Popular Science Monthly/Volume 50/December 1896/Principles of Taxation: Relation to the State XII

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THE next step of importance in this discussion is to recognize clearly the relation which the exercise or function of taxation, as it has been defined, sustains to the state.

Origin and Justification of Taxation.—The question at once suggests itself, "By what right does that entity which we call the state, whatever may be its concrete form, and whether its powers are exercised by a single man (Cæsar), by a particular class, or by a majority of citizens, take from the individual that which hitherto was absolutely his, annul his ownership, and convert the thing of value to its own use?"[1] How happens it that the exercise of this right is so absolute that the state requires the citizen to set apart from the earnings of his labor a certain sum for its use before he applies any of those earnings to the support of his family?[2]

On this point there has been considerable speculation and philosophizing. It has been assumed that there must be an actual or implied contract between the state and the citizen, in virtue of which the state supplied a certain amount of protection to life and property, and for which the citizen in return pays an equivalent in money, merchandise, or personal service. There is, however, no historical example of any such contract.

Others have sought to refer the origin of this right on the part of the state to take the property of the citizen to an antecedent right of might, and have assumed that, as the ruling power, whether monarch or majority, is physically able to take and apply to its own use all that the individuals ruled over may call their own, it is therefore legitimate and morally correct for it to exercise this right and take such part of its subjects' property as it may see fit.

A third and more plausible theory is, that as all rights of property are conventional and not natural, and without the intervention of the state by its laws could not be enforced nor protected, and, indeed, could hardly be said to exist; therefore the state is the source of all title, and the individual holds only by grant or sufferance of the state. From these premises it follows that the state, in compelling contributions from its subjects, or, as is ordinarily expressed, in "taxing," is in the position of an absolute proprietor who takes simply what is his own. This was the theory accepted and practically carried out by all the monarchs of Europe in the seventeenth century, or about two hundred and fifty years ago, and defended by the best and most eminent men of the time, as Bossuet in France and most of the great jurists of England under Charles I, as was exemplified in the case of John Hampden, who was prosecuted for refusing to pay an arbitrary tax known as "ship money"; and the decision in which, by the High Court of Exchequer, placed the property of every Englishman at the disposal of the crown. It was also so clearly expressed by Louis XIV that his words are worthy of exact citation. Thus, in a manual which he wrote for the guidance of his heir and successor, the Dauphin, he says: "I hold the place of God. To me belong exclusively the lives and fortunes of my people. The nation resides entirely in the person of the monarch. Kings are absolute masters, and may naturally, fully and freely dispose of all the property possessed by either the clergy or laity, to use at all times like wise stewards and according to the needs of the state."

Herbert Spencer refers the growth of revenue, which involves the right to take it, from the outset, like the growth of political headship which it accompanies, directly or indirectly, to the results of war. "The property," he says, "of conquered enemies—at first goods, cattle, prisoners, and at a later stage land—coming in larger share to the leading warrior, increases his predominance. To secure his good will, which it is now important to do, propitiatory presents and help in labor are next given; and these, as his power further grows, become periodic and compulsory, making him more despotic at the same time that it augments his kingdom. Continuance of this process increases his ability to enforce contributions, alike from his original subjects and from tributaries; while the necessity for supplies, now to defend his kingdoms, now to invade adjacent kingdoms, is ever made the plea for increasing his demands of established kinds and for making new ones. Under stress of the alleged needs, portions of their goods are taken from subjects whenever they are exposed to view for purpose of exchange. And as the primitive presents of property and labor, once voluntary and variable, but becoming compulsory and periodic, are eventually commuted to direct taxes; so those portions of the trades goods which were originally given for permission to trade, and then seized as of right, come eventually to be transferred into percentages of value paid as tolls and duties. But to the last as well as at first, and under free governments as under despotic ones, war continues to be the usual reason for imposing new taxes or increasing old ones, at the same time that the coercive organization, in past times developed by war, continues to be the means of exacting them."[3] Mr. Spencer further asserts that "in the early stages of social evolution nothing answering to revenue exists." These conclusions of Mr. Spencer seem, however, to be singularly imperfect, inasmuch as they do not appear to recognize that there can be such things as voluntary or beneficial taxes, or that society in order to exist would in the course of time institute taxation, even if there had been no war. He does, however, recognize that the increasing progress and complexity of civilization, by continually enlarging its sphere and functions, would continually necessitate an increase of taxation.

