wagner, i. 707–13; Hadley, 203–8.

The surplus over working expenses, the interest on debt, and the net gain are as follows:—

The zone tariff policy of Hungary has improved the net receipts, but it is perhaps too soon to say whether the improvement will be permanent.

In addition to works already referred to, see Von Scheel in Schönberg, 94–104.

See Mr. Acworth's instructive article, ‘Government Railways in a Democratic State.’ Economic Journal, ii. 629.

Victorian Year-Book, 1893, ii. 475–7. The following table gives more accurate figures for each colony:—

‘Die anderen deutschen Staaten sind Preussen (sofern sie nicht vorangegangen) in der Richtung der Staatsbahnpolitik gefolgt, haben freilich nicht ebenso günstige finanzielle Ergebnisse aufzuweisen,’ § 439.

This is specially true of undeveloped countries such as Australia and Russia.

‘If the State manages the railways just with the same degree of skill and success as the companies there would then be no gain or loss; if better, there would be gain accruing, not from good credit, but from good management; if worse, there would be certain loss. Thus, in theory, the use of the public credit proves to be a pure fallacy, and if it were not so there would be no reason why the Treasury should not proceed to invest money in many kinds of industrial enterprises besides railways and telegraphs.’ Methods of Social Reform, 371. The fact that the chance of loss is usually over-estimated is here neglected. Jevons would be right if the same income as formerly were to be secured to shareholders, but the suggestion is that only the market value of the shares should be given. It would, however, be very difficult to carry this out in practice. Railway shareholders would claim, and probably receive, compensation for their sacrifice of possible increase in future dividends.

Ely, Taxation, 270.

Methods of Social Reform, 359. His judgment is amply supported by the recent history of the Australasian railways.

Victorian Year-Book, 1887–8, ii. 139.

Cohn, §§ 440–1. See also his article, Economic Journal, ix. 93, sq., which shows that the claim for lower rates is being made in Prussia.

That this is not an imaginary danger is proved by the fact that in July, 1890, there were ‘strikes’ at the municipal gasworks in Leeds, at the London Post Office, and in the Metropolitan Police, and also a ‘mutiny’ in the Guards!

Bk. v. ch. 5, on the so-called ‘reproductive’ debt.

The railways of the United Kingdom show the following results for the year 1900:—

The gross public revenue for the year ending March 31st, 1901, was

The inclusion of the railway accounts in the Budget would raise the receipts to nearly £220,000,000, and, assuming the shareholders to receive their present income, the total expenditure to over £270,000,000, and the public debt to about £1,880,000,000. If the now standard 2¾ per cent. stock were to be given, the capital would be proportionately increased, or severe loss inflicted on the shareholders who had invested in the assurance of being undisturbed. The establishment of a sinking fund, in the same proportion as that applied in normal times to the present debt, would necessitate increased taxation, unless state management proved very much more economical.

Indian Finance, 17–25.

Wealth of Nations, 344

The Dutch policy in Java is too favourably described by A. R. Wallace, Malay Archipelago, chs. 7 and 17. See also Wagner, i. 626–7.

The Imperial Bank of Germany appears as an annual contributor to the Budget, the amount for 1901 being 12,417,770 marks.

Cp. Ricardo's ‘Plan for the Establishment of a National Bank,’ where the two branches of banking are carefully distinguished. Works, 503–12.

For inconvertible issues as a form of loan see Bk. v. ch. 6, and for the relation of the Treasury to banks see Bk. vi, ch. 2.

See Bk. ii. ch. 2, § 2.

See Bk. iv. ch. i. § 9.

See Dowell, History of Taxation, ii. 48 sq., and iii. 81–91, for the history of the tax. Movable property was exempted in 1833, and offices and pensions in 1875.

Roscher, § 18. The whole chapter (Bk. i. ch. 4) is one of the best in his work.

See Bk. ii. ch. 1, §§ 4, 5, and note at end.

Bk. i. ch. 3, § 1.

‘Die absolute und relative Höhe des Gebührenertrages in verschiedenen Staaten mit einander zu vergleichen, ist darum bis jetzt nur höchst unvollkommen möglich, weil die Gebühren fast überall, jedoch mit sehr verschiedenem Grade, mit Verkehrssteuern verquickt sind.’ Roscher, § 23, n. 16. Cp. Wagner, ii. 69.

Budget Speech, April 17th, 1890. The receipt for 1897–8 was £421,000.

The amounts paid in 1889 were as follows:—

Cohn, § 190, n∗.

Cp. ‘Bei dem engen Zusammenhang von Rechts- und Verwaltungsgebühren mit Verkehrssteuern in der Praxis und bei der für beide vielfach gemeinsamen Erhebungsform im Stempel ist die bezügliche Einnahme daraus ebenso wie die Gesetzgebung darüber nicht wohl zu trennen. Die Gesetze betreffen meist beide Abgabearten in bunter Vermengung.’ Wagner, ii. 69.

See note to Bk. ii. ch. 1 for further discussion of this point.

Other but less satisfactory measures have been sometimes suggested. Instead of the cost of restoration the original cost of production or acquisition would, it is said, show the amount of public advantage obtained from the outlay. This method is certainly easier and more definite, but it overlooks the fact that mere cost, as such, does not determine value, and that all fixed forms of wealth change their values, generally in a downward direction, in the course of time. Land is the only part of the national possessions that is likely in the long run to increase in value. The measure of present exchange value is also inapplicable, as much of the property forming the public domain is not of a kind that is demanded by private purchasers.

As pursued in Italy under the system of M. Cerboni.

As pointed out by Mr. Devas—Pol. Economy, 585—there may be a financial gain by the inducement given to foreigners to settle in the country, e.g. Italy with its artistic treasures. Further, the earning powers of the inhabitants may be increased. This property is then indirectly productive.

Leroy-Beaulieu, i. 28; Say, Dictionnaire d'Économie politique, i. 719; ib., Dictionnaire des Finances, i. 1482–85; Stein, ii. 144 sq.

Umpfenbach, 78.

The Local Government Act (1894) by the creation of parish councils and the powers given to the parish as a unit has considerably diminished the force of this contrast.

Cp. the recent Swiss legislation on forests already mentioned (Bk. ii. ch. 2, § 10), and the surrender of public lands by American States to the Federal Government.

The returns of local finance for Scotland and Ireland fail to distinguish between tax receipts and payments for gas and water. Nor are the English accounts as yet quite clearly separated. For earlier periods they are almost useless for the present purpose.

The interest on the railway debt has also to be taken into account.

This even includes the interest on the state railway debt, which should in strict accuracy be deducted.

The contributions (Matricular-beiträge) of the States to the Empire and the assignments from the imperial revenue to the States further confuse the statistics. In 1889–90 the Prussian contribution was 114,000,000 marks, the assignment from the imperial revenue 170,000,000 marks, showing a net gain to the Prussian revenue of 56,000,000 marks (£2,800,000). For 1894–5 the contributions are estimated at 234,000,000 marks, the assignments at over 215,000,000 marks, or a net loss to Prussia of 18,700,000 marks. In 1902–3 the Prussian contribution is estimated at 347,912,000 marks, the assignments at 375,789,000 marks, i.e. a net gain to Prussia of 27,877,000 marks (£1,394,000).

The German law fees (Rechtsgebühren) are so high as to really amount to a tax on litigation. For estimates of the proportion of taxation and industrial receipts cp. Von Scheel in Schönberg, 68–69.

‘The theory of the incidence of taxation has been generally treated as a branch of the application of economic science to the practical art of government. But really it is an integral part of the general theory of value.’ Marshall, 519 n.; cp. Edgeworth, Economic Journal, vii. 46.

Sir E. W. Hamilton's definition, ‘A tax or rate is an obligatory contribution by persons in respect of, or incidental to, something which they possess or something which they do’ (Memoranda on Classification and Incidence, 33), seems to be a variant on the above, but hardly covers the case of a poll tax.

See on this point the Memoranda on Classification and Incidence [C. 9528] issued by the Commission on ‘Local Taxation,’ especially pp. 85 (Courtney), 112 (Marshall), 160 (Cannan). The position in the text is fully supported by these authorities.

De Parieu, i. 5; Roscher, § 33; Cossa (Am. Trans.), 50.

In the later editions of his Scienza delle Finanze, Professor Cossa has altered this definition, omitting the last clause, which was intended to emphasise the ‘general’ nature of taxes (imposte) as opposed to ‘fees’ (tasse), regarded by him as special, not at all to assert the ‘benefits’ theory of taxation, which he rejects.

Montesquieu, Liv. xiii. ch. 1; Stourm in Dictionnaire d' Économie politique, art. ‘Impôts,’ ii. 3; cp. Leroy-Beaulieu, i. 113.

See Bk. i ch. 8, § 4 sq.

The definition of the dictionary of the French Academy.

Quoted from Cooley by Ely. Taxation, 4.

‘Taxes are simply one-sided transfers of economic goods or services demanded of the citizens, and occasionally of those who are not citizens, but who nevertheless are within the reach of the taxing power, by the constituted authorities of the land for meeting the expenses of government or for some other purpose, with the intention that a common burden shall be maintained by common contributions or sacrifices.’ Taxation, 6–7. Cp. the definition given by Wagner, ii. 210, which brings in the complication of a distinction between ‘pure financial’ and ‘politico-social’ taxation; also i. 499–500, where ‘taxes’ are marked off from ‘fees’ (Gebühren) by their ‘general’ character.

There seems to be no foundation for Mr. Cannan's suggestion that the ‘rate’ is ‘apportioned,’ while the ‘tax’ is a ‘percentage’ charge (History of Local Rates, 4–5). The only plausibility that it possesses is due to the fact that in the United Kingdom rates are practically a single-tax.

Cp. Roscher, § 33; Wagner, ii. 223.

Professor Seligman (Political Science Quarterly, vii. 715) demurs to this use of the terms ‘subject’ and ‘object,’ but it is convenient to have a word to denote the ultimate bearer of the burden of taxation, and ‘subject’ seems to be the only one at hand for the purpose, while ‘object’ is employed by eighteenth century writers to denote the commodities placed under taxation; e.g. Hamilton, Report on Manufactures (ed. Taussig), 78; A. Young, Tour in Ireland (Bohn ed.), ii. 230.

This mistake is somewhat like that committed by Blackstone in speaking of ‘the rights of things’ (Jus rerum).

Cp. Roscher, § 33; Wagner, ii. 226–8; Schäffle, Steuerpolitik, 52–3, for the use of these terms in German finance. The use of ‘subject’ in the text differs from that of the above writers, as they apply it to the person legally responsible for payment.

Principles, Bk. v. ch. 3, § 1.

The questions here raised are further discussed in Bk. iii. ch. 4, ‘The Tax System, its Forms.’ See for a full treatment of the history of the terms a valuable article on ‘Direct and Indirect Taxes in Economic Literature,’ by Professor C. J. Bullock, Political Science Quarterly, xiii. 442–476. The use of the term ‘direct’ in the Constitution of the United States has given rise to much controversy, culminating in the decision of the Supreme Court on the income tax of 1894, pronouncing it invalid as being ‘direct.’

These terms seem to be the least unsuitable equivalents of the French impôts de quotité and impôts de repartition. Professor Seligman prefers the American term ‘percentage’ to ‘rated,’ but where the units are of unequal value its use would be incorrect.

The old English ‘tenths and fifteenths’ and the later ‘subsidies’ were apportioned, Dowell, i. 88. The recent change in the French house duty is an illustration of the tendency to abandon the system.

Wealth of Nations, 347.

It is noteworthy that Adam Smith makes this separation in his account of taxes on profit: ‘The revenue or profit arising from stock naturally divides itself into two parts, that which pays the interest and which belongs to the owner of the stock, and that surplus part which is over and above what is necessary for paying the interest,’ 357.

Bk. v. ch. 3, § 1.

See Introduction, ch. 1, § 8.

Rau, i. § 292; Hoffmann, Lehre von den Steuern, 69; Cohn, § 332; Wagner, ii. 233 sq., 515.

De Parieu, i. 12–14.

Abgaben und Schulden, 15–17.

Ib. 82 sq. Stein's classification of taxes into (1) direct, (2) indirect, and (3) income taxes—the first falling on capital, the second on labour, and the last on individual economic activity—is decidedly unsatisfactory; nor are his subdivisions better. Thus the direct taxes are divided by him into those on (a) produce, (b) acquisition, (c) commerce, but the land tax comes under (a) and the industry taxes under (b), though the latter are evidently produce taxes. Stein, ii. 495 sq., and iii. passim.

The question of classification is discussed in the Memoranda on Classification and Incidence [C. 9528], but the only result reached is a negative one. The attempt to divide taxes into (a) those incidental to the ownership occupation, or transfer of property, and (b) those ‘not incidental to property,’ was thoroughly exposed, and was abandoned by the Commission.

They are (1) Contribution foncière, (2) Contribution mobilière, (3) Contribution des portes et fenétres, (4) Patentes.

Bastiat, Œuvres, v. 344 sq.; cp. Leroy-Beaulieu, i. 118.

Leroy-Beaulieu, i. 125–6. See above. Bk. i. ch. 8, §§ 2, 3. Also Bk. v. ch. 5, for a discussion of the expediency of public borrowing for this object.

Essays (ed. Green and Grose), i. 356. Prof. Seligman (Essays, 86 n.) is mistaken in supposing that the doctrine is here ‘ascribed’ to Hume, as any reader of the text can see.

Taxation and Funding, 7 sq.

Principles, Bk. i. ch. 7, § 6.

Ib. Bk. v. ch. 3, § 3.

For a good refutation of the idea that low wages make workmen active, see Wealth of Nations, 34. Arthur Young approved of high rents as promoting industry, Northern Tour, ii. 80–83; and Sir J. Caird deprecated under-letting, but wisely remarked that the opposite error of overletting is much more hurtful English Agriculture, 477.

McCulloch, 151–2; Leroy-Beaulieu, i. 258–260.

For further discussion on this point, see ch. 4 of the present Book, also Bk. iv. chs. 6, 7.

Wealth of Nations, 348. The fourth of Adam Smith's ‘classical’ rules See Bk. iii. ch. 7.

Wagner, ii. 467. In Jevons's phrase, ‘The maximisation of utility.’

See on this Dowell, ii. 249, 261, who quotes Sydney Smith's humorous account.

Works (ed. McCulloch), 87.

‘Tout impôt doit porter sur le revenu, et non sur le capital’ is the first of Sismondi's maxims. Nouveaux Principes, Liv. vi. ch. 2.

Bk. v. ch. 2, § 7.

See Marshall, Principles, Bk. ii. ch. 4, for a discussion of the diverse application of the term ‘capital.’ ‘There is, and from the nature of the case there must be, something artificial in every broad distinction between capital in general and other forms of wealth.’ Ib. ‘Preface’ to 3rd. ed., vi.

See Bk. v. ch. 5, § 9, for further treatment of this point.

Quesnay in Daire, Physiocrates, 83; Du Pont, ib. 351; Mercier de la Rivière, ib. 474. See also Quesnay's Œuvres (ed. Oncken), 332.

The often-quoted passage of Turgot, ‘En tout genre de travail il doit arriver et il arrive en effet que le salaire de l'ouvrier se borne à ce qui lui est nécessaire pour lui procurer sa subsistance’ (i. 10), shows this.

Turgot, i. 63.

Works, 210.

Principles, Bk. i, ch. 11, § 1.

Bk. i. ch. 8, § 2.

Cp. Bk. i. ch. 6, § 1, for the relation of state expenditure to industry and commerce.

On the whole question cp. Wagner, ii. 315 sq.; Cohn, §§ 236 sq.; Roscher, § 35: Held, Einkommensteuer, 66 sq. For Hermann's theory of income see Staatswirthschaftliche Untersuchungen (2nd ed.), 582–598. Professor Marshall has developed Hermann's view, Principles of Economics, i. 139 sq.

Giffen, Growth of Capital, 124–139.

See on this point the Report and Minutes of Evidence of the Royal Commission on ‘Irish Financial Relations’ [C. 7720 and 8262]. Special reference may be made to the memorandum of Sir R. Giffen, C. 7720, ii. p. 166, and the note by Prof. Sidgwick, ib. 182–3.

J. S. Mill, Principles, Bk. ii. ch. 1, § 1; cp. Marshall, Principles of Economics, Bk. vi. note to ch. 2; also see Nicholson (Principles, Bk. ii. ch. 1) for a vigorous criticism of Mill's view.

Bk. iii. ch. 1, § 4.

For a statement of this theory see Thiers, De la Propriété, 348, who compares taxation to an insurance premium.

‘sunt igitur ea vectigalia ... probanda quae in omnes ordines pro singulorum facultatibus exaequantur,’ Bodin, De Rep. Liv. vi. ch. 2. See Neumann, ‘Die Steuer nach Steuerfähigkeit,’ in Conrad's Jahrb. 1880, for a history of the doctrine. For earlier recognition of the doctrine in England see Cannan, History of Local Rates, 17–22, where the phrase juxta facultates is quoted from ‘Rhymer’ as having been used in 1345.

Wealth of Nations, 347; cp. 342.

Principles, Bk. v. ch. 2, § 2.

This view has been specially developed by Professor Edgeworth. See his articles on ‘The Pure Theory of Taxation,’ Economic Journal, vii. 550–566; also x. 174–177, and the summary of his views in Memoranda on Classification and Incidence, 127–8.

