TAX. 62 TAX. ■which distinguishes between direct and indirect. The distinction cannot be sharply drawn; but it may in general be said that direct taxes are those which are levied upon the persons or property of those upon whom the}' are expected to rest, while indirect taxes are levied upon com- modities or industrial processes with the expec- tation of their further ditl'usion. Examples of the former kind are the poll tax, the general propert}- tax, and the income tax. Examples of indirect taxes are customs duties and excise taxes. The practical advantage of indirect taxation lies in its ease of collection, and in the fact that it creates a minimum of opposi- tion on the part of the taxpayer, wno does not recognize that he is paying a tax through the enhancement of price of articles which he may purchase or not as he chooses. This very fact gives rise to one of the chief disadvantages of such taxation: namel}', that it encourages wake- ful administration, since the financier is not held to such strict account for funds raised in this way. A further objection to indirect taxation is that it weighs most heavily upon the poor, since it is only commodities in general use which can yield a considerable revenue through indirect taxation. Forms of Tax.tion. ' The simplest form of taxation is the poll tax, a head tax levied equal- ly upon all citizens or inhabitants. This tax was not uncommon in England toward the close of the Jliddle Ages ; it was an important form of taxation in the New England colonies. Where it still exists it is of minor importance. A tax on general property was developed in the north- ern colonies of America. Taxes on houses are dis- cussed under the title House Tax (q.v.). Land is in some countries, as in the United States, taxed at the same rate as other forms of prop- erty; in other countries a special land tax is levied. A tax on land if permanent has the peculiarity of diminishing the value of the laud by the capitalized value of the tax; it may therefore be said to be borne wholly by the one who owns the land at the time when the tax is first imposed. In New Zealand the tax on land is graduated with the size of the holding. The aim of this system is to prevent the accumulation of holdings in a few hands. For inheritance tax, see that title. The chief forms of indirect taxes are customs duties (see Tariff) and excise ta.xes, or taxes upon the production or sale of commodities. The latter are common wherever business is highly developed. They are employed in England to ofTset duties on imports, which would otherwise serve to i)rotect the native producer. Taxation in The United St.4.tes. There are no constitutional restrictions upon the power of the Federal Government over taxation save that "no capitation or other direct tax shall be laid unless in proportion to the census or enumera- tion." "no tax or duty shall be laid on articles exported from any State," "no preference shall be given ... to the ]iorts of one State over those of another," and "that all duties, imposts, and ex- cises shall be uniform throughout the United States." The power of the States to tax is also practically unlimited, except that they may not tax interstate commerce, or levy import or ex- port duties, or exercise the right of taxation in a manner to impair the obligation of a contract or to eonfiseate property without due process of law. The State Constitutions in manj^ cases place further limitations upon the power of taxation exercised by the State Governments. The two fields of National and State taxation have been on the whole well defined and separate since the adoption of the Federal Constitution. While there is no legal objection to the right of tlic State to levy excise taxation, the prohibition of taxation of like commodities entering the State by interstate commerce renders this right nugatory : the States are therefore practical- ly confined to direct taxation, and the Federal Goveriuiient has refrained from entering this field of taxation except in periods of great na- tional emergency. State Tax.vtion. In the majority of Ameri- can States the basis of the fiscal system is found in the general property tax, levied both for State and local purposes, upon the realty and per- sonalty of the inhabitants of the State. This tax, although general, is now being abandoned or at least limited in application, this being true of Vermont, Connecticut. Delaware, Pennsyl- vania, and Wisconsin. The tax has been fre- quently condemned on accoimt of its inadequacy as a test of 'faculty' or ability to pay taxes and because of its failure to reach personal property. According to a report of a special committee of the California Senate on taxation and revenue (.January, 1001) there is but one opinion throughout the whole country of the practical working of the tax, and this is "that it is in- equitable, unfair, and positively unjust." The tax leads to understatement, to widespread per- jury, and to numerous forms of evasion and dodging. Throtigh the inefficiency and occasional dishonesty of assessors, and through their fre- quent dependence upon popular favor, property of all sorts, and more especially personal prop- erty, escapes its just burdens, while in many eases the system of basing the taxation of the State upon the local assessment leads to a com- petition among the various districts of the State to keep their local assessment unreasonably low and thus evade, as far as possible, the burden of the State general property tax. The resulting in- equalities are only partially remedied by the various State Boards of Equalization which now exist in about one-halt of the States and which exercise the right to raise or lower the assess- ment of counties and in cases even to alter the assessment of individuals. It has, moreover, been found impracticable to secure good results by imposing severe penalties for evasion or by paying portions of the tax to persons discovering such evasions. Remedial legislation has been proposed in several States, but the Industrial Commission in its final report went beyond stich palliative measures and recommended "that the States abandon the general property tax" — but "that local revenues be raised by taxes on real estate and personalty under the general property tax system, as at present." Mortgages are taxed in most States together with the other forms of personalty, and as no deduction is usually made in the assessment of mortgaged property, the imposition of the tax on mortgages usually amounts to double taxa- tion. Attempts have been made in Massachu- setts, California. Oregon, and elsewhere to pre- vent this double taxation of mortgaged property