All such speculations and theories as to the origin and sphere of the rights of government in respect to appropriating the property of its subjects or citizens, although of philosophic interest, are, however, of no practical importance.[4] It is only necessary to recognize that in some form the organization or entity which we call the state exists for certain definite purposes, even though they be difficult of precise limitation; and to analyze the situation, as we find it, to obtain a satisfactory answer to the question at issue. For the command of a constant and adequate revenue being beyond dispute absolutely essential to the existence of organized government, the power to compel or enforce contributions from the people governed, or, as it is termed, "to tax," is inherent in and an incident of every sovereignty, and rests upon necessity.[5] The question of the obtaining of such revenue obviously, therefore, is the question of first importance in the economy of a state; the one in comparison with which all others are subordinate. For without revenue (and a government never has any resources except what it has obtained from the people), regularly and uniformly obtainable, no governmental machinery for the protection of life and property, through the dispensing of justice and the providing for the common 'defense, could long be maintained; and in default thereof production would stop or be reduced to a minimum, accumulations would cease or become speedily exhausted, and civilization would inevitably give place to barbarism and the wilderness. For like reasons also, or as the old-time Latin maxim, "salus populi suprema lex," concretely expresses it, the state holds command over the lives and liberties of its citizens equally as it does over their fortunes. In fact, the sovereignty of a state consists and exemplifies itself in the power to abridge the liberty of the individual citizen and to take his property; and the character of every government is mainly determined by the intent and purpose for which these two great functions from which all its force proceeds are exercised.

The Sphere of Taxation.—The sequence of these premises is no less important, or rather of transcendent importance; for if the power of taxation is an incident of sovereignty, as it confessedly is, then the right to exercise that power must be coextensive with that of which it is the incident; or, in other words, as the power of every complete sovereignty over the persons and property of its subjects is unlimited, the power, therefore, in every such sovereignty to compel contributions for the service of the state, or, as we term it, "to tax," must be unrestricted. "The power to tax is therefore the strongest and most pervading of all the powers of government, reaching directly or indirectly to all classes" (United States Supreme Court; Loan Association vs. Topeka, 20 Wallace, 655).

The power to tax, said Chief-Justice Marshall, in giving the opinion of the United States Supreme Court denying the right of Maryland to tax the Bank of the United States (McCulloch vs. Maryland, 4 Wheaton, pp. 316-431), "involves the power to destroy, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it." In the case of Weston vs. the City of Charleston, the same court, by the same eminent authority, also held that "if the right to impose a tax exists, it is a rigid which, in its nature, acknowledges no limits. It may be carried to any extent within the jurisdiction of the State or corporation which imposes it, which the will of such State or corporation may prescribe." And in a more recent case (Loan Association vs. Topeka, 20 Wallace) the court, through the late Justice Miller, again expressed itself to the same effect as follows: "Given a purpose or object for which taxation may be lawfully used, and the extent of its exercise is in its very nature unlimited."

The government of a complete sovereignty can therefore tax all that it can lay hands on to enforce the tax—men, women, and children; all property and business—and the power may be exercised again and again until the subject taxed is exhausted or the privilege can be no longer exercised. This statement finds abundant illustration in history of people absolutely impoverished by taxation, and of individuals who have been sold into slavery because of their inability to pay the taxes that the state or ruling power had assessed upon them. The popular idea is that such examples of the extreme exercise of power on the part of the state to compel contributions have passed into history; but this is not the case. In every purely despotic Government there is no limitation on its exercise except such as arises from the inability of the subject to contribute. The head of the state—shah, czar, or emperor—decides how much shall be exacted and the time and manner of exaction; and not infrequently the amount taken is only a little short of what it is necessary to leave to the producer in order to enable him to maintain a mere animal existence. Thus in Russia the present governmental exaction—under the name of taxes—from the agricultural peasant is understood to amount to about forty-five per cent of his annual product or earnings.

In 1890 the excise taxation of Russia—which is mainly levied upon distilled spirits and other alcoholic drinks, tobacco, sugar, kerosene, and matches—is reported to have amounted to seventy-five per cent of the value of the articles taxed. On the other hand, the Russian customs duties in the same year averaged but thirty-four per cent of the import value of the foreign goods imported—a circumstance that may find an explanation in the fact that a large proportion of imports of Russia are in the nature of machinery or crude materials for industrial use or elaboration, and apart from this the requirements of the masses in Russia for foreign products are comparatively small.

In Egypt until quite recently, as has been already shown (see previous chapter on The Tax Experiences of Egypt), the annual exactions from its peasantry—the fellahs—under the name of taxation produced an extremity of want which closely bordered on starvation.

In Italy, which in ancient times was regarded, as it is in fact to-day, potentially the richest country in Europe, and although its present Government can not fairly be characterized as despotic, its agriculture is burdened with state exactions that are reported as absorbing from one third to one half of the value of its annual product. The existing debt of the country, created largely by enormous military and naval expenditures, entails an annual interest charge of about $3.75 per head of its population.[6]

Another disastrous interference with the prosperity of the state is the system of taxing all business enterprises, after they have been established three years, at rates which in some cases swamp the profits. And in addition to such disturbing elements, there is undoubtedly an all-pervading evasion for a consideration of all forms of taxation by the functionaries whose business it is to collect the revenue. A very general feeling, therefore, naturally prevails that it is a laudable thing to cheat or rather rob the Government whenever opportunity offers.[7]