Professor Edgeworth speaks of ‘the enormous interposing chasms which deter practical wisdom from moving directly towards that ideal,’ Economic Journal, vii. 553. Professor Nicholson recognises that ‘the great merit of the faculty theory’ is that it is objective. Principles, iii. 275.

Dîme Royale (ed. Daire), 48; cp. Meyer, Principien, § 2.

Wealth of Nations, 347.

‘Nous l'avons adoptée et nous devons la défendre,’ is the expression of Leroy-Beaulieu, i. 139.

See for a full exposition of this point of view Léon Say, Les Solutions democratiques de la Question des Impôts.

Ib. i. 167.

The literature of progressive taxation is an extensive and growing one. The most important work in English is Professor Seligman's Progressive Taxation in Theory and Practice, which gives a full account of the chief theories on the subject. Masè-Dari's L'Imposta Progressiva is the chief Italian work. Other writers deserving of mention are Neumann, Mazzolo, and Cohen-Stuart.

Esprit des Lois, Liv. xiii. ch. 7.

Garnier calls his system ‘progressional.’ See J. B. Say, Traité, Bk. iii. ch. 9; Garnier, Traité des Finances, 68.

‘This doctrine seems to me too disputable altogether, and, even if true at all, not true to a sufficient extent to be made the foundation of any rule of taxation.’ Mill, Principles, Bk. v. ch. 2, § 2. Cp. McCulloch, Taxation, 65; De Parieu, i. 38; Levasseur, Précis, 343; also Neumann, Progressive Einkommensteuer, 112.

Sax, Staatswirthschaft, 503–513; Wieser, Natural Value (Eng. trans.), 236.

The English assessed taxes might have been thus employed.

Professor Seligman, Progressive Taxation, 212–215; West, The Inheritance Tax. See Bk. iv. ch. 9.

Amongst specimens of this class the plan of the late F. W. Newman, by which the tax rate increased 1 per cent. with each additional £1,000 of income, may be mentioned. A common formula is that ‘the tax should triple as the income doubles, the starting point being selected according to the propounder's fancy. But there is evidently no limit to the varieties of arrangement.

Impôts Démocratiques, i. 172. It may be suggested that the scale that would give the maximum revenue should be chosen, but this is (a) extremely difficult to determine, and (b) is not consistent with the aim of proportional sacrifice. It is besides quite possible that several different scales would satisfy the condition.

The objection to progressive taxation on the ground of its arbitrary nature has been a leading point with French economists, e.g. Leroy-Beaulieu, i. 148, and was emphasised by the older English school, but is treated as of slight importance by most recent writers. Prof. Seligman declares that ‘all governmental actions which have to do with money relations of classes are necessarily more or less arbitrary.... a strict proportional tax.... is really more arbitrary.... than a moderately progressive tax. The ostensible “certainty” involves a really greater arbitrariness.’ Progressive Taxation, 194. Mr. Devas, while allowing the objection where the aim ‘is not to equalise sacrifice but to equalise property,’ regards it as inapplicable to ‘moderate graduation.’ Political Economy, 529. Prof. Nicholson holds that the ‘objection is purely formal. It is equally applicable to the relative proportion of direct and indirect taxes.’ Principles, iii. 278. In reply it may be remarked that though it is true that all action of a sovereign government is in a sense arbitrary, the adoption of a definite principle based on ‘simple and obvious’ grounds limits the capricious exercise of the power. Such a limiting principle exists in the case of proportional, but is absent in that of progressive, taxation. The distribution between direct and indirect taxation is regulated by reference to the effect on the different classes concerned, and, though unavoidably imperfect, ought to be directed by a general rule. But in any case the adoption of progression brings in an additional element of arbitrariness in the selection of the particular scale, which may be compared with the additional uncertainty in a double standard currency owing to the possible varieties of the ratio between the two metals. The appeal to the analogy of judicial decisions suggests the difference between the settled rule of ‘law’ and the fluctuating judgments of ‘equity.’ As Selden could truly say that ‘equity is a roguish thing,’ so can it be said that the policy of progressive taxation, particularly in a democratic society, is an uncertain thing.

Prof. Nicholson, in questioning the force of this objection, seems to have misconceived its real bearing. ‘Though the personal method of declaration must be applied to the surplus, it will still be as effective as in other cases, and the chance of evasion may be allowed for.’ Principles, iii. 278. But the essential point is that the introduction of progression necessitates the adoption of the comparatively ineffective method of personal declaration for all income, and thereby increases the opportunity, as the higher rate stimulates the desire, for evasion, which no doubt must ‘be allowed for’ in estimating the yield of the tax, just as the encouragement to smuggling must be considered in the case of heavy duties on luxuries. The need for making this allowance is generally regarded as weighing against such duties, and similar reasoning in respect to progressive taxes seems warranted. The experience of Italy with its income tax gives support to the belief that reliance on declarations of income is unsatisfactory.

This objection is regarded by some writers as applicable ‘to the whole system of taxation on property or income’ (Seligman, Progressive Taxation, 195), or to ‘all taxes on capital’ (Nicholson, Principles, iii. 278), and therefore ‘not applicable to progressive taxation as such’ (Seligman, loc. cit.). This view, however, does not take into account the extra pressure on the growth of accumulation that a progressive rate must cause. The case is similar to that of increasing fines for each repetition of an offence, the wrongdoing consisting in the saving or production of a given amount of wealth. As stated in the text, there may be some compensation in the effects of moderate progression, but this gives no support to Professor Seligman's courageous assertion that ‘If a moderate progressive tax is really more equitable than a strictly proportional tax, progression will be less of a fine on thrift and industry than proportion would be’ (loc. cit.). The usual arguments against progressive taxation are given in Lecky's Democracy and Liberty, ch. 3, in an old-fashioned form and with no consideration of recent theoretical discussion.

Cp. Wealth of Nations, 375.

As pointed out by Professor Seligman and Nicholson, the slight increase in return obtained by progressive taxation is not an objection to its use. It can at most be regarded as showing that its advantage must be looked for else where. ‘If it is conceded that the progressive tax is more equitable than the proportional tax, it is utterly immaterial whether it yields more revenue or not.’ Seligman, Progressive Taxation, 195. In deference to this criticism, the text of earlier editions has been altered. It is nevertheless true that as a great engine of fiscal reform progressive taxation is in Proudhon's words ‘un bilboquet, un joujou démocratique,’ which will not relieve the poorer taxpayers.

See Wicksteed, Alphabet of Economic Science, for a clear statement of the general principle applied in the text. Signor M. Pantaleoni argues that the richer person (B) may even suffer more (1) if the additional wealth happens to be of special importance to him, or (2) if his sensibility be keener.

Cp. Sax, ‘Die Progression ist keine vollständig regelmässige. Je nach der Beschaffenheit der einzelnen Bedürfnissgruppen kann sie bald geringer sein, vielleicht zum Stillstand gelangend, bald in raschen Sprüngen emporsteigen. Staatwirthschaft, 512.

The progression à rebours of French economists.

Neumann, Progressive Einkommensteuer, passim; Léon Say, Les Impôts Démocratiques, i. 203–258; ii. 225–264; Leroy-Beaulieu, i. 152–156, 160–168; Cohn, §§ 213, 214; Palgrave, ‘Progressive Taxation in Switzerland,’ Journal of the Statistical Society, ii. 225–267; Seligman, Progressive Taxation, Part I.

See § 13; also ch. 6 of the present book, ‘Principles of Local Taxation.’

Particular instances of progressive taxes will be considered in Bk. iv. chs. 4 and 9, ‘Taxes on Property and Income,’ and ‘Taxes on Successions.’

I.e.

Bk. iii. ch. 2, § 6.

The effect of local rates and the shifting of taxation do in fact put some of the pressure on the very poor, but the statement in the text is true of the immediate effect of imperial taxation up to the recent changes by which sugar and imported corn have been put under taxation.

Schmidt, Steuerfreiheit des Existenzminimums, 4, 5.

The criterion of ‘necessaries’ varies according to the class concerned. ‘We may say that the income of any class in the ranks of industry is below its necessary level when any increase in their income would, in the course of time, produce a more than proportionate increase in their efficiency.’ Marshall, Principles of Economics (3rd ed.), i. 139.

In Political Science Quarterly, iv. 64–5. Cp. ‘Der Staat ist für alle ein Bedürfniss, seine Existenz ist für die Gesammtheit nothwendiger als das Leben eines Einzelnen.’ Held, Einkommensteuer, 103.

Mill's view on the subject, though his conclusion is the same as that in the text, appears to be inconsistent with his views on population and his criticism of allotments (Principles, Bk. ii. ch. 12, § 4). Would not taxation of the minimum tend to check population, and exemption tend to increase it?

The doctrine of the exemption of the subsistence minimum received a new application in the discussions on Irish taxation. The error pointed out in the text was adopted by Mr. Sexton in his report, and countenanced by Sir R. Giffen. See The Final Report [C. 8262], 70–1. Cp. Book iii. ch. 2, § 8, and infra, § 15.

See the reports and evidence of the Parliamentary Committees on the Income Tax 1852–53 and 1861, especially the evidence of Newmarch, Farr, and J. S. Mill.

See the proposal of Mr. Blunden for a tax on the yield of property (i.e. in fact, a differential income tax). Economic Journal, vii. 607 sq.

Bk. iv. ch. 4, ‘Taxes on Property and Income.’

See Vocke, Abgaben, 471–2.

I.e. a tax assessed on amount of property, but really paid out of income.

All included in the German ‘Conjuncturgewinn.’ Cp. Professor Marshall's explanation of ‘Conjunctur,’ Principles of Economics, i. 656.

Wealth of Nations, 356, 378.

For a forcible statement of this view see George, Social Problems, 205–208.

Wealth of Nations, 356.

Cp. Sumner, Life of Jackson, 184–5; Marshall, Principles, 486–7.

‘Die Speculation ist nicht bloss, wie Lassalle behauptet, “ein Rathen auf die Wirkungen, welche die unwissbaren Umstände hervorbringen werden.” Sie ist mehr als das. Sie ist der Kampf der mit Kenntniss der wissbaren Umstände ausgerüsteten Intelligenz gegen die rohe Uebermacht des Zufalls.’ Cohn, § 343. On the important functions of speculation in the modern economic system see Hadley, Economics, ch. iv., and the fuller discussion in Emery, Speculation on the Stock and Produce Exchanges of the U.S.

For state ownership of land see Bk. ii. ch. 2, § 4. On the Land Tax, see Bk. iv. ch. 1; and for taxation of ground rents ch. 6, § 5 of the present Book.

See the Reports of the Commission on ‘Indian Expenditure’ [C. 8258. 9; Cd. 130. 131] especially iv. 90–127 (ch. 3 of Final Report) for an examination of the heads of outlay where joint contribution was suggested. The governing principle propounded was that of ‘common interest,’ which apparently means ‘common benefit.’

Article 8.

The Federalist (Letter 21) 123 (Lodge's edition).

The financial weakness of the ‘Confederation’ was one great reason or the adoption of the present Constitution of the United States. ‘Finance was the great overwhelming trouble which laid bare the fatal vices of our political system, and it was on financial rocks that the rickety Confederation was dashing itself to pieces.’ H. C. Lodge, Alexander Hamilton, 39. The peculiar condition of the Austro-Hungarian Empire accounts for the retention of the present system.

See infra, Bk. iii. ch. 6, § 3.

The history of the United States, Switzerland, and Germany supplies instances. Hamilton admits the difficulty but seeks to extenuate it. ‘Imposts, excises, and, in general, all duties upon articles of consumption may be compared to a fluid which will, in time, find its level with the means of paying them.’ Federalist, 124. The whole paragraph is worth reading as an early example of the equal diffusion theory. Cp. Seligman, Incidence, 133–4.

The provision in the United States’ Constitution respecting direct taxes was designed for this purpose. It has had the serious effect of preventing the establishment of an income tax.

The Income tax reimposed in England in 1842 was not extended to Ireland till 1853. The Irish spirit duties were equalised only in 1858.

See the Report of the Commission on Irish Financial Relations, especially the memoranda and evidence of Sir R. Giffen and Mr. M. O'Brien. For a more extreme view see Lough, England's Wealth, Ireland's Poverty.

This was the position occupied by Mr. Gladstone, Sir S. Northcote and English finance ministers generally in dealing with this question.

Bk. iii. ch. 1, § 3.

Cp. the several estimates made for the ‘Financial Relations’ Commission. Also Sidgwick's ‘Note,’ ib. ii. 182; see in addition, Economic Journal, vi. 189–94, and Béla Foldes, Finanz-Archiv, xvii. 798–9.

For scientific discussions of this question see Adams, Science of Finance, 449–64; Seligman, Essays, ch. 8. The great development of industrial companies in America, and the peculiar restrictions of the federal constitution have given the corporation tax prominence which it has not received elsewhere. The formation of international trusts and combines will probably increase its importance in European finance.

Interstate taxation of companies in America and the income derived from colonial investments by residents in England may be referred to in illustration.

The discussions on the Finance Act of 1894 respecting the levying of the estate duty on property simultaneously taxed in the Australian colonies supplies a good illustration.

It should be noticed that the introduction of progression into the tax-system tends to increase the difficulties connected with double taxation, as in the case mentioned in the preceding note.

See Bk. iii. ch. 6, §§ 3,4, and on the whole subject of ‘double taxation’ cp. Cohn, §§ 223–228, Roscher, § 63, Wagner, ii. 406 sq. Recent contributions to the subject are Seligman, Essays, 95–120; Walker, Double Taxation in the United States; Westlake, Economic Journal, ix, 365–374; Flora, Le Finanze degli Stati Composti; A. Garelli, Diritto Internazionale Tributario. Prof. Westlake's article is the first indication of study of the subject in England.

See Wagner, i. 47, 500; ii. 381 sq. 455–459, for a statement of the ‘social’ view.

Cp. Prof. Nicholson's judgment on ‘the social function of taxation.’ Principles, iii. 282–4.

And yet this doctrine has a curious affinity to that of minimum sacrifice. See supra, § 4.

Taxation and Funding, 18. Cp. ‘The problem which every Chancellor of the Exchequer professes to solve is not how to levy taxes in proportion to capacity to bear them, but how to get the money he requires with a minimum of suffering and discomfort to the nation.’ Cannan, Economic Review, vii. 111.

This is, of course, not inconsistent with the doctrine that ‘economy’ is of even more importance than ‘equity,’ which is so vigorously expounded by Mr. Cannan (Economic Journal, 469–80). Cp. Bk. iii. ch. 7, §§ 5, 6.

See Bk. iii. Ch. 2, §§ 6–7; ch. 3, §§ 11–12.

A dictum credited to Sir G. C. Lewis.

The need for drastic fiscal expedients was greater in mediæval times than it is now, and this explains much of the seeming harshness of the earlier regal policy.

The war period (1793–1815) affords a good illustration of the disposition to impose fresh taxes, Dowell, ii. 208–245; cp. also the recent sugar, coal, and corn duties.

Vauban, Dîme Royale, 50–98. A remarkable proposal was placed before the States-General of 1577 at Blois. Besides the duties whose repeal was advocated by Vauban, the salt tax and the customs on wine were to be removed, and a graduated duty on households, called taille égalée, was to be employed. Clamageran, ii. 217–219.

It is doubtful whether this plan should not be really ascribed to Richardson. That was McCulloch's opinion. See Seligman, Incidence, 57 n 1; also Professor Gonner's article on ‘Decker’ in Palgrave's Dictionary of Political Economy.

For Adam Smith's criticism see Wealth of Nations, 371. The idea of a general consumption tax was propounded by Revans, A Percentage Tax on Domestic Expenditure, and by Pfeiffer, Staatseinnahmen, ii. 538–554.

Vanderlint's Money answers all Things appeared in 1734. See Ricca Salerno, Dottrine Finanziarie in Inghilterra, 23–26.

See Turgot's advocacy of the single tax on land. He declares: “Cette proposition est contraire à l'opinion de ceux qui avaient conçu le système de la dime royale.... Ce système peut effectivement éblouir par sa simplicité, par la facilité du recouvrement, par l'apparence de la justice distributive.... Il pêche cependant par différents inconvénients,” i. 404.

Mirabeau, Théorie de l'Impôt, 316; Turgot, ii. 114.

An ingenious plan of this kind was proposed by the late W. N. Hancock. See his General Principles of Taxation as illustrating the advantages of a perfect Income Tax.

Mill, Principles, Bk. v. ch. 2, § 3.

Guyot, l'Impôt sur le Revenu, 222. See also Menier's various works, especially his L'Avenir Économique.

Political Arithmetic. A statement quoted with approval by Sir G. Lewis Northcote, Financial Policy, 309. Mr. B. Holland has recently sought to revive it, Economic Journal, vii. 219–20. As shown in the text, it has no support either from theory or experience; see Economic Journal, vii. 420–22.

Wealth of Nations, 381.

For the English tariff, Dowell, ii. 249–261; Buxton, Finance and Politics, i. 18, 19. For the United States, Wells in Cobden Club Essays (2nd series), 479.

Cp. Leroy-Beaulieu, i. 179–185.

Cp. the well-known saying of Baron Louis, ‘Faites-moi de bonne politique et je vous ferai de bonnes finances.’

Physiocraets, 474. The italics are in the original.

See Bk. iii. ch. i. § 8.

