| PRINCIPLES OF TAXATION. |
By DAVID A. WELLS, LL. D., D. C. L.,
CORRE8P0NDANT DE L'INSTITUT DE FRANCE, ETC.
XVIII.—THEORY AND PRACTICE OF INCOME TAXATION.
COMMENCING with first principles, the general taxation of incomes is theoretically one of the most equitable, productive, and least exceptionable forms of taxation. What can be fairer than that each citizen should annually contribute an equitable and just portion' of his net gain or income for the support of the government or State under which he has elected to live, and in default of which he would not be likely to have either gain, income, or property? and such a method of supporting a government would therefore seem to be in accord in the highest degree with those canons or maxims of taxation which are regarded by nearly all economists and jurists as the highest embodiment of human wisdom on this subject.
And yet the proposition is hardly open to dispute that a general income tax, with such administrative features as are essential to make it desirable as a revenue measure, can not be successfully administered under a free and popular form of government. On this point the comparatively recent experience of the United States, which few now remember, ought to be most instructive. Thus, in 1869, under a Federal law assessing all incomes in excess of $1,000, and with a corps of trained officials to execute it, only 259,388 persons out of a population in that year of about 37,000,000 acknowledged the receipt of any taxable income; and in 1872, when the exemption had been raised to $2,000 and the population had increased to over 39,000,000, the number of persons who had an income tax ran down to 72,949—leaving a presumption that every one of those who did not pay and was made subject to inquisition by the officials in respect to his income, made oath that he was not in receipt, from wages, salary, interest, or profits, of an income liable to taxation in excess of $2,000. From an economic point of view it would be a misnomer to call such a result "taxation"; from a moral point of view its characterization as "appalling" would not be inappropriate.
Another point which may also be accepted as theoretically beyond dispute is, that if all were willing to live up to and carry out the correct and rational theory of an income tax, there would be little use for tariffs, customhouses, internal revenue departments, and excises. But that is exactly what human nature, as we find it, will not agree to have done in the one case, or to do in the other. In fact, there is hardly any other one thing which human nature so much dislikes to do as to pay taxes, although it is capable of demonstra-