Limitations in the Sphere of Taxation.—Attention is next asked to the fact that the foregoing propositions respecting the unlimited power of a state to compel contributions, or to tax, and which (as shown) have received the sanction of the highest judicial authorities, are predicated on the assumption of complete sovereignty on the part of the state. But in a truly free state such sovereignty does not exist, and the conditions which make it free necessarily preclude its existence. Thus in every such state the two great functions which constitute its sovereignty, namely, the right to interfere with the liberty of the citizen and with his property, have been called into existence and can be rightfully exercised for certain purposes only, which admit of precise definition. In such a state the fundamental and essential purpose of government is not to abridge the liberty of the individual citizen in respect to his person, or his possession and use of property, but to increase it; and this result (overlooked in a great degree by economists and legislators), as has already been pointed out, can only be attained by taking a part of the property of the citizen which the existence of the state has enabled him to acquire, for the purpose of maintaining instrumentalities for preventing any encroachment upon his rightful liberty and punishing those who attempt it. In fact, in every free state there are limitations on the exercise of the taxing power, growing out of the structure of its government, or because it is free; or, as Chief-Justice Marshall expressed it, "by the implied reservations of individual rights growing out of the nature of a free government, and the maintenance of which is essential to its existence."

From the first dawn among the Anglo-Saxon race of the idea of a constitutional or free government, the necessity of establishing an inhibition on the power of government, in respect to the taking of property, was recognized; expressed or implied in the Magna Charta, and subsequently incorporated in the Federal Constitution, through its provisions respecting the equality of taxation, and that private property shall under no circumstances be taken for public uses without just compensation.

The necessity of a free state may, however, be so great i. e.,—in the prosecution of war for national defense, or the maintenance of national existence—as to require that the entire resources of its people should be at the disposal of the Government, and compel a resort to taxation, even to the exhaustion of everything—property and business—which may be its objective; and in this sense—i. e., for the preservation of individual liberty and property—and in this sense only, is involved any inherent power or right in taxation to destroy. The nature of the principle involved also finds illustration in the circumstance that municipal authorities are warranted, in the case of extensive conflagrations, in absolutely destroying large amounts of property in the shape of buildings and their contents, in order to preserve a much larger amount of like property from destruction. The principle under discussion would not accordingly justify the use of taxation in time of peace (as has been exercised by the Federal Government of the United States) for the primary purpose of destruction, and not for revenue or the preservation of property. Clearly, if this right of taxation is unlimited, the property of every citizen would be subject to the absolute disposition and control of the depositary of power in the state for the time being; and the recognition or nonrecognition of such limitation marks, as before pointed out, more than any other one thing, the dividing line between a free government and a despotism.[8] Probably the most weighty and concrete judicial opinion on this subject was that given by the Supreme Court of the United States in 1874 in the now celebrated case of the Loan Association vs. Topeka, 20 Wallace, in which the late Justice Miller, with the substantial concurrence of his associates, indorsed and amplified the opinion of Chief-Justice Marshall touching the reservation of individual rights under a free government as follows:

"It must be conceded," he said, "that there are rights in every free government beyond the control of the state. A government which recognized no such rights, which held the lives, the liberty, and the property of its citizens subject at all times to the absolute disposition and unbounded control of even the most democratic depositary of power, is after all but a despotism. The theory of our governments, State and national, is opposed to the deposit of unlimited power anywhere. The executive, the legislative, and the judicial branches of these governments are all of limited and defined powers. There are limitations of such powers which grow out of the essential nature of all free governments—implied reservations of individual rights, without which the social compact could not exist, which are respected by all governments entitled to the name. . . . Of all the powers conferred upon the Government that of taxation is most liable to abuse. Given a purpose or object for which taxation may be lawfully used, and the extent of its exercise is in its very nature unlimited. This power can as readily be employed against one class of individuals and in favor of another, so as to ruin the one class and give unlimited wealth and prosperity to the other, if there are no implied limitations of the uses for which the power may be exercised. To lay with one hand the power of the Government on the property of the citizen, and with the other bestow it upon favored individuals to aid private enterprises and build up private fortunes, is none the less robbery because it is done under the forms of the law and is called taxation. This is not legislation. It is a decree under legislative forms." And in the same case the same court declared that "the whole theory of our governments—State and national—is opposed to the deposit of unlimited power anywhere."

No one would probably question that if an assemblage of men reasonably intelligent—though not versed in law, political economy, or the teachings of social science—were to come together for the purpose of founding a state de novo, they would, while recognizing at once, and as it were instinctively, the necessity of insuring to the government of such state a revenue adequate to its support, never even so much as dream for one moment of intrusting to it a power to take the property of any individual member of such assemblage, except so far as might be absolutely necessary to carry out and fulfill the purposes for which it was proposed to call the state into existence. They would be mentally blind if they did not see at once that intrusting to the state a power of unlimited interference with the citizen's right to property, they would create not a free government but a despotism.