‘The classification of taxes as direct and indirect, it may be as well to premise, has been objected to on the ground that it cannot be consistently applied.... But this objection applies only to the wording of the ordinary definition of direct and indirect taxes, and we may safely continue to employ the terms to denote the radical distinction intended; namely between taxes on the one hand levied either directly from the contributors themselves or from funds on the way to them, and taxes on the other hand on producers or dealers, in the intention that they shall recover them in the prices finally paid by consumers,’ Cliffe Leslie, in Cobden Club Essays (2nd series), 192.

See for further discussion Prof. Bullock's article already referred to (Book iii. ch. i. 1, § 8). He supports the treatment in the text.

See Dowell, Hist. of Taxation, Pref. xii.; Vocke, Abgaben, 1–16.

Cp. Vocke's remarks, Abgaben, 624–5; also Finanzwissenschaft, 355.

See Cliffe Leslie's forcible argument in Cobden Club Essays (2nd series), 252 sq.

Ireland was not included till 1853, but the abatement limit was raised, which probably compensated for this addition, and since then there have been great extensions both of exemption and abatement.

E.g. in Ireland Schedules A and B of the income tax, so far as land is concerned, are taken on a fixed valuation, and therefore cannot expand in the same way as in Great Britain. They may, however, decline, as the landowner has the option of paying on rent instead of on valuation.

Gaudin, Mémoires, i. 217.

Wealth of Nations, 348.

Principles, Bk. v. ch. 6, § 1.

The doctrine that indirect taxation is voluntary is accepted by Sidgwick. ‘It is urged that direct taxation, being inevitable, is a greater burden than an equal amount of taxation voluntarily incurred by purchasing commodities. And I think that this cannot be denied,’ Elements of Politics, 175. He applied it to the case of Irish taxation (Financial Relations Commission, ii. 182), and was followed by Mr. A. J. Balfour. Assuming, however, that a certain amount has to be raised by taxation, it follows that abstinence from the consumption of taxed commodities will make it necessary to tax fresh commodities, and when all have been taxed to use direct taxation, which might better have been employed at first. Taxation which checks consumption is unproductive and burdensome through privation to the people. Prof. Edgeworth ingeniously points out that under indirect taxation there will be ‘a loss of consumers’ rent, which does not occur when the amount is directly subtracted from income,’ and therefore regards taxes on commodities as ‘more burdensome than direct taxation,’ Economic Journal, vii. 568. Consideration of this matter shows the inaccuracy of estimating the weight of taxation by the yield of taxes. Thus the yield of the tea duty in Ireland for 1901–2 is only 25 per cent. more than that for 1899–1900, though the duty is 50 per cent. higher. In studying the effect of taxes the privative side of their action should never be overlooked.

The increase of duties in 1840 by Baring is an instance; 5 per cent. extra all round did not give increased receipts, Dowell, ii. 313.

‘Financial Reform,’ in Cobden Club Essays (2nd series), 189???263; also reprinted separately.

Leslie, ut supra, 204, 205, 207–8, 219, 225–231.

The re-imposition of the sugar duty in 1901, though justified by the need of revenue, is open to the objection of hampering industry.

Bk. i. ch. 4, ‘Administrative Supervision.’

The last-named only through the legislative prohibition, slightly relaxed in the past few years.

The great increase in the English death duties in 1894, and the recent changes in France, support this statement.

See Bk. iii. ch. 6, § 3.

On this difficult subject reference may be made to Professor Seligman's masterly study, The Shifting and Incidence of Taxation, the first edition of which appeared at the same time as the first edition of this work. It, especially in the second enlarged edition (1899), enters into special points both of history and of theory at much greater length than would be allowable in a general manual. The large amount of agreement between Professor Seligman's conclusions and those set forth in the text affords a gratifying confirmation of their correctness. Professor Edgeworth's series of articles on various aspects of incidence are highly important. See his ‘Theory of International Values,’ Economic Journal, iv. 435 sq.; ‘Pure theory of Taxation,’ ib. vii. 46 sq., 226 sq.; ‘Incidence of Urban Rates,’ ib. x. 183 sq., 340 sq., 487 sq. See also the collection of opinions in Memoranda on Classification and Incidence [C. 9528].

See the sections on incidence in the several chapters of Bk. iv. (ch. 1, § 9, ch. 2, §§ 5, 13, ch. 4, § 11, ch. 6, § 16, ch. 7, § 7, ch. 8, §§ 2, 6, ch. 9, § 11).

‘Manifestly there can be no payment by the citizen unless there is a corresponding receipt by the Government.’ Adams, Finance, 388–9.

‘I have no doubt that it is desirable to eschew the use of the term “incidence” of taxation.’ Memoranda, 166.

Tacitus notes the fact in the case of slaves: ‘Vectigal ... venalium mancipiorum remissum, specie magis quam vi, quia cum venditor pendere juberetur in partem pretii emptoribus accrescebat,’ Ann. xiii. 31.

‘Considerations on the Lowering of Interest,’ Misc. Works, 595.

For a full account of the views of the earlier English writers on these questions, see Seligman, Incidence, 11–91 (Part i. Bk. 1).

Bk. iii. ch. 4, § 2.

See Turgot, i. 442–4, for an application of this argument to the case of Holland, which had been brought forward to refute the doctrine of Quesnay.

For the physiocratic doctrine of incidence see Quesnay, Second Problème (ed. Daire), 127 sq.; Turgot, i. 392–444; Seligman, Incidence, 96–112.

There can, however, be little doubt that Adam Smith was much influenced by the physiocratic teaching on this subject.

Wealth of Nations, 357.

See Wealth of Nations, Bk. v. ch. 2 pt. 2. For exposition and criticism of his views see Kaizl, Überwälzung, 3–8, and Falck, Steuerüberwälzung, 30–48.

On Ricardo's doctrine of incidence see Falck, 48–70; Kaizl, 8–11.

Nicholson, Introduction to Wealth of Nations, 9.

On J. S. Mill's differences from Ricardo see Falck, 71–90. He points out that ‘Mill's doctrine of the operation of taxes differs but slightly and only on special points from that of Ricardo,’ 71.

Cp. Professor Seligman's remarks on Ricardo, Incidence, 117–121.

Essays (2nd edition), 384.

Canard's Principles d Économie politique appeared in 1801. See Kaizl, 11–15, for a clear summary, and also Seligman, Incidence, 125–128. An early statement of the theory, limited to taxes on commodities, is that of Alexander Hamilton. ‘Imposts, excises, and in general all duties upon articles of consumption may be compared to a fluid which will in time find its level with the means of paying them.... In the course of time and things an equilibrium, as far as it is attainable in so complicated a subject, will be established everywhere.’ Federalist, 124. Cp. supra, Bk. iii. ch. 3, § 15.

Stein, ii. 550–591. For the views of Thiers and Stein see Seligman, 129–132.

Memoranda on Classification and Incidence, 51–2. (The quotation is from Mr. D. A. Wells.)

lb. 99. It is quite in keeping with this school of thought that he should immediately add, ‘The case of old rates which tend to become a rent charge on the property affected is, however, a very special one,’ thus mixing up the ‘diffusion’ theory with the ‘capitalisation’ theory.

Address on ‘Imperial and Local Burdens,’ Statistical Journal, lxiv. 566.

Statistical Journal, lxiv. 559.

This attitude is adopted in the ‘separate Report’ of Sir E. W. Hamilton and Sir G. Murray, in which the problem of incidence is characterised as ‘insoluble.’ ‘Incidence,’ it is added, ‘must in short be merely a matter of conjecture and speculation.’ Final Report on Local Taxation, 109 [Cd. 638]. Lord Avebury also approaches the same position, Statistical Journal, lxiv. 559. (It may be noticed that he misrepresents Prof. Nicholson's opinion. That writer's assertion, ‘that an answer is impossible,’ is limited to the incidence of import and export duties, it does not apply to ‘rates or taxes’ generally. See his Principles, iii. ch. 10.)

A prominent representative of this attitude is Held, who declares: ‘Die Überwälzung ist gewiss kein reines Phantom, aber sie ist noch weniger im einzelnen Falle nachweislich.’ Einkommensteuer, 145–6.

Lord Avebury remarks that ‘Prof. Bastable also condemns Canard's view.’ He quotes the statement in the text, and adds, ‘But unfortunately he gives no refutation either short or long.’ Statistical Journal, lxiv. 567. Considering that the remainder of the chapter is devoted to setting forth a theory of incidence which is quite inconsistent with Canard's theory, and which, if true, completely overthrows it, this desire for a ‘refutation’ appears rather unreasonable. The best refutation of an erroneous view is the exposition of the true one. As Prof. Seligman well says (in a passage not quoted by Lord Avebury), ‘The optimistic theory is so superficial that it scarcely deserves a refutation..... Our review of the eclectic theories as well as the whole positive and constructive part of the present monograph will show the shallowness of the doctrine. Were the theory true there would be no need for any investigation like the present.’ Incidence, 134. It is only necessary to add that none of the passages of this work quoted by Lord Avebury bears the meaning he appears to attribute to them. See § 9, infra, and Bk. iv. ch. 3, § 3.

The terms in the text are the nearest equivalents of ‘Fortwälzung,’ ‘Rückwälzung,’ and ‘Weiterwälzung,’ which are used by German writers, but with various minute differences. The process called ‘Abwälzung’ by Hock and Wagner should not be regarded as belonging to the subject at all. See Hock, 96; Wagner, ii. 346–8.

Cp. Seligman, Incidence, 148 sq.; also Jevons, Theory, 161 sq.

For the economic theory of taxation of monopoly, see Marshall, Principles. (3rd ed.) Bk. v. ch. 13, § 4. Also the articles by Edgeworth already referred to, especially The Pure Theory of Taxation, No. ii. (Economic Journal, vii. 226–38). Cournot seems to have laid the foundation of the scientific analysis of monopolies in his Principes Mathématiques, chs. 5, 6.

Cp. the more elaborate enumeration in Seligman, Incidence, 181, which applies to taxation in general rather than to the special form of taxation on commodities.

‘The theories of the values of labour and of the things made by it cannot be separated; they are parts of one great whole.’ Marshall, Principles, Preface, viii.

See Ricardo, Principles, chs. 1–6; J. S. Mill, Principles, Bk. ii. Sidgwick, Principles, Bk. ii. chs. 6–9; Walker, Political Economy, pt. iv. Marshall, Economics of Industry (1st edition), Bk. ii. chs. 6–12; Principles of Economics, Bk. vi. chs. 4–11; Nicholson, Principles of Political Economy, Bk. ii.

The increased produce that wisely expanded taxation provides is not a determinable quantity, otherwise it would perhaps be possible to regard it as the source of taxation, as the older theory of State services suggests.

The facts that land may vary in productiveness either from fertility or situation, and that cultivation may be either extensive or intensive, make the statement more complex, but do not alter its essential nature.

See Ricardo, Works, 104; Senior, Political Economy, 123; McCulloch, note 30 to Wealth of Nations.

See Bk. iv. ch. 1.

Ricardo, 102.

Turgot, i, 63; Ricardo, 122.

Wealth of Nations, 358.

The effects of a rise or fall in the rate of interest are not quite simple. Speaking broadly, the tendency on balance is that a rise in interest encourages, and a fall checks, accumulation; but ‘the growth of material capital depends on a number of variables,’ Nicholson, Principles, i. 394, cp. 209–10. Cp. Marshall, Principles, 316–8. For an attempt to minimise the effect of the rate of interest on accumulation, see S. and B Webb, Industrial Democracy 610–627.

‘Either the labourers themselves or the public generally as consumers’ is Jevons's statement. Theory, 278.

Prof. Marshall's conception of ‘quasi-rent’ is useful here. Principles of Economics (3rd ed.), 477–8. During the short period the capitalists bear taxation; in the long period the process of shifting is carried out.

‘It is laid down that taxes on the profits of all employments fall on capitalists only, and cannot be shifted on any other class. But there is in reality a perpetual migration along the borders between capital and labour, as there is also an intermediate class who individually may be regarded as capitalists or workmen.’ Leslie, Essays, 390–1.

‘Les taxes établies sur les salariés, ou sur leurs dépenses, sont done évidemment payées en entier por ceux qui payent leurs salaires.’ Quesnay, ‘second Problème’ in Œuvres (ed. Oncken), 706.

‘The recompense of ingenious artists and of men of liberal professions ... necessarily keeps a certain proportion to the emoluments of inferior trades.’ Wealth of Nations, 366; cp. Turgot, i. 444. The salaries of state officials are the only exception allowed by Adam Smith.

See the passages already quoted.

Lord Avebury (Statistical Journal, lxiv. 567) regards this statement as ‘an admission which amounts almost to a surrender’ of the hostile position taken above (§ 4) in regard to the theory of equal diffusion. He fails to perceive the difference between a complicated adjustment and an equal distribution, and has overlooked the explanation of ‘diffused incidence’ as being ‘where the process of shifting affects more than two parties,’ supra, § 5.

The most elaborate attempts at statistical investigation of the shifting and incidence of a tax is the study of Laspeyres on the effects of the abolition of the Prussian ‘meal and meat’ tax. Finanz Archiv, xviii. 46–282. The results reached are quite in accordance with those obtained by the deductive method.

In such governments as England or France the legislature can completely control the fiscal expedients of municipalities and other smaller territorial administrations. The powers of the American ‘state’ are limited (a) by the federal constitution, (b) by the state constitution. Cities are controlled by state legislation. Cp. Bryce, American Commonwealth. i. 498.

See Bk. i. ch. 7, §§ 2 sq.

This is true even of the American colonies in the period between the separation from England and the establishment of the present constitution.

The great measures of legislation on local government are (1) The Poor Law Act, 1834; (2) The Corporation Reform Act, 1835; (3) The Local Government Act, 1888, creating County Councils; (4) The Local Government Act, 1894, establishing Parish and District Councils.

Bk. i. ch. 7, §§ 6, 7, 8.

The following is curious as coming from a strong supporter of free trade: ‘I should be inclined to suggest as a possible means of taxation ... a customs duty or octroi on the admission of articles of general consumption into a locality.’ Giffen in Memoranda, 98; see also Row-Fogo in Economic Journal, xi. 356–7

Bk. iv. ch. 5, § 6.

Local Taxation, 204.

For further discussion of the property tax see Book iv. ch. 4, §§ 3, 4.

Cp. Report of Town Holdings Committee (1891), Questions 176–180.

See Bk. iv. ch. 2, § 5, for a discussion of the incidence of house taxes.

The Final Report of the Royal Commission on Local Taxation recommends the transfer of ‘licenses’ to the local authorities.

Bk. ii. ch. 5, § 3.

Goschen, Local Taxation, 205: ‘It may happen that owing to events at present unforeseen, it will be impossible for the Imperial Exchequer to part with so important a source of revenue as the house tax.’ The Majority Report of the Local Taxation Commission approves of the surrender.

See Bk. iii. ch. 5, §§ 5, 6, 7; Bk. iv. ch. 1, § 9; ch. 2, § 5.

On the question of incidence see Goschen, Local Taxation, 163–168, and the fifth Report of the Committee on Town Holdings, No. 341 (1890), especially Questions 41–5, 88–101, 331 (Sidney Webb); 1804–32, 2024–26 (Munro); 1243–46 (Farrer); 2714–22 (Rogers). The Memoranda on Classification and Incidence, issued by the Local Taxation Commission, contain the latest views on this important matter, see also ‘The Incidence of Urban Rates,’ Edgeworth, Economic Journal, x. 172 sq.; 340 sq.; 487 sq.

The distinction drawn in the text between expenditure for general purposes and that for the particular advantage of the locality has been well expressed in recent discussion by describing rates levied for the former as ‘onerous,’ those for the latter being ‘beneficial.’ The serviceable terms, which seem to have been first applied in this connexion by Sir G. H. Murray (Economic Journal, iii. 701), are employed in the Reports of the Royal Commission on Local Taxation and are best used with direct reference to expenditure. It should be added that the distinction between the two classes has been long recognised by scientific students; cp. e.g. ‘Da die Gemeindewirthschaft in so vielen Punkten eine Art von Mittelstellung zwischen Staats- und Privatwirthschaft einnimmt, so darf man auch bei ihren Steuern nicht vergessen dass zwar manche ihren Ausgaben nur decentraliserte Staatsleistungen betreffen,’ Roscher, 159. Cp. also Cohn, §§ 125–6, and 459.

‘It is one of the fairest and most unobjectionable of all taxes. No part of a person's expenditure is a better criterion of his means, or bears on the whole more nearly the same proportion to them.’ Mill, Principles, Bk. v. ch. 3, § 6. Supported by Engel's researches.

See Rosewater, Special Assessments, 2–21, for instances.

Rosewater, ib. chs. 2, 3. It may be added that the rapid growth of towns in America made this system almost necessary. Owners of property hardly felt aggrieved when they really got full value for the charge. Though they did not contract with the municipal authorities (as not seldom happens in Great Britain), there was in fact a quasi-contract, which saved trouble.

For the provisions in various American towns see Rosewater, 64–65.

Special assessments in the United States represent a capital sum; but as they can be collected by instalments this is really non-essential. Either a fixed rate extending over a number of years, sufficient to pay off the principal expense, funds for which could be obtained by borrowing (cp. Bk. v. ch. 8), or redeemable rent charges seem to be the best technical forms.