The question may be here naturally asked. Is there any record in history of any assemblage of the founders of a state which discussed this subject, or took definite action in respect to it? In answer it may be said that the two most striking assemblages in history which resulted in the formation of states, and of which any record is preserved, occurred in connection with the first settlements of New England, and that which resulted in the formation of the Federal Constitution and the creation of the nationality of the United States. The assertion would hardly be warranted that the early plantations of New England were formal assemblages gathered together for the avowed purpose of forming a state. They were, in fact, land companies, and so far as the law then existing permitted, were incorporated as such. This act of incorporation, derived from a corporation created by James I of England in 1606, and known as the Plymouth Company, was in the first instance and at once used as the basis for forming a political organization by the members of a land company or plantation. The necessity of a revenue to defray the expenses of the organization or incipient government, and in default of which there would be no adequate protection to persons and property, or, what is the same thing, no civilization, was at once recognized; and probably the very first act of the assemblage of the members of the company, after the selection of persons to exercise authority, was to authorize the levy of taxes. These taxes were assessed and collected in all respects as they are now in the great States that have been the outcome of these feeble plantations, through what may be termed a process of political evolution. That is, the individual members of the various communities or their authorized representatives met in their "General Court," as it was called, made appropriations, and, in order to pay them, levied what they termed a "rate" or assessment. This levy was put into the hands of a constable, who proceeded to enforce or collect the tax, either in the form of work or commodities or money. There is furthermore no indication in the records of these early times of any limitation as to the extent or degree of assessment, and for the very obvious reason that it never then occurred to any one that the power of taxation could possibly be used for the destruction of private property or controlling the acquisition and distribution of property—the inventions of a later period. The taxation of those days was necessarily of the crudest possible character. It fell almost exclusively on real property, and what was manifestly tangible and visible, for the very good reason that there was very little of what is now called personal property in existence—that is, there were no credit or paper representatives of property, but everything in the nature of property existed in the form of land, slaves, houses, animals, agricultural products, tools, or furniture.

The record of the assemblage (convention) that drafted the Constitution, which by adoption by the parties (States) thereto called the United States into existence as a nation, on this subject of guarding and limiting the taxing power on the part of the prospective State or Government which they proposed to create, is comparatively full and complete. The Revolution, which involved the renouncing of all allegiance of the British-American colonies to the mother country, had its origin in unjust taxation; and in the Declaration of Independence this fact was made conspicuous among the reasons that were relied on by the colonies to justify their action in the opinion of mankind. The attempt in 1778 to establish a General Government by the union of all the colonies under certain conditions, known as Articles of Confederation, was found after a few years of experience to be wholly lacking in all the elements of strength and stability, through the lack of any proper adjustment of the power of taxation; thereby entailing an almost complete inefficiency of sovereignty. Thus, there was no power in the Congress of the Confederation to raise money by taxation; but the Confederation depended for revenue upon requisitions on the several States, with which the States might comply or not, as they chose, and with which they generally did choose not to comply, either promptly or fully, if at all. Some of the States levied duties on the imports of merchandise at the expense of their neighbors; and adjacent ports in different States competed with each other by arbitrarily varying the rates on imports, as the Congress of the Confederation had no authority to regulate commerce, or legislate on this subject for the whole country.[9] The result was, as Mr. Madison expressed it, that "the Federal authority had ceased to be respected abroad, while at home it had lost all confidence and credit." It was to remedy this one radical infirmity, more than any other, that the present Constitution was projected and formed. Other great improvements in the Articles of Confederation were contemplated and made in the Constitution when it was formed, but the most important of all was in the regulation of taxation. Hamilton, who drafted the address to the States inviting them to send delegates to the convention by which it was formed, wrote thus in The Federalist:

"The power of taxation is the most important of the authorities proposed to be conferred on the Union."

The necessity of conferring adequate power in this particular upon the new Government which it was proposed to create was admitted by all; and yet there was no power which the people were more determined to guard, so that it could never be arbitrarily or unjustly exercised. And if it had not been supposed that the provisions of the new Constitution furnished ample security against any such action, not one of the States would have assented to its ratification.

The preamble of the Constitution asserts, almost in the first instance, that the object of its formation was to "establish justice," an obvious correlative of which is that there must be equality, and no discrimination in taxation as respects the same persons or things. In its first article (second section) it next provided that "representatives (in Congress) and direct taxes shall be apportioned among the several States according to their respective numbers, excluding Indians not taxed." The explanation of this provision, which now seems singular, is undoubtedly to be found in the assumption of the framers of the Constitution that taxation in the future, as it had been in the past, would be mainly direct in its assessment and incidence; and that wealth was so equitably distributed in the colonies (as it was at that time), and, as Roger Sherman, of Connecticut, expressed it, "the number of people alone "was" the best rate of measuring wealth." And on such supposition the absolute requirement of a strict apportionment of taxation according to population, with an inherent penalty of loss in congressional representation as the result of evasion, was undoubtedly regarded as a safeguard against unjust or discriminating taxation.