See the history lucidly given in Sir E. W. Hamilton's ‘Memorandum’ (C. 9528), reproduced in Memoranda, 11–19; also Chapman, Local Government and State Aid, ch. 7. Each of these ‘grants in aid’ was clearly due to ‘the pressure brought to bear on the government’ by interested parties, as, indeed, Sir E. W. Hamilton's narrative shows. One important item is the cost of the Irish police, which exceeded £1,408,000 in 1895–6, and is still paid by the central government.

These were (1) the license duties; (2) a proportion (one-half) of the probate duty; (3) 6d. per gallon on spirits and 3d. per barrel on beer, i.e. taxes on acts, property, and commodities. In 1894 a portion of the new estate duty equivalent to the previous probate duty was substituted for the latter.

See Final Report of Commission on Local Taxation, ‘The principles on which Mr. Goschen's scheme was founded are in our opinion broad and sound.’ 17; cp.112. For a more unfavourable view see Farrer, Mr. Goschen's Finance, 80 sq.

See the vigorous criticism by Hamilton and Murray in their separate Report, Local Taxation Commission, Final Report, 116–120; and Chapman, Local Government, ch. 8.

It has been alleged that ‘ear-marking’ of certain sources of revenue for the local taxation account is a mere fiction, since, whatever funds may be assigned, it is necessary to impose fresh or retain existing taxation to meet the gap in the national revenue, and it is this fresh (or retained) taxation that goes to the aid of local finance. This is true, but it is equally true of the transfer of any form of taxation, owing to the fact that imperial and local finance are essentially connected. The revenue system is fluid, and the ultimate adjustment always operates on the ‘marginal’ expenditure and the ‘marginal’ revenue. See Bk. i, ch. 8, § 4.

75 per cent. of the coffee duty, 25 per cent. of the spirit duties, the excises on sugar and wine, and 40 per cent. of the postal receipts. See De Parieu, iv. 386 sq. for a full discussion.

Particularly by the Lex Huene of 1885, repealed in 1893; see ‘Die Lex Huene.... und ihre Wirkungen.’ Finanz Archiv, x. 488–498.

i. 712. Mr. O'Meara℄Municipal Taxation, ch. 5℄pronounces in favour of the Continental system of Centimes additionnels, but the much higher authority of Mr. Blunden may be cited in support of the position in the text. Local Taxation and Finance, 72. The Prussian reform which practically abandoned the system of Zuschläge, except in the case of the income tax, also supports it.

For a detailed account of Prussian local finance and the recent changes therein, see Wagner, iv. 64–97; also ‘Local Government and Finance in Prussia,’ Diplomatic and Consular Report, No. 487 (year 1899), and J. Row-Fogo, ‘Local Taxation in Germany,’ in Economic Journal, xi. 354–78. The last-named writer seems to have in some way misunderstood the brief statement in the text, which is in accordance with the facts.

Farrer, Mr. Goschen's Finance, 54.

Mr. Row-Fogo (Economic Journal, xi. 355) refers to the text, and confesses himself ‘entirely unable to appreciate the weight of this argument,’ which is natural enough, as he has misconceived its meaning. The question is not one of ‘making up the roll.’ The real point is the amount of discretion given.

The various Reports made by the Commission on Local Taxation agree in recommending additional aid from the central Government to local finance. The chief feature of difference is respecting the form of the relief. The proposal of a definite grant from the Consolidated Fund, adjusted at intervals of ten years, and equal to one-half of the ‘onerous’ expenditure (see supra, § 5), is strongly urged in the separate Report of Sir E. W. Hamilton and Sir G. Murray. The crux of such schemes is the discovery of a just method of distribution. The plans suggested for this purpose seem to involve a series of arithmetical calculations resting on no solid basis of equity. See Final Report [Cd. 638], 23–32, 73–83, 133–140.

Bk. i. ch. 7, § 9, for these duties.

Mr. Hewins mentions Milles, a commissioner of customs, as advocating ‘certainty’ and ‘indifference of assessment’ in respect to taxation of commodities. English Trade and Finance, xviii.

For the maxims of the writers mentioned in the text see Vauban (ed. Daire), 47; Roscher, § 44, note 1; Garnier, 324. For Verri see Ricca-Salerno, Dottrine Finanziarie in Italia, 276–282.

Quesnay's maxims have been already referred to: Int. ch. 2, § 6. Those of the elder Mirabeau are to be found in his Théorie de l’ Impôt, 201, and are also given by Roscher ut supra, and by Garnier, 325.

Thorold Rogers speaks of ‘The famous canons of taxation which Adam Smith borrowed from Turgot’ (Economic Interpretation, 115), but gives no evidence in support of his statement, which is clearly unfounded. On the interesting question of Smith's relation to Turgot, see Léon Say, Turgot, 45; Rae, Life of Adam Smith, 203 sq. Cannan, Introduction to Adam Smith's Lectures, pp. xxiii-xxiv. According to Cunningham, ‘Adam Smith's celebrated maxims about taxation are improved in form, but in substance’ are adopted from Moreau de Beaumont. English Industry and Commerce, ii. 436 n.

The prevailing sentiment of his time is conveyed by J. S. Mill when he calls the Smithian maxims ‘classical.’ The extreme limit of hostile criticism is reached by F. A. Walker, who declares that ‘These maxims have been quoted over and over again as if they contained truths of great moment, yet if one examines them he finds them at the best trivial, while the first and most famous cannot be subjected to the slightest test without going all to pieces.’ Political Economy, 489. Cohn's judgment is quite as severe. § 333.

Wealth of Nations, 347–8.

Principles, Bk. v. ch. 2, § 1.

Nicholson, note 45 to Wealth of Nations, 418.

Wagner, ii. 292; cp. Sidgwick, Political Economy, Bk. iii. ch. 8, § 6.

F. A. Walker, Political Economy, 490. See also Bk. iii. ch. 3, § 14, and the words there referred to for the discussion of double taxation.

Cp. the questions discussed by the Physiocrats and Adam Smith, respecting the effect of Dutch taxation on France and Germany, and the movement of capital in order to escape taxation. Bk. iii. ch. 5, §§ 2, 7.

Nouveaux Principes d’ Économie Politique, 2 vols. 1819 (2nd ed. 1827). For Sismondi's general position see Ingram, History of Political Economy, 165 sq.; also Roscher, Geschichte, 845; and Cohn, Grundlegung, § 85.

See Ricardo, Works, 87–9; Bentham, Theory of Legislation, 107–8; also cp. Bk. iii. ch. 2, § 5, and ch. 3, § 10.

See passages referred to in preceding note.

These are given at length in his Traité (ch. 13), 156–165.

According to Hock taxation should be (1) just, (2) logical, (3) economical. Held lays down the rules of (1) generality, or that all who have incomes should contribute; (2) equality, i.e. income should be taxed without reference to its source; (3) the greatest possible care of the national well-being and its increase. Einkommensteuer, 121.

Wagner divides the chief principles (oberste Grundsätze) into four classes, arranged in the order of their importance, and distinguished as (a) financial, (b) economic, (c) ethical, (d) administrative. Under (a) come (1) taxation should be adequate to meet expenditure, (2) it should be elastic; under (b) are placed (3) the sources of taxation should be rightly chosen, (4) the kinds of taxes should be selected with reference to their effects; class (c) includes rules (5) taxation should be general, and (6) it should be proportional; while, finally, class (d) contains the rules that taxation should be (7) determinate, (8) convenient, and (9) collected with the smallest cost, in fact Adam Smith's last three maxims.

The economic rules are somewhat vaguely expressed, but (3) refers to the taxation of income and of capital, and (4) draws attention to the incidence of taxation. The sixth rule is regarded as varying according to the conception taken; from the pure financial point of view it is proportionality to income, from the politico-social one it is in proportion to capacity.

‘Ilier muss die Finanzwissenschaft vielmehr specialisiren und casuistisch verfahren, als sie bisher gewöhnlich gethan hat,’ ii. 305.

Bk. iii. ch. 2, § 4.

See Bk. iii. ch. 3 passim.

The experiences of the United States Treasury since the Civil War may be referred to as supplying an excellent series of illustrations. Enormous surpluses have been followed by considerable deficits, accompanied by grave economic disturbance.

President Hadly in his valuable Economics lays stress on the advantages of ‘certainty,’ but he connects it with proper assessment, which is essential in order to avoid ‘uncertainty of primary incidence,’ Economics, 451–9. Journal of Political Economy, v. 86–9. This, however, seems as much a matter of ‘equality’ as of certainty.

Wealth of Nations, 286.

Cp. with the maxims given in the text those enumerated by Mr. C. S. Devas, Political Economy, 606. It would be possible to frame many derivative rules℄as e.g. ‘Taxation should be diversified’℄but they could not lay claim to general application, and most of them belong more fitly to the treatment of special taxes (Bk. iv.).

Dowell, i. 8, for the ‘hide.’ For the Jugerum, Mommsen, Hist. Rom. i. 95. St. Vincent and British Guiana have the uniform tax. Parl. Papers (1891), 181, Taxation of Land.

Clamageran, i. 16.

‘Land (in Ohio) was divided into three classes, according to quality, and there were three rates of taxation per 100 acres; one for land of the first quality, another for land of the second quality, and still another for land of the third quality,’ Ely, Taxation, 134.

Restraints must be placed on the sale of crops until they are inspected by the tax-collector and his share settled.

Wagner, iii. 26; Clamageran, i. 19. Seebohm, English Village Community, 290 sq. For England, Seebohm, 40; Dowell, iii. 67.

Dowell, i. 5.

Vignes, i. 11; Dowell, i 88, 154.

Wealth of Nations, 349–50.

Wagner, iii. 25–6.

Said to be derived from ‘capistratum.’

‘The survey and valuation of Bohemia is said to have been the work of more than a hundred years.’ Wealth of Nations, 351. The French cadastre, begun in 1807, was not completed till 1850. In Madras we hear that ‘in 1855 the work of survey and re-settlement was begun. This work will be accomplished in or about 1895, but certain districts of the Presidency will then have seen this very re-settlement expire.’ Goodrich, Economic Journal, i. 451. In like manner the Irish valuation usually known as ‘Griffiths's’ has become by lapse of time very misleading.

Three valuations of Lancashire made in 1790, 1840, and 1890 respectively, would have few common, or even proportional results.

Leroy-Beaulieu, i. 343. For Italy, Alessio, i. 224–5; Fournier de Flaix, Traité, 498. According to the former, land was taxed in Lombardy, at 25 per cent., in Liguria at 7 per cent.; the latter gives 79 per cent. for Modena and 17 per cent. for Sicily. A new cadastre for Italy is proposed.

Bk. ii. ch. 4, § 5.

Schedule A—

Local Rates for 1898–99—

In the last country the returns from gas and waterworks are included in the rates, but are unimportant.

Local Taxation Report (No. 168, 1893) xxxvii-xl. Cp. Blunden, Local Taxation and Finance, 62.

Owing to the great fall in the value of land the assessments are now probably up to, or in some cases beyond, the true amount.

Local Taxation, 17, 50. Cp. Mr. Fowler's Local Taxation Report, xxxv.

More precise figures are—

For the French land tax, Stourm, i. 124–220: Vignes, i. 25–39. Dict des Finances, s. v. ‘Foncière.’

En 1876, 6,614 propriétés étaient expropriées par le Fisc pour le recouvrement de 936,774 francs d'impôt, et en 1877, 6,644 propriétés pour 662,722 francs. Le Fisc dévore la petite propriété trop obérée. De 1873 à 1878, 35,074 petits propriétaires ont perdu leur avoir par l'expropriation forcée. Laveleye, Lettres d Italie (1880), 161–2. For the Italian land tax, De Parieu, i. 205–218; Alessio, Sistema Tributario, i. 88–232.

More accurate figures for 1900 are—

For the German land taxes, Cohn, §§ 303–6; Wagner, vol. iv.; Fournier de Flaix, 393 sq.

Bk. iv. ch. 4, § 3.

Probably lowest in Saxony.

It does not follow, as has been asserted, that Ireland suffers from this system. It would on the whole tell in her favour.

Professor Seligman—Political Science Quarterly, vii. 719—seems to question this proposition, which nevertheless is a necessary deduction from the nature of the land tax.

Bk. iii. ch. 6, § 4. The recent Prussian legislation noticed in § 7 is in accordance with the doctrine here laid down.

The proposal was made by Léon Say in the debates on the Impôt foncier in 1890 (Finances de la France, iii. 437), and by Professor Ely, Taxation, 251–3, who would exempt land from even ‘State’ taxation.

See Ricardo, Principles, ch. 9. McCulloch, Senior, and J. S. Mill all desert him in this case. See Bk. iii. ch. 5, § 6; also J. S. Mill, Principles, Bk. v. ch. 4, § 4.

‘As a matter of fact it appears that a great portion of the farms in England are not rack-rented. If so, it is clear that any increase in local burdens must fall on the margin between the actual rent and the rack-rent, and so far diminish the advantage derived by the farmer from his actual rent being below a rack-rent, and till that margin were exhausted it would naturally be useless for him to apply to his landlord to readjust his rent.’ Goschen, Local Taxation, 165. But as Mr. Blunden (Local Taxation and Finance, 42) points out, in times of depression this may tell in a different way. Rents continue above the economic level, and the rates paid by the occupier are an aggravation of his position.

See Leslie, Essays, 395–7, for an illustration.

See Bk. iii. ch. 5, § 6.

Bk. ii. ch. 4, § 5.

On the English house and window taxes, Wealth of Nations, 355–357; Dowell, iii. 165–192.

Bk. iv. ch. 1, § 4. Sir H. Fowler's estimate for England and Wales in 1891 was £23,560,000, but it should be remembered that other property is included under this heading. Local Taxation Report, xl.

The yield of the Personnelle mobilière has been as follows—

Some of which, however, are reserved for the central government. In 1890 the centimes additionnels raised for state purposes came to 18,262,000 francs.

The figures for the ‘door and window’ tax are—

The Impôt foncier on propriétés bâties, now separated from the land tax proper, gives the following results—

Taking this with the preceding notes we reach the result in the text. Mr. Egerton in the year 1890, estimated that ‘the total tax on land and houses in France will be found to amount this year to about £15,000,000 independently of the personal and ‘mobilière’ tax of £5,500,000 and of the door and window tax of over £3,000,000.’ Reports as to the Taxation of Land and Buildings, (C. 6209), 16.

For the Italian house tax, Alessio, i. 233–266.

Cohn, § 306; Reports on Taxation (C. 6209), 31.

I.e. taking the florin at 2s. The figures are—Austria, 30,713,000 florins; Hungary, 10,000,000 florins.

The plan adopted in the recent valuation of buildings in France, Finanz Archiv, viii. 193–4.

Cp. with the discussion in the text the fuller treatment by Professor Seligman, Incidence, Part ii. ch. 3. His careful discrimination of the different effects of the tax according to its point of first imposition—on the landowner, builder, or occupier—is most valuable as a lesson in the effect of economic friction, but he seems to give too little weight to the forces that shift taxation on the ground owner. In his second edition, Professor Seligman remarks that this criticism ‘seems to overlook’ the statement in his text that ‘as between the landowner and the tenant, the tenant is the weaker party’ (Incidence, 241). The assertion so broadly made is a disputable one. It does not follow that because rent rises with increasing demand, it will rise still further in consequence of a tax. The difference of view as to the elasticity of demand for houses accounts for the difference on this point. Moreover, in the theory of incidence it happens that the holder of a differential gain is the weaker party (infra, Bk. vi. ch. 5, § 6). To avoid misapprehension, it must be added that it is not ‘the tax’ but a portion of it (as suggested by the word ‘taxation’) that has a tendency to pass on to the ground owner. Professor Edgeworth's complete agreement powerfully supports the position here taken (Economic Journal, vii. 66). See for further reference to the latest discussions Bk. iii. ch. 6, § 5.

If the house tax were levied directly from the building owner, the influence of economic friction would keep part of the burden on him.

Professor Seligman (Incidence, 242 n.) asks, ‘But why should the landowner take less? The building owner is in the weaker position, for his building is on the land and under the law goes with the land.’ This implies a misconception of the supposed case. It is the intending builder who is considered, and therefore, the question may be answered thus—because, otherwise, his site will remain vacant. The building owner is not in the weaker position, for his building is not yet on the land. In respect to existing leases there is no room for shifting between the building owner and ground owner, and when a lease has expired, the ground owner absorbs the building owner's interest, or, as Professor Seligman puts it, ‘the building under the law goes with the land.’ Cp. the statement ‘this freeholder is generally spoken of as the “ground landlord,” but ... is in no sense more the owner of the ground than of the house ... At the expiration of the lease both land and house revert to him together.’ Report of Town Holdings Committee, vi. vii. This position is fully accepted by Lord Balfour and his co-signatories in the separate Report on urban rating and site values. Commission on Local Taxation, Final Report, 154. A slight alteration in the text meets Professor Seligman's other objection, viz. ‘that there is no such thing as a strict monopoly value of a lot.

Fawcett, Political Economy (5th ed.), 626. His argument as to the incidence of rates on the consumer is based on too rigid an interpretation of the doctrine of equality of profits.

The latest scheme in this direction is that of a section of the Local Taxation Commission for a special charge on site values. This charge is to be divided between owner and occupier, the latter deducting one-half the tax from his payment. See Final Report, 153–176. More extreme plans are vigorously criticised in this Report.