Next, in section 8, article 1, after empowering Congress "to lay and collect taxes, duties, imposts, and excises," to pay the debts and provide for the common defense and general welfare of the United States, was added another provision, the like of which does not find an exact counterpart in any political constitution or statute of which there is historical record—namely, that "all duties, imposts, and excises shall be uniform throughout the United States." This provision is one of the first importance. It would seem that there could be no doubt that the framers of the Constitution, having specially in view the fact that, under the Articles of Confederation, the several States endeavored to tax everything belonging to every other State that came within their territorial jurisdiction, and that there was no authority on the part of the then General Government to prevent such action, did not mean that the entity, called a State, they were about to create, should have any power of discriminating in respect to the imposition of duties, imposts, and excises in any degree; fully recognizing that the moment a State or government thus discriminates it passes the line of distinction between a free government and one that is not free. It is to be further noted that the words "to pay the debts and provide for the common defense and general welfare of the United States" should also be regarded in the light of a limitation of the purpose for which the taxes, etc. (authorized in the opening words of the section), may be laid and collected. This view was taken and strongly presented by Mr. Jefferson in 1791, shortly after the adoption of the Constitution. He says: "To lay taxes to provide for the general welfare of the United States is to lay taxes for the purpose of providing for the general welfare. For the laying of taxes is the power, and the general welfare the purpose, for which the power is to be exercised. They are not to lay taxes ad libitum for any purpose they please, but only to pay the debts or provide for the welfare of the Union. In like manner they are not to do anything they please to provide for the general welfare, but are to lay taxes for that purpose."—T. Jefferson's Works, p. 557.

Finally, there was added by amendment to the Constitution the following provision, which, although implied in the Magna Charta, had not been previously so explicitly expressed in the Constitution or statutes of any other State: "Nor shall private property he taken for public use without just compensation." Obviously this provision constitutes another limitation on the power of Congress in respect to the taking of private property for public use by taxation or any other method. In a case involving the bearings of this provision on the taxation of a citizen of New Jersey, the Supreme Court of that State analyzed and interpreted its meaning as follows: "A tax upon the person or property of A, B, and C individually, whether designated by name or in any other way, which is in excess of an equal apportionment among the persons or property of the class of persons or kind of property subject to this taxation is, to the extent of such excess, the taking of private property for a public use without compensation. The process is one of confiscation and not of taxation."—36 New Jersey, p. 66, 1872.

It is certain, therefore, that in at least one assemblage for the purpose of creating a State—namely, the Federal Convention—its members clearly recognized the incompatibility of the possession and exercise of an unlimited power of taxation by a State and the coexistence of a free government.

Right of Eminent Domain.—Apart from the right of a State to take private property for its use by taxation, the State may also legitimately take such property when the interest of the public requires it, through what is called the law or right of eminent domain. The distinction between the power of taxation and the power of eminent domain is, however, clear and well defined. An appropriation of property under the right of eminent domain is a forced sale which its owner is compelled to make for the public good, and for which a pecuniary consideration equal to the estimated full value of what is taken is due from the State. And the exaction can not be considered as a tax "unless similar contributions are made by the public itself, or be exacted rather by the public will, from such constituent members of the same community as own the same kind of property." On the other hand, no pecuniary consideration is paid when money is demanded under the power of taxation, the benefits which the taxpayer is assumed to receive being indirect.

An Important Imperfection or Omission in the Federal Constitution.—Any discussion of the sphere of taxation in the United States would be incomplete that failed to recognize a feature, in the way of imperfection or serious omission, in the Federal Constitution, that hitherto has not attracted the attention it deserves. All powers inherent in the Constitution of the United States were derived from the States, and granted by them in their acts of ratification; and "the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people."—Article X, Constitutional Amendments.