Some small licenses on manufactures have been retained by the central government, viz. brewers, distillers, tobacco manufacturers, and medicines.

One-third of the rent is now taken as the profit of the farmer, who, however, if he prefers, may be assessed under Schedule D. Previous to 1894 one-half the rent was the standard in England and Wales.

Under the Ancien Régime industry was taxed through the personal Taille and the Vingtièmes.

Most important is the law of 1844, amended in 1853, 1872, 1880, and 1893.

For the Patente see Vignes, i. 52–53, ii. 333–380; Leroy-Beaulieu, i. 393–414; Wagner, iii. 468–489.

More accurate figures are—

The additional centimes include those for State purposes, which amounted to 20,200,000 francs in 1885 and to 39,000,000 francs in 1900.

For the Prussian Gewerbesteuer, Cohn, § 307; Wagner in Schönberg, 273; also Finanzwissenschaft, iv. 18, 20, 31, 32, 41; Taxation of Personal Property (Misc. No. 2, 1886, C. 4909), 8–10. For the recent changes see Wagner's article in Finanz Archiv, xi. 1–76, and J. A. Hill, ‘The Prussian Business Tax,’ Quarterly Journal of Economics, viii. 77–92.

See on these Stts Wagner, iv. 830–46, where the latest changes are noticed. For Bavaria see Schanz, ‘Das Bayrische Ertragssteuersystem,’ FInanz Archiv, xvii. 551–772.

See Seligman, Essays, 136–264 (chs. 6, 7, 8), for a history and discussion of this tax

For a full enumeration of the bases of the corporation tax see Seligman, Essays, 176–9. The most important are those given in the text; see also Adams, Finance, 449–466.

Cohn, §§ 461–3; Reitzenstein in Schönberg, 623; Fournier de Flaix, 401 seq. For the future in Prussia the industry tax will be altogether local.

It is significant that Adam Smith discusses the income tax under the title ‘capitation taxes,’ Wealth of Nations, 367.

Dowell, iii. 3–7.

Vignes, i. 40–1.

De Parieu, i. 139–151.

Seligman, Finance Statistics of American Commonwealths, 53; cp. Ely, Taxation, 209 11. This was the case in Massachusetts until the amendment of the Constitution in 1891, Massachusetts Tax Commission Report (1897), 5.

Lord Avebury (Statistical Journal, lxiv. 567) regards this passage as ‘an admission which amounts almost to a surrender’ of the position taken with respect to the theory of equal diffusion in an earlier part of this work (see Book iii. ch. 5, § 4). It is, however, merely a criticism of the exaggerated form of the doctrine held by the Physiocrats and Ricardo. To hold that labourers do not always, or even generally, shift capitation taxes is quite consistent with believing that taxes are not equally diffused.

In Mr. Dowell's words ‘personal property slipped out of assessment,’ iii. 85; see also Cannan, History of Local Rates, for the limitation of rates to immovable property.

Bk. iii. ch. 3, § 13.

But see § 4, infra, for the partial revival of this tax; also cp. Bk. iv. ch. 9, for inheritance taxes, which are closely akin to sudden charges imposed on property.

The total mass of legislation and legislative proposals is quite overwhelming. It has been collected with characteristic thoroughness in the elaborate work of Schanz, Die Steuern der Schweiz (over 2,000 pages in 5 volumes).

The following table will show the rates of charge—

The following are the areas and populations of the cantons referred to—

The above account of the Ohio property tax is condensed from Ely, Taxation, Pt. ii. ch. 4, which gives full details.

Essays, 61. The recent Ohio Tax Commission is equally emphatic. ‘The system as it is actually administered results in debauching the moral sense. It is a school of perjury. It sends large amounts of property into hiding. It drives capital in large quantities from the State,’ Report, 24.

Report on Local Taxation, 17–18.

Quite as striking is the case of Cincinnati. The following figures give the amounts assessed to realty and personalty respectively at three different periods—

We thus see that while real property has more than doubled in value, the personal property returned is roughly about two-thirds of what it was twenty-five years previously. For further details as to evasion see the excellent Report of the Tax Commission of Ohio (1893), especially 24–31.

The Massachusetts Tax Commission, while recognising certain of the advantages of an income tax, declines to recommend its adoption. See Report, 85–7.

Bk. iii. ch. 6, § 3.

The best American authorities approve of the corporation tax as a peculiarly suitable form of revenue for the States. Thus Prof. Adams concludes that ‘in view of the peculiar duties imposed upon a State, and because of the nature of corporation and natural monopolies, that all special and corporation taxes should be assigned to the State as an exclusive source of revenue.’ Finance, 502.

On the whole subject of the property tax see the Local Taxation Report of Mr. Wells and his colleagues, made in 1871; Professor Seligman's chapter, ‘The General Property Tax,’ Essays, 23–61; his Finance Statistics of the American Commonwealths, 53–66; and Professor Ely's Taxation, 146–201, in which a mass of evidence is collected showing the grievances that arise from the property tax. Professor Ely, however, fails to notice that the same arguments may be urged against the state income taxes advocated by him in a later part of his valuable work (287–311).

See § 8, infra.

See Finanz Archiv, x. 370, where the reasons for the measure are given at length.

The precise rates are:—Property under 6,000 marks is free; between 6,000 and 24,000 marks the tax rises from 3 marks to 12 marks, at the rate of 1 mark for each complete increment of 2,000 marks. Between 24,000 and 60,000 marks the increments are 4,000 marks and the increased duty 2 marks. Between 60,000 and 200,000 marks the increments and increased duty are 10,000 marks and 5 marks respectively. From that point up to 2,000,000 marks increments and extra tax are doubled. A property of 2,000,000 marks (£100,000) therefore pays 1,000 marks (£50). Every further addition of 100,000 marks involves an increased charge of 50 marks.

For the new Dutch system see Boissevain's elaborate study, Finanz Archiv, xi. 419–682 (reprinted separately); also Seligman, Essays, 322–30. The measures are due to the eminent economist Pierson, and were defended by him on financial, not on social grounds.

‘It was in this crisis of the revolutionary war that, when Mr. Pitt found the resources of taxation were failing under him, his mind fell back upon the conception of the income tax.’ Gladstone, Financial Statements, 14.

It has twice within this period acted as a war tax, viz. in 1854–56, during the Crimean War, and in 1900–1903 for the South African war.

They are—

See B. Sayer, On the Income Tax, 1833; Parnell, Financial Reform, 1830.

The last time that its existence was endangered was by Mr. Gladstone's proposal of abolition in 1874.

Financial Statements, 20.

This method of stoppage at the source has been generally recognised as a characteristic and valuable feature of the English income tax. This is the judgment of Prof. Dunbar (Quarterly Journal of Economics, ix. 38–40), Prof. Seligman (Pol. Science Quarterly, ix. 644–5) and quite recently of Mr. Hill. The same view is forcibly supported by Mr. Blunden. The only dissentient of note is Prof. Adams, who objects that the principle is carried too far. ‘It [the government] taxes the salaries of public officials by not paying them as much as it promised.... The result is the citizen is never sure of getting into his pocket all that he or his property earns’ (Finance, 479). Further ‘it may be questioned if the use made of it by the English income tax is quite honest in its purpose or fair in its results’ (ib. 484). Two points are raised by this criticism, viz., (1) the honesty of the system, (2) its fairness as between different sections. The former seems to anyone actually conversant with the English system almost ludicrous. What is the advantage to the citizen of getting into his pocket what he must immediately pay out again? There would be the necessity for a double transfer of the amount of the tax. So far as public officials are concerned the contention, to give it any substance, should be for exemption from taxation of their salaries. The second point really attacks, not the method of ‘stoppage at the source,’ but the income tax itself, on the ground that all incomes are not equally discoverable. This is the great difficulty that any income tax must encounter; but it can hardly be held that a contrivance which makes some parts of income more easily ascertainable adds to this weakness. Were all income capable of being taken at the source the income tax would be perfect. An abandonment of the method would increase, not diminish, the inequality inherent in this as in all taxes.

The following figures of income assessed are instructive—

On the Income Tax see Dowell, iii. 90–120; Hill, The English Income Tax. Chailley, Impôt sur le Revenu, 89–218, gives a full and lucid account of the English system. The series of studies in the Economic Journal by the late G. H. Blunden (whose loss Englsh students of finance must deplore) are most instructive: see vol. ii. 637–52; v. 527–31; vii. 607–18; xi. 156–68.

I.e. on a small part of permanent income; the other groups pay at the lower figures mentioned in the text.

This view has received the support of Newmarch and J. S. Mill, as, too, of Leroy-Beaulieu and Chailley.

For the Italian income tax see Chailley, 220–344; Alessio, i. 318–370.

See the careful discussion by Piernas Hurtado, Hacienaa Publica, ii. 457–68.

See Bk. iv. ch. 3, § 2.

For the Prussian income tax see Cohn, §§ 315–20, and for the recent reform, Wagner, Finanz Archiv. 551 sq.; also J. A. Hill, ‘The Prussian Income Tax’ in Quarterly Journal of Economics, vi. 207–26.

More exact figures are—

Supra, Bk. v. Ch. 2, § 10.

See Sieghart, ‘The Reform of Direct Taxation in Austria,’ Economic Journal, viii, 173–82, and the same writer's fuller account, Finanz Archiv. xiv. 1–110

The following are the precise grades—

The amount was $69,800,000 (£14,000,000). See infra, Bk. v. ch. 4 § 6.

See for this abortive income tax the admirable articles of Profs. Dunbar (Quarterly Journal of Economics, ix. 26–46) and Seligman, Economic Journal, iv. 639–67.

Among opponents of the income tax are M. Guyot and Léon Say, chiefly on the ground of its progressive and ‘personal’ character. Guyot, Impôt sur le Revenu; L. Say, Les Finances de la France, ii. 163–78; iii. 255–87; iv. 576–99, 645–67. M. Chailley, in his elaborate Impôt sur le Revenu, is a strong supporter. Leroy-Beaulieu (i. 491) is neutral. Mr. Bodley explains that the income tax is always regarded as a device of radical politicians, and adds, ‘My own observation’ leads me to believe that an income tax is unsuited to the French temperament, and that its imposition would be a mischievous error. France, 622.

Bk. iii. ch. 3, § 9.

This is the really decisive argument against direct progression, as contrasted with the English method, which is ‘degressive,’ and which throws the task of claiming exemption or abatement on the person interested.

‘The real tendency of all these exemptions,’ said Mr. Gladstone, ‘is the breaking up and destruction of the tax.’ Financial Statements, 45.

A new period of assault on the alleged inequalities of the income tax seems to be approaching. Mr. Blunden's proposal of a property tax (really a higher charge on permanent incomes) has much to commend it in the case of a high rate to meet exceptional outlay.

Limited to one-sixth for land and one-eighth for houses.

Bk. v. ch 2, § 4.

Fawcett, Political Economy, 538 sq.

Bk. iii. ch. 1, § 12.

Wagner, ii. 233, 515; Cohn, § 332.

This is probably the best plan in a purely descriptive or historical treatment. It has been adopted by Mr. Dowell (who gives tobacco a class to itself), and in great measure by De Parieu.

Tobacco, e.g., is free in India, subject to excise in the United States and Germany, monopolised in France and Italy, and taxed by the customs in England.

Cp. Cato's over-valuation of articles of luxury after the repeal of the Les Oppia, and his taxation of them.

Bk. iii. ch. 4, §§ 8, 9.

Leslie, Financial Reform, 241–2. This is one of the many instances in which economic forces act and react on each other.

See Bk. iv. ch. 2, §§ 1–5 inclusive.

To be distinguished from the trade licenses noticed in Bk. iv. ch. 2, § 8.

The Irish rate of 2s. (with 6d. additional for stamp) is for this reason better than the English one of 7s. 6d.

The respective contributions are—

The licenses on carriages should be added; they are placed with the ‘drink’ licenses in the financial returns.

Thus in England the receipt from the Excise on commodities has been for many years, speaking broadly, 30 per cent. of the total tax receipts—£26,050,000 out of £78,665,000 in the year 1894–5—but now hardly exceeds 25 per cent.—£31,600,000 out of £121,893,000 in 1901–2. The contributions indirectes and the fiscal monopolies in France show for 1901 a gross yield of £41,800,000. Allowing for the expenses of working the tobacco monopoly, the balance remaining is over 25 per cent. of the total tax revenue. The German Imperial excise is of less importance, but still gives a substantial contribution, estimated at £15,800,000 for 1900–1. In the United States the internal revenue for 1899–1900 was $233,000,000, that for 1900–1 $238,000,000 or over 40 per cent. of the receipts from every source.

Bolles, Financial History (1861–1885), Bk. i. chs. 9. 10; Wells in Cobden Club Essays (2nd series), 479.

The first excise was created by the Long Parliament in 1643, Dowell, ii. 8 sq.; Sinclair, History of the Revenue, i. 46, 278.

Subject of course to the complicated reactions discussed in Bk. iii. ch. 5, § 5.

Bk. ii. ch. 3, §§ 6, 9.

Bk. iii. ch. 4, § 5.

The hostility of the Physiocrats to indirect taxation was shared, so far as internal taxation went, by the other sections of the liberal party. It is note-worthy that this disposition is also found in the labour parties of the present day, who resent taxation on commodities consumed by the working classes as taxation of labour. Cp. Lassalle, Die indirecte Steuer und die Lage der Arbeitenden Classen.

Bk. iii. ch. 4, § 6.

In preceding editions it was stated as an illustration that, ‘With an increased expenditure of £20,000,000 per annum in Great Britain, the exemption of sugar from taxation could hardly be continued.’ This has been confirmed by fact.

Cp. Bk. i. ch. 6, § 3; and for a notice of the fiscal aspect of protection, ch. 7, § 2 of the present book.

The principle stated in the text is important, but is often overlooked. Thus in the controversy on the financial relations of Ireland to Great Britain it has been argued that the imposition of the same taxes must produce equality, the different character of consumption in the two countries being neglected. On the other hand, Sir R. Giffen (Financial Relations Report, ii. 161) has suggested that the possible existence of inequality is a ground for separate financial treatment, overlooking the fact that a system of taxation may be unequal as between individuals and classes within a single country in exactly the same way. From which it follows that the true remedy for injustice in either case is reform of taxation. Provided the tax objects are properly selected there is no injustice in placing two countries under a common system.

Bk. iii. ch. 3, §7.

Wealth of Nations, 375.

For Economics this distinction has been worked out by Menger, who grades commodities in ‘orders’ according to their nearness to the consumer. Cp. Marshall, Principles (3rd ed.), 133–4.

Some license duties and that on the railways’ receipts from passengers are placed under the excise, but they really belong to another category of taxes (see ch. 8 of the present Book).

See for the customs infra, Book iv. ch. 7, § 3.

The case of the sugar duty illustrates admirably the principle of relativity in taxation. Recognition of the fact that sugar is relatively a good object for taxation is quite consistent with the belief that the removal of the sugar duty in 1874 was highly beneficial.

The hereditary excise had the former, the temporary excise granted for the life of the King the latter object, but the distinction was purely formal.

The severity of the revenue laws was greatly increased. Hallam declared that ‘our fiscal code ... is to be counted as a set-off against the advantages of the Revolution.’ Constitutional History, iii. 290.

Wealth of Nations, 369.

‘The revenue from inland duties had varied considerably in different years. In 1700 over a million, it was in 1702 nearly £1,400,000.’ Dowell, ii. 62.

For the details of these taxes, Dowell, ii. 208–245, and vol. iv. under the several heads.

The following were the amounts yielded by the excise taxes on the above-mentioned articles at the dates of abolition—

An increase of 6d. per gallon imposed in 1894 was removed in 1895, but re-imposed in 1900.

Bk. iv. ch. 2, § 8.

The prohibition at first applied to Ireland, but was removed in 1779 in consequence of the American war. It was re-imposed in 1832.

Lavoisier, the eminent chemist, was one of the sufferers. For the system of the Ancien Régime, see Stourm, chs. 11–14. For the mechanism of the Finances, cp. Bk. vi. ch. 2, also Bouchard, Système Financier de l'Ancienne Monarchie and the Dictionnaire de l'Economie Politique, s. v. ‘Finances de l'Ancien Régime.’ For the earlier history, Clamageran, Histoire de l'Impôt, and for the latter part of the 18th century the elaborate works of Gomel, Les Causes financières de la Révolution Française (2 vols.); Histoire Financière de l'Assemblée Constituante (2 vols.), and Histoire Financière de la Législative et de la Convention, as yet only vol. i.

Stourm, i. 295.

Introd. ch. 2, § 4.

For the re-establishment of the French finances see Stourm, Les Finances de l'Ancien Régime. For Bonaparte's place see the same writer's lately issued Les Finances du Consulat. Mollien, Mémoires d'un Ministre, 1780–1815, is full of instructive details.

Taxation and Funding, 231.

By the Law of December 1900 the duty on circulation is the only one retained for wine and cider.

See Economic Journal, i. 307–24, for a fuller account of monopoly for taxation.

That is, including the customs duty on imported salt, the excise proper yielded £385,000.

In the case of sugar also the customs and excise returns are combined, but the customs only brought in £820,000.

More accurate figures are—

See § 14, infra.

In 1897–8 the following were the receipts and expenses of the salt and tobacco monopolies—

The wealth of Italy has been estimated at £2,120,000,000, or one-fifth that of England. Pantaleoni, Giornale degli Economisti, Aug. 1890, 139 sq. Cp. Giffen, Growth of Capital, 153.

Cp. Bk. iv. ch. 3, § 2, for the ‘class tax.'

114,000,000 marks out of 141,000,000 marks in 1886–7. Cohn, § 413.

The following figures illustrate the relation of the sugar duty and bounties—

This table shows the effect of changes in the laws regulating the bounties, and the growth in recent years of the net receipts. The customs duty is so small that it may be neglected.

Bk. iv. ch. 2 § 7.

For the German taxation of commodities up to 1888, see Cohn, §§ 411–23; for the later, and indeed the complete, history, Wagner, iv. 666–724.

See Wickett, ‘Studien über das Österreichische Fabrikmonopol,’ Finanz Archiv, xiv. 198–284.

Wells in Cobden Club Essays (2nd Series), 479.

For the tobacco tax, Olmsted in Quarterly Journal of Economics, v. 193 sq.

The Swiss alcohol monopoly has given a small profit. The receipts from September 1887 to the end of 1900 amounted to £5,836,000, the expenses to £3,604,000, showing a surplus of £3,232,000 or about £244,000 per annum. The Russian experience since 1895 is also in favour of a monopoly.

See § 4, supra.

The recent sugar convention is an indication pointing in this direction.

Constitution of the United States, Art. i, § 10.

Supra, § 9

Supra, § 6.

Vignes, i, 205–16. A law of December 1887 allows the communes to remove, and compels them to lower their octrois on the boissons hygiéniques (wine, cider, beer, and mineral waters).

The distribution of the duties among the different articles is shown by the following figures for the year 1900:—

Of the total on drinks 67,000,000 francs were levied on wine, 57,500,000 francs on spirits, and 16,500,000 francs on beer. The cost of collection in 1900 came to about £1,250,000, which should be deducted from the gross receipts of £14,200,000.

Only six Tuscan communes had octrois out of 246, and only one in every ten of those in the kingdom of Sardinia. ‘Report on the Octroi Duties in Italy,’ Parliamentary Papers (C 6206), 1891.

Supra, § 8.

See, however, for a discussion of the modifications required, Conigliani, Tributi Locali, 232–62.

For the German octrois, see Cohn, §§ 457 sq. Cp. ‘In Deutschland sind die Octrois von geringer Bedeutung, der Bieraufschlag in Bayern und einige neuere Verbrauchsabgaben Württembergs ausgenommen; Belangreicher sind sie schon in Oesterreich; Wien zieht aus den städtischen Verzerungssteuern eine ansehnliche Summe.’ Schäffle, Steuerpolitik, 452.

Bk. iii. ch. 6, § 7.

Isolated octrois may be found in all these countries, e.g. that at Copenhagen.

Journal des Économistes, December 1891, 449–461.

Bk. iii. ch. 5, § 5.

This argument will reappear in connexion with the incidence of import duties.

This has been alleged of the Belgian reform and also of the partial remission of the Parisian octrois in 1848. The absence of any traceable effect on price by the abolition of the London coal dues is another instance.

Report on Octroi Duties (C. 6206), 14, 15.

The following table shows the position of the Customs revenue in the leading European States—

A large part of the United States’ revenue has generally been obtained from this source, often exceeding one-half of the total receipts. The lowest yield since 1884 was in 1893–4, when the Customs were only $131,818,000. The highest absolute amount was in 1900–1, when $238,585,000 were received, or 40 per cent. of the revenue from all sources.

For the great number of tolls and passage duties in mediæval times see Clamageran, i. 160–1; Pigeonneau, Histoire du Commerce de la France, i. 96–99, 182–3. The tolls on the Seine in 1315 are set forth in a document given in Fagniez, Documents de l'Industrie et du Commerce en France, ii. 30–37 for Germany, Zimmern, Hansa Towns, 102.

See Introd. ch. ii. § 5.

For this side of Mercantilism, see Wealth of Nations, Bk. iv. ch. 8.

India is, perhaps, the only country in which the revenue from exports exceeds that from imports.

Mommsen, Hist. of Rome, iii. 397–8; Merivale, Romans under the Empire, v. 45; Clamageran, i. 73.

Dowell, i, 75 sq.

For England, see Schanz, Englische Handelspolitik, and Cunningham, Growth of English Industry and Commerce, Bks. vi., vii; for France, Pigeonneau, ut supra.

‘Taxes proposed with a view to prevent, or even to diminish, importation are evidently as destructive of the revenue of the customs as of the freedom of trade.’ Wealth of Nations, 191.

Bk. iv. ch. 5, § 2.

Report of Import Committee (1840); Leroy-Beaulieu, i. 615; Cohn, § 407; Wagner, iv. 769.

The English revenue from this source kept very near £20,000,000 per annum for forty years. In the period 1815–1900 it has only varied between £24,000,000 and £19,000,000, notwithstanding the extensive remission of taxation. The export duty on coal and the import one on sugar account for the great rise in 1901–2. The estimate for 1902–3 exceeds £35,000.000.

J. S. Mill, Principles, Bk. v. ch. 6, § 2.

Bk. iv. ch. 6, § 2.

Cp. Mill's advocacy of a tax on raw silk. Principles, Bk. v. ch. 6, § 2.

Cp. Bk. iii. ch. 3, § 10, for this use of a progressive tax on income.

The treatment of the wine duties and the export duty on coal indicate a retrograde tendency in this respect, still further shown in the re-imposition of a duty on imported corn.

Dowell, i. 195; ii. 34. Some of the hottest contests between the king and the people turned on questions of taxation, e.g. the currant duty (Bates’ case). For the earlier history, see Hall, History of the Customs Revenue.

For Walpole's fiscal policy see Morley, Walpole, 166–82; for his ‘excise’ scheme, Leser, Ein Accise-Streit.

The following figures give the yield of the customs at selected periods:—

Sinclair, History of the Revenue, ii. Appendix No i. ; Dowell, ii. 62, 109; Wilson, National Budget, 55.

There were three stages in the movement, viz. (1) the reforms of Huskisson 1823–7, which opened the way; (2) Peel's tariffs of 1842 and 1845, by which a substantial instalment of free trade was given; and (3) the measures of Mr. Gladstone in 1853 and 1860, which completed the work. For the fiscal history of this period, see Dowell, ii. 249–361; Buxton, Finance and Politics, i. 1–217; Bastable, Commerce of Nations, ch. 6; also Northcote, Twenty Years of Financial Policy. For the general character of the legislation, Wagner, iii. 300–1.

It is important to maintain the distinction between ‘finance’ (Finanzwissenschaft) and ‘economic policy’ (Wirthschaftpolitik). To introduce a discussion of the merits of free trade or protection into a financial treatise would tend to confuse these separate subjects, and would thus be detrimental to both. Prof. Plehn's statement (Finance, 185 n) that in this work we ‘refuse to discuss protective duties because we believe them [sic] “vicious” and “uneconomic,”’ is, it need hardly be said, entirely destitute of foundation. Such a reason, as he rightly says, ‘is not scientific.’ Therefore to ascribe it without a shadow of evidence—the quotation marks inserted in his note are spurious—is a proceeding which may be left to the reader to characterise.

Thus in 1839 crystal beads yielded 1s. 7d., starch 1s. 9d., Bruges thread 1s. 3d., extract of vitriol 12s. 3d.!

Between 1815 and 1885 the amount of duties remitted was £35,861,000 against £8,063,000 imposed, or a balance of £27,800,000 remitted. Wagner, iii. 299. But there were no remissions in the last ten years of the period, and those in the preceding fifteen years (1861–75) amounting to £14,500,000, were on purely revenue duties—tea, sugar, &c. In the period 1885–1900 the tea, tobacco, and currant duties were reduced.

As predicted in the 1st edition of this work, pp. 488–9.

Import duties on timber and petroleum have been suggested by Sir R. Giffen as a substitute for part of the income tax (Times, January 10, 1902).

On the bonding system, cp. Cliffe Leslie, Financial Reform, 199, 214–6.

For Colbert, see Clamageran, ii. 599–697; also Sargent, Economic Policy of Colbert. For the internal customs, Stourm, i. 470 sq., and for the tariff of 1791, ib. ii. 61–75.

Leroy-Beaulieu, i. 614.

I.e. including the salt duty.

The following figures are more precise:—

On the French customs, see Leroy-Beaulieu, i. 612–31; Wagner, iii. 784–834, and Erganzungsheft, 124–34.

On the history of the Italian customs, see the elaborate study by Alessio, ii. 346–452.

For the founding of the Zollverein, see Roscher, § 102; also his Geschichte, ch. 34, and for the present German customs, Cohn, §§ 404–10; Wagner, iv. 655–66, 767–70.

For the American tariffs see Taussig, Tariff History of the United States, where, however, financial considerations are not made prominent.

The Indian transit duties—the most important of which was that on Cashmere wool (10 per cent.)—were abolished by Mr. James Wilson; see his Financial Statement (1860), 22. But part of the opium revenue is really a transit charge on the drug from the native States.

The Indian opium duty—partly monopoly, partly transit—yielded 84,500,000 rupees in 1880–1, but the estimate for 1899–1900 was only 66,000,000 rupees, the Brazilian coffee duty gave £1,800,000 in 1889.

The English customs system was extended to Scotland in 1707, but not to Ireland till 1825, when the Union duties were repealed. At present the Channel Islands are outside it, and the Isle of Man is under special regulations.

Wealth of Nations, 379.

The abolition of the Indian transit dues was for the object of stimulating through trade. Wilson, ut sup. 22.

Wool in mediæval England and opium in India at present have been suggested as examples, but the latter is undoubtedly open to some competition. The newly imposed coal duty has given rise to much discussion on this point. Mine owners, lessees, colliers, shippers, foreign consumers, and the home consumers of imported commodities have each and all been put forward as the real bearers of the tax. Cp. Jevons, Coal Question, 337.

For further discussion of this complicated question, see Nicholson. Principles, iii. 342–9; Seligman, Incidence, 300–304; Edgeworth, Economic Journal, iv. 39–48; Bastable, International Trade, 110–24, and Britt. Assoc. Report, 1889, 440–48, also cp. Bk. iii. ch. 5.

For the corn duties, Wagner, ii. 359, 367; Conrad, art. ‘Landwirthschaft’ in Schönberg, ii. 247–260; for tea, Senior, Pol. Ec. 184.

See Bk. iii. ch. 1, §§ 11, 12; ch. 4, § 10.

See the discussion in Memoranda on Incidence [C. 9528] as to the nature of the postal revenue, and cp. supra, Book ii. ch. 3, § 9.

See Foxwell and Farrer, Express Trains, 118 sq.

Bk. ii. ch. 3, §§ 14, 19.

The tax on bicycles recently imposed in France may be regarded as a tax on transport, but it is perhaps more correct to place it under the head of licences.

Sidgwick, Pol. Ec. 574; Fawcett, Pol. Ec. 628–9. See for discussion of some theoretical varieties Edgeworth, Economic Journal, vii. 230–2.

Professor Ely advocates taxation of gross receipts in order to escape evasion. Taxation, 324. But where this danger exists a more thorough reform is wanted. Taxation of railways by American States on this basis is particularly unsuitable owing to inter-state competition. See Adams, Finance, 458–62.

Dowell, iv. 338–47.

Cp. Mill's judgment, ‘A tax on newspapers is objectionable, not so much where it does fall as where it does not,’ Principles, Bk. v. ch. 5, § 2. But does not a tax ‘fall’ where it is privative?

See the heads of revenue in the annual Statistical Abstracts, where ‘stamps’ take a place beside ‘customs’ and ‘excise.’

Theory of Legislation, 140; cp. Bk. i. ch. 3, § 2.

Cp. Bk. ii. ch. 4, § 8.

Both in France and Germany popular feeling is strongly in favour of an extension of ‘Bourse taxation,’ as shown by the French law of 1892 and the German legislation of 1894 and 1900.

Some of the ‘penny’ duties devised by Mr. Gladstone erred in this respect; e.g. that on packages, justified by its author for statistical reasons. Financial Statements. 161, 295. The French statistical duties have the same defect. Leroy-Beaulieu, i. 617.

The following are the figures for selected years:—

Dowell, iii. 290–1.

In 1881 the postage and revenue penny stamps were combined, so that the exact receipt of the latter is now a matter of calculation.

These charges were known as contrôle, insinuation, and centième denier. The stamp duty was known as the formule.

Stourm, i. 442–3, 468–9; Leroy-Beaulieu, i. 528, 533.

The following figures give the result of the enregistrement and timbre for 1901.

From this total the succession duties have to he deducted, and allowance has to be made for the element of fees under the ‘other duties.’ Actes civils et administratifs amount to £3,000,000, Actes judiciaires to £960,000. Probably one-half of these sums should be regarded as ‘fees,’ the other half as taxation.

‘Taxes upon the sales of land fall altogether upon the seller.’ Wealth of Nations, 364; cp. Mill, Principles, Bk. v. ch. § 1.

Suppose, for example, that a property, which free of duty would sell for £10,000, is subject to 10 per cent. on transfer. If the whole tax fell on the seller he would only get £9,000, if it all fell on the buyer he would pay £11,000. Is it not plain that if an exchange is to take place the probability is that there will be a division of the tax? When there are many transactions the less eager buyers and sellers will withdraw, and there will be fewer dealings at a higher price, the tax included. See Böhm-Bawerk, Positive Theory of Capital (Eng. trans.), 203–13, for the theoretical basis of this position.

See on the whole question of succession duties the careful monograph by Dr. Max West entitled The Inheritance Tax; A. Garelli, L'Imposta Successoria; and Schanz, ‘Studien zur Geschichte und Theorie der Erbschaftssteuer,’ Finanz Archiv, xvii. 1–62, xviii. 553–678.

Cp. Bk. ii. ch. 4, § 6. The ‘relief’ or ‘heriot’ was the commonest of the feudal dues.

See the material collected in Wilcken Griechische Ostraka.

This was the vicesima hereditatum, which underwent several changes until it was abolished in the sixth century.

See the long list given by West, 112, n. 2. Some of the names might have been omitted as of little weight, and others, e.g. Leroy-Beaulieu, are those of very lukewarm supporters.

Cp. Bk. iii. ch. 2, § 5, and Bk. v. ch. 5, § 9, for recognition of this fact. Professor Marshall declares that ‘the old objection to taxes on inheritances that they are paid out of capital ... seems to me to have great force still,’ Memoranda, [C. 9528], 123.

It is therefore impossible to accept Dr. West's statement, that ‘Whether a tax is paid out of capital or income depends not on the form of the tax but upon its amount and the time allowed for payment’ (Inheritance Tax, 119), unless we reduce the antithesis between the terms so opposed almost to vanishing point. The mere ‘name’ of a tax has of course no effect.

The strongest body of sentiment in favour of high succession duties is that which regards them as an agency for reducing large fortunes, and thus bringing about a better distribution of wealth. In Bentham's language such persons desire to sacrifice ‘security’ to ‘equality.’

See West, 114–19, for a list of the different theories, also Seligman, Essays, 122–33, who holds that the tax is one on ‘accidental income.’ Schanz (Finanz Archiv, xviii. 172–6), after reviewing the earlier theories, bases this form of taxation on (a) the increase of ability in the payer, (b) the justice of beavier taxation on property, (c) the power of the State to limit inheritance.

It is ingeniously suggested by Sidgwick that inheritance taxes are ‘quite sui generis,’ and therefore outside the rules for distributing general taxation. See his Political Economy, 577–9, and Politics, 176–7. But this view overlooks the close connexion between property and income, and also that between the successors and those from whom they inherit.

Financial Statements, 62.

The system of insurance so extensively advertised by British insurance companies to meet the estate duty of 1894 indicates very plainly that this is the essential character of the tax. This view is adversely criticised by Seligman (Essays, 132), on the grounds that (a) if the existing system (i.e. without the inheritance tax) does reach the living taxpayer, there is the injustice of double taxation; (b) if it does not reach him, there is inequality between persons dying at different ages. To which it may be rejoined that (a) it is because the existing system only partially reaches the taxpayer that the inheritance tax is introduced; and (b) that there is inequality in the case of persons dying at different ages, but this, like other inequalities, is hardly avoidable without incurring greater evils. Westlake recognises ‘the fact that death duties may be regarded as capitalised income tax,’ (Economic Journal, ix. 372), and holds that this view is in accordance with the principle of the British system. Lord Milner also declares, ‘I regard the death duty as equivalent to an extra income tax on property.’ ‘Commission on Agricultural Depression,’ Evidence, iv. 478 a.

Cp. Bk. iii. ch. 3, § 17.

Cp. the Roman rule as to disherison of children, justified by the jurist Paulus on the ground that there was a sort of co-partnership between the father and the children. See Pliny's remarks as to the vicesima hereditatum, which was ‘tributum tolerabile et facile heredibus extraneis, domesticis grave, since it was levied on goods ‘quaeque nunquam ut aliena et speranda, sed ut sua semperque possessa cepissent.’ Paneg. 37.

Bk. iii. ch. 3, §§ 6, 7, 8.

E.g. J. S. Mill, who declares that ‘The principle of graduation ... seems to me both just and expedient as applied to legacy and inheritance duties.’ Principles, Bk. v. ch. 2, § 3.