As has been already pointed out, the convention that framed the Constitution was especially solicitous and careful to guard and limit the power of taxation on the part of the new Government which it was proposed to create, so that it could never be arbitrarily or unjustly exercised. They anticipated in action the aphorism of John Stuart Mill, that "men do not need political rights in order that they may govern, but in order that they may not be misgoverned"; for, as was truly said by Guizot, "a constitution is only a device for turning ordinary mortals into tolerable monarchs." At the same time, the convention practically omitted to impose any limit or restriction on the exercise of the power of appropriating private property on the part of the States; or, as Chancellor Kent expressed it in his Commentaries on the Constitution, they left "to a State the command of all its resources and the unimpaired power of taxing the people and property of the State." On this point the only direct provisions of the Constitution are that neither the Federal nor State governments shall take private property for public uses—i. e., by taxation or right of eminent domain—without due compensation; and that no State, without the consent of Congress, shall lay any imposts or duties on imports or exports. By repeated decisions of the United States Supreme Court, another provision has been substantially ingrafted in the Constitution—to wit, that neither the Federal Government nor the governments of the States shall tax any of the instrumentalities or exclusive property of the other. The result is that, except for possible provisions in the Constitutions of the several States, their respective legislative assemblies may regulate, restrict, or appropriate the property of its citizens to an unlimited extent, and may delegate this sovereign power to local municipal corporations created by them. In short, in virtue of the power of levying unlimited taxes, the power of the Legislatures of the States that make up the Federal Union is as absolute as that of the Czar of Russia or the Sultan of Turkey. Not only may they take in this form all the property in the commonwealth, but also the property of its citizens in other countries. There is no Federal constitutional hindrance to their taxing, to any amount, real estate in any other State or country owned by citizens resident within their territorial jurisdiction. The constitutional provision that private property must be paid for when taken for public uses mainly refers, in the States, to the taking of land for highways and other similar acts of necessity by eminent domain.[10]

How little the people of the United States recognize the fact that they are living under a dual form of government, with like powers to some extent, especially in respect to the exercise of taxation, finds an illustration in the following incident. The question was recently put to the writer by a gentleman who had filled with ability the office of Governor of one of the leading States of the Federal Union, how it happened that the Federal Government could impose on him an income tax, and his own State, at the same time, assess him with not only another like income tax, but also with a tax on the property from which his income was derived? The idea of a dual government and its inconveniences, and that the Congress of the Federal Government had not cared to remedy the latter, had not occurred to the interrogator.

Had the power of the States to take money by taxation from their people been limited at the time of the formation of the Federal Union by constitutional provisions, the injury and disgrace of State repudiation might have been wholly avoided, and much wasteful extravagance checked.

"Within an hour's ride from the city of New York several towns can be reached that were bankrupted by undertaking 'public works upon a magnificent scale.' The number of Western communities that have been ruined from the same cause is countless. A very great number of people in the Eastern States, both poor and of the middle class, have been impoverished by the sudden check to the prosperity of these communities. Nor is any severer tax imposed upon any class than that which is paid by those who have only their wages to live upon, when they are deprived of these by the collapse of municipal credit and the consequent sudden stop to extravagant expenditure. The average cost of the pensions paid by the United States is ten to twelve dollars a year to every family in the country, and in many cases the pension charge alone is equal to half a month's or even to a month's wages. Not a few of the governments of the earth are now insolvent because of excessive expenditures upon public works. In South America and Australia, extravagant undertakings of this kind have caused widespread ruin and distress; and the poor of several other nations are likely to find out eventually that the alleviation of temporary distress by governmental expenditure of capital is like keeping off the cold by burning down the house."—D. MacG. Means, The Forum, 1894.

That the State governments should have bestowed the unlimited and imperial power of taxation upon city governments, and given up to their use and control the entire property of the citizens, is an extraordinary abuse of trust and a renunciation of the true functions of government. As a result of this policy these delegated governments have, within a comparatively recent period, absorbed for alleged public uses a large proportion of the property of the citizens, to the estimated extent in some instances of more than one third—that is, the usufruct (right of using and enjoying)—and the American citizen has to-day no constitutional or legal remedy. "No such plunder was ever sanctioned or practiced before in the history of civilized governments. That it has been possible in the United States argues the gravest defect in its political system. That a check is needed of the most absolute kind is recognized by all thoughtful men. Such check can only be had from the Legislatures of the States, who can not be too prompt in correcting the evils resulting from this extraordinary surrender of their supreme jurisdiction on the vital subject of taxation. The Legislature holds the public purse, and is false to its trust as its custodian when it authorizes corporations to put their hands, unwatched, into this purse and take from it, uncounted, all that their extravagance and cupidity desire. It is no apology that city governments are chosen by popular vote. It is the essence of our government that personal rights are, by our Constitution, wholly independent of the voting power, and certainly property should be equally so protected."

The question here naturally arises, How happened it that the framers of the Constitution and founders of our Government, while carefully defining and limiting the powers of the Federal Government in respect to the taking of property through taxation, omitted to make any like provisions applicable to the States? An answer is, that it was probably an oversight, favored by the circumstance that there was no English precedent for suchp rovisions. At the time of the Revolution it was, and ever since has been, the occupation and duty of the British House of Commons to limit and, if considered expedient, resist the pecuniary demands of the crown, and latterly of its ministers; and this occupation and duty were never delegated without restriction to any subordinate legislative assemblage. It might have been, and probably was, assumed by the framers of the Federal Constitution, that the several States in making their Constitutions would have followed the precedents respecting the rights and duties of taxation that they (the framers) had established; and, if the several Legislatures of the States had been confined to these rights and duties, and had never delegated them without restriction to the complicated, ill-organized, and irresponsible municipal corporations, which in latter days have grown to such portentous size, little of danger would have followed.[11] It should, however, be here noted that remedial action in this matter has recently been taken by some of the States, by forbidding their counties, cities, towns, or villages from incurring an indebtedness in excess of a percentage, varying with their population, of the valuation of the real estate subject to taxation. Constitutional restrictions on the borrowing power of the State itself, and of the municipalities within its territorial jurisdiction, have also in some of the States been adopted.

From the above discussion the following conclusions would seem to be fully warranted:

The limitation on the exercise of the power of taxation under a free government necessarily grows out of the source and sole justification of the power—namely, its necessity; and the righteousness of any specific interference by the state with individual rights in respect to property (as well as in respect to personal liberty) may be tested by the question, Is it necessary? Not Is it convenient? Not Is it suitable? If the necessity exists, then the power may be justifiably exercised to a corresponding extent. But, on the other hand, if the interference transcends that which is absolutely essential for fulfilling the rightful purposes for which the state exists, then it loses its sole justification of necessity and becomes tyranny, the definition of which is "despotic use of power." Further, "if the state, even to promote its necessary and legitimate objects, takes the amount of property to which it is entitled in such a manner as requires a citizen to pay more than his just share of the requisite amount—whether it be great or small—it takes that to which it has no right; it does what, if done by a citizen in defiance of law, is called robbery; if under color of law, is called fraud; but which in a government which makes law is simply confiscation and tyranny." And yet, very strangely, this tyranny has come to be regarded and defended by not a few intelligent persons who claim to understand the theory and nature of a free and just government as an act of wisdom and statesmanship, and in the highest degree beneficent to the citizen whose property is confiscated.

Reporting concerning the progress made on the English Philological Society's New English Dictionary, now in F, Mr. H. Bradley observed that the F-words include many scientific terms, and some of the oldest English and Romanic words, besides several onomatopœic words of arbitrary coinage. Initial fl has attracted makers of imitative and contemptuous words: flip, flap, flop; flish, flash, flush; flick, flack, fluck; flim-flam, flip-flap, etc. Of special words, foist has not the nauseous origin often attributed to it, but is analogous to the dialectical German fäusten, to get into one's fist. It occurs first in Dice-Play, of 1532, and means the holding in hand of a false die, to introduce at any point of the game; the false die was "foisted in"; all the known senses flow from this and parallel those of cog. Fogger in "pettifogger of the law," of about 1550, and in trade a huckster, peddler, sweater, is probably from the Fuggers, the great merchants of Antwerp in the fifteenth century. The word has passed into many languages. To fog, to cheat, swindle, is a back formation from fogger.
  1. "Titius is to render to Cæsar that which is Cæsar's. But when Cæsar comes to take the shock of wheat or the firstling of the flock Titius may well ask, as he gives them up. Why are they Cæsar's rather than mine? What right to them has Cæsar and not my neighbor Mævius?" Tyranny in Taxation. Theodore Bacon. New-Englander, 1867.
  2. The probate judiciary of the State of Connecticut has recently held that in the settlement of insolvent estates taxes due prior to the assignment of an assigning debtor should be regarded as preferred claims, and as such should be paid in full by the trustee.
  3. Abundant illustrations from historical or recent experiences of the successive stages of such assumed evolution of taxation are given by Mr. Spencer in the chapter On Revenue in his volume on Political Institutions.
  4. Edmund Burke, the great Irish statesman, is on record as characterizing any discussion of the abstract right of taxation in place of the actual facts of the situation, as belonging to the domain of political metaphysics, "a great Serbonian bog in which armies whole have sunk," and that it was by fighting for such "a phantom, a quiddity, a theory that wants not only a substance but even a name," that English statesmen threw away their American colonies.
  5. "When we ask, What right has the state to infringe upon man's natural freedom? we are involved in the difficulty that there are no rights, in the strict sense of the term, antecedent to the state. All rights that we know anything about are either legal or moral. The right of the state to govern man can not be derived from law, for law is the creature of the state. If it is a moral right, it must rest on the same basis on which all morality rests, and this must be either conscience, or divine revelation, or utility. Of course, consent has nothing to do with morality. Conscience, furthermore, will not do as a basis for the state, for conscience does not enlighten us further than to let us know that we ought to obey the state if it is right to do so. Revelation, also, answered only so long as a direct and miraculous connection was believed to exist between human and divine authority. This leaves nothing but utility as the basis for the moral right of the state to interfere with man's natural freedom."—Anonymous.
  6. A national tax on movable (personal) property—the ricchezza mobile—is levied on the poorest of the Italian people; and often the bed has to be sold or the saucepans pawned to pay it.
    The gate tax, dazio consumo, best known to English ears as octroi, which has been the especial object of the Sicilian fury, is a curse to the whole land. Nothing can pass the gates of any city or town without paying this odious and inquisitorial impost. Strings of cattle and of carts wait outside from midnight to morning, the poor beasts lying down in the winter mud and summer dust. Half the life of the country people is consumed in this senseless, cruel stoppage and struggle at the gates; a poor old woman can not take an egg her hen has laid, or a bit of spinning she has done, through the gates without paying for them The wretched live poultry wait half a day and a whole night cooped up in stifling crates or hung neck downward in a bunch on a nail; the oxen and calves are kept without food three or four days before their passage through the gates, that they may weigh less when put in the scales.