The only scientific bases for progressive succession duties would be (a) the establishment of the regressiveness of other taxes, so that in this case a duly calculated progression would restore proportionality, and (b) the proof of the justice of progression on an assigned scale over the whole tax system. It was on the former ground that Lord Goschen defended his estate duty of one per cent. on estates over £10,000. He declared that ‘On the whole, I think it will be found that the men whose fortunes are considerable are those who pay the least in proportion to their aggregate income.’ Budget Speech, April 18, 1889.

This limit was raised from £5,000 to £10,000, then to £100,000, next to £500,000, and lastly, in 1815, to £1,000,000. It was abandoned in 1859.

‘We propose to alter the law and ... to extend the legacy duty to all successions whatever.’ Gladstone, Financial Statements, 62.

For the history of the English death duties, see Dowell, iii. 124–140.

See for a lucid but one-sided statement of these anomalies Lord Farrer's Mr. Goschen's Finance, 117 sq.; also A Handbook to the Death Duties, by Messrs. Buxton and Barnes.

Real property paid no probate duty; succession duty on it was not due for a year after death; it could be paid by eight instalments, and it was calculated on the successor's life interest only, not on the full value.

The scale of duties is given in the following table:—

As seems to have been the original design. Cp. the section of the Act, 57–58 Vict. ch. 30, § 14, with clause 12 of the Bill as introduced.

On this point cp. Bk. iii. ch. 3, § 14.

One very difficult question is the relation of the death duties to local finance. Lord Goschen's allocation of half the probate duty has been continued under the present system, with the substitution of 1½ per cent. of the new estate duty. This substitution, however, altered the character of the charge, which ceased to be on personal property (to which the ‘probate’ duty was confined), and instead fell on all the mass of wealth passing by succession. See ‘Local Taxation Commission,’ Final Report, 114.

The growth of the total death duties is best seen by the date at which each additional million was reached—

The following table gives the scale of duties under the laws of 1901 and 1902; the latter introduced the progression on inheritances exceeding £40,000. It is instructive as showing the arbitrary way in which progressive taxation can be applied. Cp. Bk. iv. ch. 3, § 7, for this point.

Hamburg, Lubeck, and Alsace-Lorraine are the only exceptions; the latter possesses a modified form of the French law of 1870.

See the valuable tables in Finanz Archiv, xviii. 679–695.

See Book iv. ch. 4, §§ 2, 8.

Finanz Archiv, xviii. 637. For a fuller account of the facts respecting continental inheritance taxes see, besides the articles of Schanz, West, Inheritance Tax, ch. 1. It is impossible to follow the many small changes in the various States.

The first to draw public attention to these remarkable experiments was Sir C. Dilke. Problems of Greater Britain, 513–4.

The following table gives the proportional contribution of the different heads of revenue in the Australasian colonies for 1890:—

It thus appears that the yield from succession duties, which are only one part of the non-customs taxation, is very small. See The Victorian Year-Book (1892), i. 231.

See Seligman, Essays, 133 n. for a list of States using the inheritance tax in 1895. On American state legislation, see West, ch. 3.

Minnesota amended its constitution to remove this obstruction.

This is the judgment of Professor Adams (Finance, 504, who, however, suggests a claim of the smaller local bodies), Professor Seligman (Political Science Quarterly, xiv. 139), and Professor Taussig (ib. xiv. 123).

Professor Adams, in discussing the allocation of taxation, remarks, ‘The Federal Government would be excluded, because under the rule imposed by the Constitution it cannot justly make use of direct taxation,’ Finance, 504. From the economic point of view this is correct, but it may be questioned whether there is any justice in this interpretation of the constitutional rule. See W. H. Dunbar (Quarterly Journal of Economics, xv. 292–8) on the legal question. It is interesting to notice that under either French or German law a succession duty is certainly ‘indirect.’

See the Massachusetts Tax Commission (1897) Report, in which a uniform inheritance tax is recommended. Report, 93–4.

Wealth of Nations, 364.

See on this question the discussions in Memoranda on Incidence [C. 9528], especially 88 (Courtney), 105 (Sidgwick), 133 (Edgeworth).

Cp. Bk. i. ch. 8, §§ 1 sq.

Thucydides, Bk. i. ch. 13; Grote, Hist. Greece, xi. 498–500; Roscher, § 124, n. 1.

Roscher, op. cit.; Merivale, Romans under the Empire, ii 169.

Sinclair, Hist. of Revenue, i. 76.

Wealth of Nations, 386.

Ibid.

Frederick, i. 290.

Roscher, § 124; Wagner, i. 173–7; Cohn, § 169.

2 Cohn, § 169.

The accumulation of silver by the American Treasury, though primarily a matter of policy rather than one of finance, has in the last few years been a disturbing element, and has affected both the trade and the revenue of the country.

Bk. ii. ch. 4, § 1.

Introduction, ch. 2, § 1.

Roscher, § 130.

Turpe est et multum regali reverentiae derogat a suis subditis mutuare pro sumptibus regis vel regni. Thomas Aquinas (?), De Regimine Principum, ii. 8. The approval of state treasures by so many early writers was intended as a condemnation of the alternative method of borrowing.

‘The king was both in theory and practice the financier of the nation.... if he had to provide security for a loan he did it upon his own personal credit, by pledging his jewels, or the customs, or occasionally the persons of his friends for the payment.’ Stubbs's Constitutional History, ii. 558. See the whole section for borrowing in mediæval England.

Middle Ages, iii. 340. Loans by the French kings can be traced back to 1287. Vührer, Histoire de la Dette Publique, i. 2 sq.

Vührer, i. 16–20.

For a good account of the character and defects of mediæval public credit, see Ehrenberg, Zeitalter der Fugger, i. 18–31, 55–63.

On the loans of the city States, see Ehrenberg, i. 38–41.

‘Einen Bürgerstaate, der Republik der Vereinigten Niederlande, ist es unter allen modernen Staaten zuerst gelungen, sich einen wirklichen Staatscredit, und mit dessen Hülfe die Unabhängigkeit als Vorbedingung glänzenden Gedeihens zu schaffen.’ Ehrenberg, ii. 321.

Macaulay, Hist. of England, i. 141.

Adams, Public Debts, 9. So far as the influence of the wealthier classes is directed to securing public credit it is decidedly beneficial.

The Socialists and some Catholic writers are very vehement in their attacks on La Haute Finance. For more moderate criticism see C. Jannet, Le Capital, La Speculation et La Finance, ch. 12. He, however, shows (ch. 11) that at the commencement of the modern loan system the evils were greater. The student of the history of the money market feels the truth of Emerson's remark, that ‘the first lesson of history is the good of evil.’

Cohn, §§ 535, 536. “At the present time over one hundred States that possess practical sovereignty for debt purposes offer their bonds to the choice of an English investor, and if to this number were added the obligations of quasi-sovereignties, the London Market would show over 150 sorts of public securities. There are here found the bonds of China, Japan, Persia, Siam, Egypt, Liberia, Orange Free State, Zanzibar, besides many other peoples of the Old World. The South American States are nearly all represented.’ Adams, Public Debts, 5.

Neymarck, Les Dettes Publiques, 86.

Dict. of Pol. Econ. art. on ‘Debts, Public,’ i. 509. The estimate given in the United States Census Report for 1890 is somewhat lower.

Macaulay, Hist. of England, ii. 398.

Macaulay, Hist. ii. 479; Rogers, First Nine Years of the Bank of England, xiii. xiv.

One curious item, the oldest of all, and hence sometimes regarded as the origin of the debt, was added in 1706. The Cabal Government of Charles II. bad in 1672 seized on the Goldsmiths’ loans to the Exchequer, a proceeding known as the ‘shutting of the Exchequer,’ and had simply paid interest on the amount of £1,328,000 detained. In 1683 even the interest was stopped. Legal proceedings were taken by the sufferers, and after a series of trials the House of Lords decided in their favour; but by an Act of 1699 it was provided that after December 25th, 1705, one-half the amount (£664,000) should be added to the existing debt, to bear interest at 6 per cent.

Hamilton, 64.

The following was the capital funded for each year between 1793–1802:—

See Hamilton, 256.

Financial Statements, 16.

Hamilton's Inquiry was published in 1813, and Ricardo's Essay on the Funding System in 1820.

By the budget of 1894 an aggregate sum of £2,123,000 was placed on the reduced sinking fund, thus lowering still more the amount devoted in that year to the redemption of debt.

See § 1, and ch. 6, § 2, of present Book.

The total was composed as follows:—

About £58,000,000 was held by government departments, leaving £500,000,000 in the hands of the public.

The amount for which payment was demanded was very small; in the case of the ‘new threes,’ only £761,000, or less than ½ per cent.

The following are the details of the different loans:—

National War Loan £30,000,000, 2 3/4 per cent. interest, redeemable April 5th, 1910, issued at £98 10s. 0d.

Exchequer Bonds, £10,000,000, 3 per cent. interest, redeemable August 7th, 1903, issued at £98.

Exchequer Bonds, £3,000,000, 3 per cent. interest, redeemable December 7th, 1905, issued at £98 2s. 11d.

Exchequer Bonds, £11,000,000, 3 per cent. interest, redeemable December 7th, 1905, issued at £97 5s. 4d.

Consols, £60,000,000, issued at £94 10s.

Consols, £32,000,000, issued at £93 10s.

Treasury Bills in various amounts. Total for War purposes, £13,000,000.

This operation consisted in the cancelling of £28,000,000 of Consols and the substitution of two annuities arranged to expire in 1923.

The figure of £747,876,000, given above as the debt burden in 1902, is slightly higher than that of 1884, which was £746,424,000. The inclusion of the latest loan of £32,000,000 would bring us back to 1873 with its total of £779,222,000.

Vührer, i. 320. Cp. Ehrenberg's account of Spanish finance in the 16th century. ‘Es trieb rettungslos aus einer Krisis in die andere. Staatsbankerott und Zwangsconsolidation wurden gewöhnliche Finanzmittel,’ Zeitalter der Fugger, ii. 259.

Ib. i. 181. The estimates, however, are not in agreement. Ib. 1. 178.

Necker's policy of meeting deficits by borrowing, in opposition to that of Turgot's, is justly condemned by Gomel, Causes Financières de la Révolution Française, i. ch. 8.

Vührer, i, 336. But see for a higher estimate, Gomel, i. 487–9.

On the debt system of the First Empire, see Vührer, ii. 31–58.

Vührer, ii. 160.

In 1845 the highest and lowest prices of the several stocks were:

Leroy-Beaulieu, ii. 498.

Vührer, ii. 238.

For the finance of the Second Empire, see Vührer, ii. 258–369.

The loans contracted were as follows:

Cp. Vührer, ii. 538; Leroy-Beaulieu, ii. 573. For a full treatment of the finance of the early years of the Third Republic, see Léon Say, Les Finances de la France, vols. i. and ii. His account is first hand evidence.

The constitution of the French debt on January, 1st, 1901, was as follows:

The conversion of the 3½ per cent. rentes will bring the general 3 per cents. to 22,000,000,000 frs. The capital value of the life charges cannot be put at less than 25,000,000,000 frs.

See Bk. ii. ch. 3, § 13.

These annual deficits, ‘which began with £15,000,000 for 1860 and rose to nearly £29,000,000 in the war year 1866, became less than £3,000,000 in 1871, and only a little over £500,000 in 1874,’ amounted in the aggregate for the fifteen years 1860–1874 to £166,000,000.

The principal stock is the consolidated 5 per cent.; its capital exceeds £320,000,000.

For the Prussian debt, see Cohn, §§ 488–94; Neymarck, 3–6.

See Bk. v. ch. 1, § 3.

Out of $70,000,000 war expenditure, $64,300,000 was met by loans, and $5,700,000 out of the tax receipts, or 92 per cent. and 8 per cent. respectively. Adams, Public Debts, 124.

The smallness of the debt in the period 1836–60 will be best realised from the fact that its capital amount rarely exceeded, and in several years was much under, the annual income of the Federal Government.

The following table shows the relations of loans to tax revenue in the years 1861–66. See Adams, 132.

Bolles, Financial History (1861–1885), 306. According to Prof. Adams, ‘the interest-bearing obligations of the United States stood at their maximum in August, 1865, amounting at that date to $2,381,000,000.’ Public Debts, 249.

See Noyes, Thirty Years of American Finance, chs. 9, 10.

The following figures show the position of the United States balances for the last fourteen years:—

A special 3 per cent. ‘ten-twenty’ loan of $198,000,000 was issued in 1898 for this war.

The highest point was in Nov. 1899.

On June 30th, 1901, the following were the several stocks:—

By March 1st, 1902, the capital charge was further reduced to $937,021,160.

The assets available against this charge are not easily valued. Much depends on the future policy of the State.

The settlement after the South African War will certainly double this figure.

Thus the situation of France in 1871 was an entirely unexpected one, and could be no criterion for judging the usual position of that country.

The peculiar treatment of Egypt and Greece is noticeable, as indicating the tendency towards international regulation in the case, not only of non-sovereign, but also of small independent States.

The ‘repudiations’ of 1840–50 are the best known examples.

It must, however, be remembered that the method of procedure may often be complex, and make recovery of the debt difficult, if not hopeless.

The case of Greece, just referred to, and the possible difficulties of European States with the South American Republics may be referred to.

The former is Berkeley's account, Querist, No. 233; the latter phrase is used by Pinto, a Dutch writer. Roscher, § 125, note 1.

‘Les dettes d'un État sont des dettes de la main droite à la main gauche, dont le corps ne se trouvera point affaibli.’ Melon, Essai Politique, ch. 23 in Économistes Financiers du 18me siècle, 749.

Cp. Bk. i. ch. 8, § 6, and Bk. iii. ch. 2, § 2.

Macleod's theory of credit is tainted by this fault.

Esprit de Lois, Liv. xxii. chs. 17, 18.

Hume, ‘Essay on Public Credit.’ Wealth of Nations, 387.

History of England, ii. 400.

Sinclair's History of Revenue, Pt. ii. ch. 2, i. 350 sq.

Hamilton, 9.

Bk. v. ch. 7, § 3.

Chalmers, Political Economy, ii. 71 sq.

Principles, Bk. i. ch. 5, § 8, Bk. v. ch. 7, § 1.

On these writers see Cohn, §§ 511–14; Roscher, Geschichte, §§ 152, 160, 195.

Bk. i. ch. 8, § 1.

See C. Dietzel, System der Staatsanleihen; Stein, iv. 421; Wagner, i. 144 sq., for statements of the doctrine. Cohn, §§ 515–7, supplies a pointed criticism.

This was probably true of part of the French loans of 1871–2.

Principles, Bk. i. ch. 5, § 8.

Mill briefly refers to this point in a footnote to his later editions, Bk. i. ch. 5, § 8 (6th ed.).

Mr. MacDonald (Economic Journal, xii. 24–28) misapprehends the doctrine of Chalmers which he criticises.

Mill, Principles, Bk. v. ch. 7, § 1. His error has been exposed both by Cairnes, On the Best Method of Raising the Supplies for War Expenditure, 10, 11, and by Cliffe Leslie, Notes (privately printed), 17, 18.

For a clear statement of the modern mobility of loan Capital see Cunningham, British Association Report (1891), 727.

The labourers' sufferings were really due to the continued bad harvests, the depreciated paper money, the restrictive laws against labour, the old Poor Law, the check to imports by war, and the industrial revolution. The capitalists gained by the greater use of machinery and the command that England at times obtained over the supply of foreign markets.

Cp. Sidgwick, Pol. Economy (1st ed.), 323, for the possible effect of inventions in so raising the rate of interest as to injure labourers.

Cf. Bk. i. ch. 8, § 1.

See Bk. i. ch. 1, § 2 for this peculiarity of public economy, and cp. Bk. ii. ch. 3, § 21.

The occasional depressions in colonial securities and the difficulty at times of procuring fresh loans illustrate the danger that attends such a system, and the need for caution in its use.

Cp. Bk. iii. ch. 2, § 5, and for a discussion of the conception of revenue see Marshall, Principles, Bk. ii. ch. 4, §§ 3, 4, (3rd ed.). Prof. Fisher and Mr. Cannan urge that the distinction between ‘capital’ and ‘income’ turns on differences in respect to time, Economic Journal, vi. 509 sq., vii. 199 sq., 278 sq.

‘The expenses of a war are the moral check which it has pleased the Almighty to impose upon the ambition and the lust of conquest that are inherent in so many nations. There is pomp and circumstance, there is glory and excitement about war, which, notwithstanding the miseries it entails, invests it with charms in the eyes of the community, and tends to blind men to those evils to a fearful and dangerous degree. The necessity of meeting from year to year the expenditure which it entails is a salutary and wholesome check, making them feel what they are about, and making them measure the cost of the benefit on which they may calculate.’ Hansard, March 6th, 1854. Cp. the useful criticism in Northcote, Financial Policy, 259–264.

Bk. iii. ch. 3, § 12.

On this ground the imposition of a property tax to contribute to the cost of the South African War would have been justifiable.

Professor Adams (Public Debts, 94) objects to the use of the income-tax for the purpose described in the text, but it seems on insufficient grounds. He hardly makes due allowance for the speedy yield of new taxes. ‘The financier,’ he thinks, ‘may hope for assistance from his new taxes within eighteen months of their levy,’ ib. 140. The first duties would surely come in much sooner. Speaking of the income-tax Mr. Blunden remarks, ‘A further great merit in the tax is the promptitude with which its machinery can be brought into operation, the flow of funds in response to an increase of the rate beginning almost at once, and the full addition for the year being brought into account within from nine to fifteen months, according to the period of the year at which the increased rate is decided upon.’ Economic Journal, ii. 642.