    By this insensate method of taxation all the food taken into the cities and towns is deteriorated. The prating and interfering officers of hygiene do not attend to this, the greatest danger of all to health that is, inflamed and injured animal and fowl carcasses sent into the markets. The municipalities exact the last centime from their prey; whole families are ruined and disappear through the exactions of their communes, who persist in squeezing what is already drained dry as a bone.—Fortnightly Review, 1894.
  7. It is enough to see how railways are built by the Government of Italy to form an idea of the openings afforded for rascality and fraud in their construction. "They are not built by contract, but on estimate. A building company estimates that a certain line will cost a certain sum and receives the job, which is always indeed a 'job.' The Government guarantees a certain income per kilometre, and the constructor makes the road as long as possible; but when the grant (which is made in bonds of the state) for the amount authorized is exhausted, the constructor coolly tells the ministry that the road must stop there unless the ministry makes another grant, which is of course done, and the invariable result is that the original estimate is nearly, or quite, or even more than doubled; with the consequence that none of the roads, as they are made, ever pay their expenses and interest on their cost of construction. More than that, they are so burdened with deadheads that it is estimated that only forty per cent of the passengers they carry pay full fare, the remaining sixty per cent paying from nothing up to seventy-five per cent of the fare. Deputies and senators travel free everywhere in the kingdom, but as the state pays a block sum for their privilege, it is not a dead loss, though, as every deputy who travels insists on having a whole compartment for himself, the road becomes anything but a profitable one. Every employee of the great systems of Italian railways has the right to make three journeys a year on each one, where he likes, and with his family, and the consequence is that some of them ruin themselves taking long railway journeys for which they have not the money to pay the expenses. And they are sixty thousand, with as many more pensioned off who have the same privilege; and, as all travelers know, the railway fare is the smallest part of the expense of a journey."—Correspondence New York Evening Post, June, 1896.
  8. The dictum of Chief-Justice Marshall, used by this distinguished jurist in the heat of argument, has been adopted by many courts as justifying the uncontrolled exercise of the taxing power. A slight consideration will not justify the dictum. The proposition that the power to tax is the power to destroy is in opposition to the fundamental principles of a free government. It asserts the broad doctrine that the power to tax, one of the legislative powers, is unlimited and arbitrary. It is claimed that there is no such thing as arbitrary power in this country: that the form of government being republican, those who exercise the powers of government, whether executive, legislative, or judicial, are clothed with a trust which is not to be executed in accordance with a mere whim, or in an arbitrary manner, but according to the purpose of its creation."—Burroughs' s Law of Taxation, 1877.
  9. The author of The Federalist (No. 7) refers to the situation of New York, as compared with that of Connecticut and New Jersey, as affording an example of the opportunities which some States had under the Confederation of rendering others tributary by a monopoly of the taxes on imports, and said that New York would neither be willing nor able to forego the advantage of levying duties on importations, a large part of which must be necessarily paid by the individuals of the other two States in their capacity of consumers.
  10. There is nothing in the Constitution of the State of New York which requires that taxation shall be general, so as to embrace all taxable persons in the State, or within any district of the State; or that it shall be equal, or that it shall be in proportion to the value of the property of the person taxed, or that it shall not be apportioned according to the benefit which each taxpayer is supposed to receive from the object on which the tax is expended."—People ex rel. Griffin vs. Mayer, 4. N. Y., 419, 1851.
    "There is no constitutional limitation upon the legislative power to tax the persons and property of individuals within the State. The power may be exercised to pay debts contracted before the property-holder comes within the jurisdiction."—Pampelly vs. Village of Oswego, Ct. of App., 1863, N. Y.
    "Unless restrained by provisions of the Federal Constitution, the power of the State as to the mode, form, and extent of taxation is unlimited when the subjects to which it applies are within her jurisdiction."—Kirtland vs. Hotchkiss, Connecticut.
    "The Legislature can constitutionally impose a tax on all watches, pianos, carriages, dogs, spirituous liquors, or other chattels without reference to their value. It can impose an arbitrary tax upon any avocation or business without estimating its volume or value."—People vs. Equitable Trust Co. of New London, Conn., 1887; System of Taxation in the State of New York, prepared by Hon. Julien T. Davis, at request of a committee of the Legislature, 1888.
  11. In his treatment of this important topic, the author is mainly indebted to Mr. Manley Howe, of Boston, who, in a newspaper article published some years ago, seems to have been the first person to intelligently present the facts in the case and their consequences to the general public.