In England, e.g., the suspension of the terminable annuities and the new sinking fund,—which was employed in 1885, and again from 1899 to 1902—provides nearly £5,000,000 for meeting the fresh expenditure.

For the passage of ‘extraordinary’ into ‘ordinary’ expenditure see Bk. i. ch. 8, § 1.

For the weak treatment of the English debt see Bk. v. ch. 3, § 4; for the American instances, Adams, 112–133; Ross. Sinking Funds, 21–82; for the French one, Bk. v. ch. 4, § 2.

Bk. v. ch. 5, § 2.

France had £550,000,000, the United States, including the ‘State debts, £532,000,000, as their respective capital liabilities. Leroy-Beaulieu, ii. 597. The French debt, so far as the central government is concerned, is probably here placed too high, but it serves as an illustration of the principle.

Essay on Sinking Fund, 29, quoted by McCulloch, note 33 to Wealth of Nations, 632.

Cp. Jevons’ Theory, 119, 120, for this distinction.

Bk. i. ch. 8, § 4.

The best methods are: (1) that of Sir R. Giffen, which capitalises income, and (2) that of M. de Foville, which takes the property changing hands by succession as the base of calculation. Giffen, Growth of Capital; De Foville, La France Économique (1887), 437 sq.

If we assume that the annual increase of wealth has not changed since 1885 we can add over £2,000,000,000 to Sir R. Giffen's estimate of £10,037,000,000 for that year.

Cp. Prof. Nicholson's essay on ‘The living capital of the United Kingdom’ (Money, 2nd ed. 354–373), in which the highly conjectural value of £47,000,000,000 is assigned to this factor, or group of factors, of production.

Cp. Bk. ii. ch. 5, § 1 for this position.

Its application in local finance will appear in Bk. v. ch. 8, § 3. The same plea is put forward by the Russian Government in mitigation of the criticisms on its growing debt.

Thus the revenue obtained by the English Government from the Suez Canal shares is a deduction from the debt. The suggested debt of £30,000,000 to be placed on the Transvaal is of the same kind.

Leroy-Beaulieu, ii. 285–6: Roscher, § 132. For the suggestion of a forced loan by Pitt in 1796, see Sinclair, History of Revenue, i. 344.

The British war loan of 1899 was described as a patriotic proceeding, but the subscribers were immediately able to obtain a small premium, and, therefore, self-interest sufficiently accounts for the large amount applied for.

This system was named from Tonti, its inventor or populariser.

For a comparison between the terminable annuity and the stock redeemable in sections, see Léon Say, Les Finances de la France, iii. 589–92. M. Say preferred the latter.

Public Debts, 162.

Thus the present English ‘consols’ will not be redeemable until 1923, and the reduced 3 per cent. French Rentes are irredeemable up to 1910.

Bk. v. ch. 7, § 5.

The stock held by government departments does not exceed £70,000,000, and it is by its use chiefly that annuities are created, as private persons do not regard them with favour.

The recent English loans for war purposes have been at a fixed discount, which increased with each issue. By this course some loss was incurred, but the money-market interest was conciliated.

Justification may, however, exist in the fact that the gain by lower interest exceeds the loss through the creation of more capital. As Prof. Miller justly remarks (Journal of Pol. Economy, i. 141), ‘The whole question is largely one of financial arithmetic.’ The point may be illustrated by taking the opposite case of a loan bearing high interest and issued at a premium. Here the State gains in capital and loses on interest, but it is tolerably evident that the lenders will take the two sides of the transaction into account and guard themselves against loss. The great objection to the creation of extra capital is the generally improvident character of state administration, especially where future advantage is concerned.

See Newmarch's paper, ‘Loans raised by Mr. Pitt,’ in Statistical Journal, xviii. 104 sq., for an ingenious defence of the policy.

Lord Rosebery's Pitt, 210.

Hamilton, 197–206.

Cp. Bk. ii. ch. 4, § 4, and Bk. v. ch. 8, § 5.

The increase in the English floating debt in consequence of the great conversion of 1888 was merely temporary.

The metallic stock of the United Kingdom has been variously estimated at from £70,000,000 to £110,000,000, the interest on which would not exceed £4,000,000. In other countries the amount would be greater, but the shock to established habits would also be more felt.

Governments have to accept legal tender money in payment of taxes, unless in the case of customs duties, which are often made payable in gold under the erroneous idea of drawing money into the country. Leroy-Beaulieu, ii. 692.

ii. 685; cp. the statements by Viscount Goschen and Lord Avebury to the same effect. Hansard, April 28, 1882.

Sir R. Giffen has declared ‘that it would now be the wisest thing for us to give up any attempt at the reduction of debt, so long, at least, as the mean for paying are really derived from taxes on capital.’ Economic Journal, ix. 363–4.

Perhaps ten per cent. of the total amount would represent the limit within which increased expenditure should not alter the established system.

Cp. Mill, Principles, Bk. v. ch. 7, § 2, for a statement of the cruder view.

Hamilton, 10.

Price, Observations on Reversionary Annuities: criticised by Hamilton, 129–48.

For Pitt's Sinking Fund, Hamilton, 97–8; Ricardo, Works, 517. For criticisms of it, Hamilton, 149–60; and for a more favourable view, Rosebery, Pitt, 81–3.

See Adams, Public Debts, 265; Ross, Sinking Funds, 51–3 Dunbar, Quarterly Journal of Economics, iii. 46–54.

‘There is disclosed in the administration of Mr Gallatin the true policy of debt payment ... Under the guidance of his clear insight this country departed from the pernicious methods of English financiering.’ Adams, 268. Cp. Ross, 60.

Lord Rosebery, Pitt, 83.

Bk. v. ch. 5, § 4.

The very high price of English Consols in the period 1894–9 was mainly due to their purchase by the National Debt Commissioners, operating in a limited market. See Giffen, ‘Consols in a Great War,’ Economic Journal, ix. 353 sq.

Bk. v. chs. 3 and 4 passim.

In France, for example, conversion has not for this reason been attempted at certain favourable periods, viz. (1) under the Orleanist governments, and (2) between 1878 and 1883.

Bk. v. ch. 6, § 5.

Those of 1716, 1751, and 1888 are examples. The conversion of the French 3½ per cents. is another good instance.

Ricardo. Works, 149; Mill, Principles, Bk. v. ch. 7, § 2.

Bk. ii. ch 4, § 1.

This important question is again exciting public interest.

This statement is in accordance with Prof. Irving Fisher's theory that appreciation of money tends to lower interest. See his Appreciation and Interest; also Prof. Clarke's articles, Political Science Quarterly, x. 389 sq., xi. 249 sq., 493 sq.; and Marshall, Principles (3rd ed.), 673–4.

Public Debts, 343 sq.

The following table shows the comparative indebtedness of the several divisions in 1880 and 1890 respectively:—

It thus appears that state indebtedness is declining, but that of the smaller divisions is increasing, though this advance has been checked in recent years by legislative restrictions.

Prussia, Austria Hungary, Russia, India, and the Australasian colonies may be given as instances.

Cp. Bk. i. ch. 1, § 2 for the limitation of public activity in this respect.

This is the really crucial point in connexion with the vexed question of municipal trading.

Either by special taxation or the sale of concessions, Bk. ii. ch. 3, § 6.

Even on the assumption that Adam Smith's ideas as to the limits of state action should be observed, ‘The duty of erecting and maintaining certain public works’ is one of those prescribed by him. Wealth of Nations, 286.

For expenditure and taxation, cp. Bk. i. ch. 7, § 7, and Bk. iii, ch. 6, § 8.

The separation of the local debt carried out by Lord Goschen marks this very clearly.

Many of the larger British towns are favourably situated for this purpose.

Cp. Fawcett, Political Economy, 629–31.

Cp. Bk. iii. ch. 6, § 5.

The County Councils will probably in the future make greater use of their borrowing powers.

It is quite possible that the ‘intermediate’ bodies (cp. Bk. i. ch. 7, § 5) will grow in relative importance. See Prof. Marshall's suggestions in Memoranda, &c. [c. 9528], 123–4.

Two years’ valuation is the limit in British and Irish towns.

The literature for this part of the subject has received important additions since the last edition of this work. Stourm's valuable treatise is now in its 4th edition and is paralleled by the German work of Heckel, Das Budget. Masè-Dari's Bilancio dello Stato, is specially useful for Italy. A fuller recognition of the necessity for studying budgetary legislation as a part of finance is evidenced in the space—one-fifth of the whole treatise—allotted to it in Adam's Science of Finance, and the smaller works of Plehn and Daniels also devote separate sections to this topic.

For the attitude in this respect of the mediæval writers, the Germans of the seventeenth century, and Montesquien, cp. Intr. ch. 2, §§ 3, 5.

See the Dialogus de Scaccario (attributed to Richard, Bishop of London), printed by Madox in his History of the Exchequer; also by Stubbs, Select Charters, 168–248. Hall's Antiquities of the Exchequer gives a more popular account of the working of the system.

See Bouchard, Système Financier, 21 sq., on this point.

Cp. Bk. iii. ch. 7. The condition of the French finances just before the Revolution affords an admirable illustration of this statement.

The case of France under the Ancien Régime referred to in the preceding note is also instructive in regard to the evils that result from concealment and the absence of responsibility. At present the Russian and Indian finances show by their contrast the advantage that publication of vouched accounts and the power of opinion may be, even to a subject country.

Hallam, Middle Ages, iii. 84–86; Stubbs, Const. History, ii. 543–601. For the development of parliamentary taxation see Gneist, History of the English Constitution (2nd ed.), 388–93.

Hallam, Const. History, iii. 27–32.

Dicey, Law of the Constitution, 328–9. See, for a fuller account of the actual regulations, Anson, Law and Custom of the Constitution, ii. ch. 7.

In the colonial period there had been frequent disputes with the governors as to the granting of supplies and the preparing of estimates.

‘The Congress shall have the power to lay and collect taxes.’ Art. i. § 6. ‘All bills for raising revenue shall originate in the House of Representatives.’ Ib. § 7. ‘No money shall be drawn from the Treasury but in consequence of appropriations made by law; and a regular statement and account of the receipts and the expenditures of all public money shall be published from time to time.’ Ib. § 9.

Le Budget, 40 sq.

Stourm, op. cit. 23–5.

Cp. Bk. vi. ch. 3, § 7, for further explanation.

Derived from the French bougette, the bag in which the minister carried the papers and accounts necessary for his statement. The term seems to have come into use about 1760. Dowell, ii. 139.

For the scientific use of the term ‘Budget’ see Stourm's excellent work Le Budget, 1–5.

Stourm, op. cit. ch. 3.

Stourm, 74; Wilson, Congressional Government, 171–2.

As in some of the smaller German States.

Stourm, 77. The alteration of the French financial year has been often suggested. See the discussion of the matter by Léon Say, Finances de la France, iii. 315–59.

Cp. Bk. ii. ch. 5, § 5.

It seems plain that the head of a great industrial department, such as the English Post Office has become, should have the same weight as the heads of the Army and Admiralty admittedly possess. The difficulty of applying the strict administrative control necessary in the case of public expenditure to industrial undertakings is one very weighty argument against extension of the state domain. The Treasury could hardly keep a Railway Department within bounds.

The French method of adding smaller budgets to the ordinary one is therefore a violation of principle and injurious in practice. Stourm, 187. It may, however, be said that the Budget sur Ressources spéciales is really a statement of one part of local finance. But it is incomplete as regards the communes, and in fact of no service as a mode of control.

The respective merits of the French compte d'exercice and the English compte par gestion are carefully considered by Stourm (ch. 5), who is perhaps too favourable to the former.

The estimates of expenditure in England for the three years April 1, 1889, to March 31, 1892, as compared with results, show an error of only £137,000 in a total of £264,000,000, or a little over 1s. per £100.

Cp. Wagner, ii. 747.

See as to these rules Bk. iii. ch. 7.

The system adopted in India, where 266 district treasuries are established. By the use of bills the transmission of funds, so far from being an expense, is made to yield a slight profit.

Wilson, Congressional Government, ch. 3.

M. Stourm supposes that the attendance in Committee of Supply is smaller than in the case of ordinary sittings. Le Budget, 273. He has been followed by Masé Dari (Bilancio, 112) and Adams (Finance, 147–8). The latter asserts that ‘as a matter of fact none but the leaders commonly attend.’ This view is altogether erroneous.

Todd, Parliamentary Government in England, i. 690 sq.

‘This principle is commonly involved in mediæval metaphysics as to the prerogative of the Crown, but it is as useful in the nineteenth century as in the fourteenth, and rests on as sure a principle.’ Bagehot, English Constitution, 146.

Hearn, Government of England, 378. Cp. Leroy-Beaulieu, ii. 113.

Stourm, 295. In the United States the separate appropriations amount to about two thousand.

In 1900 the votes were rearranged by the government, but the opposition at once objected to the change.

The ‘committees’ of the American system have this advantage, but in their case there is no real unity.

It has, however, been pointed out that this limitation may lead to extravagance by inducing a department to spend rather than surrender surplus funds. The official feeling is ‘let us use up our balance.’

As in the case of the two English funds of the ‘Treasury Chest’ and ‘Civil Contingencies.’

Gladstone, quoted by Todd, Parliamentary Government, i. 740–2.

Wilson, Congressional Government, 159. Prof. Adams approves, though with hesitation, of deficiency bills as a necessity. Finance, 184–5.

Stourm, 369–73. His figures do not quite agree with those given by Leroy-Beaulieu, ii. 104.

The proper mode of providing for increased naval expenditure has been a subject of hot debate between the two great English parties. Lord Goschen preferred the permanent method; Sir W. Harcourt advocated the annual one. So long as a consistent scheme is adopted and maintained there seems to be really no important difference. The control of the House of Commons over expenditure is in either case effective.

Thus the tedious process of ‘supply,’ which used to take thirty-five working days of the session, is, in the French sense, a part of the budget. By the existing rules of the House of Commons twenty days are set apart for supply, and on the last of these days all the votes that remain are put to the vote without debate. This has the effect of unduly extending discussion on the earlier and destroying it on the later votes.

Peel, for example, miscalculated the yield of the income-tax for 1842 by not taking into account the fact that only one half of the tax would come in during the financial year. Northcote, Financial Policy, 41. Lowe increased some of his surpluses by manipulating the collection of the income-tax. More generally, there is no doubt that a surplus could be manufactured by starving the permanent part of the public services and throwing the additional cost of replacement on succeeding years.

In France, for each of the years 1883, 1884, 1885, the uncollected receipts were about 2½ per cent. and the unpaid expenditure 11 per cent. of the total figures. Stourm, 123–4.

See Masé Dari, Bilancio, 57–8.

Finance, 206–7.

The case given by Prof. Adams (Finance, 207), of interest for the three months ending July 31st, when the fiscal year ends on June 30th, illustrates this. The two months will run on for each year. If, e.g., the year for 1901–2 gains at the end, it loses at the beginning.

In respect to semi-sovereign States, e.g., Egypt, the method of accruals might be applied with advantage in order to separate the amount available for improvements from that assigned for creditors.

Bk. vi. ch. 2, §§ 5, 6.

Cp. Burke's great speech on ‘Economical Reform,’ particularly Works, ii. 81 sq.

Sir H. Parnell vigorously attacked the methods of control existing when he wrote (1830). Financial Reform, ch. 11.

The occasional ‘committees on finance’ became the annual Committee of Accounts in 1862. The Act reorganising the control and audit department is 29 and 30 Vict. c. 39.

The Bank of England by its management of the debt and its practical custody of the revenue is, in a sense, a government bank, but not a state one. Cp. Bk. ii. ch. 4, § 2.

Mollien, Baron Louis, and Audriffe may be mentioned.

So have also Belgium and Holland.

For an admirably clear account of the U.S. system see Adams, Finance, 193–200. See also the articles on ‘The Control of National Expenditures,’ by E. I. Renick and N. H. Thompson. Political Science Quarterly, vi. 248–281, and vii. 468–482.

Todd, Parliamentary Government, ii. 57 sq.

According to Adams, ‘The House of Representatives has not seen fit to continue its experiment with what perhaps may be termed a legislative auditing committee.’ Finance, 200.

Wilson, Congressional Government, 175; also Bolles, Financial History (1861–1885), 523 sq.

Stourm, Le Budget, chs. 28 and 29.

See supra, Bk. i. ch. 7; Bk. iii. ch. 6; Bk. v. ch. 8.

Supra, Bk. i. ch. 7, § 4, and Bury, Student's Roman Empire, 440–2.

Goodnow, Comparative Administrative Law, i. 271.

See Bryce, American Commonwealth, ch. 48.

Supra, ch. 2, § 2, and Adams, Finance, 125–9.

British local finance has become much more intelligible since the financial year has been arranged.

See Bk. ii. especially ch. 2, §§ 5, 6, 18.

The movement in England towards what is called ‘municipal trading’ has greatly increased this danger. See Row-Fogo, ‘The Statistics of Municipal Trading,’ Economic Journal, xi. 12–22.

The audit of the accounts of English boroughs is unsatisfactory as it is conducted by elected auditors. See Report on ‘Municipal Trading’ [305, 1900], 137–141. The Irish system is, in this respect, better.