TAXATION IN AMERICAN STATES AND CITIES.* WHEN Lord Coleridge visited
the United States as the guest
of the American Bar, he is said to have declared that many of the systems of procedure with which he then became acquainted, were for the English lawyer nothing less than museums of extinct legal monsters. Forms of pleading and special writs that with us are only known by name, and rank here almost with the dodo or the mastodon, he there discovered still alive and vigorous. In the same way, the different fiscal systems of the various States of the Union contain forms of taxation and methods of collection which have long ago become matters of history in the Mother-country. In Maryland, for instance, the practice of farming out the collection of the revenue actually exists to this day. In many of the States a poll-tax is levied, and in some of these the right to vote depends upon its payment. More extraordinary still, in some cases what is in fact the corn& or forced labour, obtains as a substitute for the poll-tax. In Atlanta, Georgia, the Road-tax is in the nature of a poll-tax of about 14s. per head, and is collected "by compelling those who cannot or will not pay the road-duty in cash, to work for ten days on the highways." After this, not even the Phila- delphian tax on watches seems an anachronism.
Far more important, however, than the very interesting information conveyed by Mr. Ely's book in regard to the fiscal curiosities of the Union, are the lessons it teaches as to the principles of finance. The first lesson that we learn from American experience is the fact that in taxation almost more
than in any other branch of human government, is it impos- sible to lay down absolute rules based upon a priori considera- • Taxation in American States and Cities. By Richard T. Ely, Ph.D., assisted by John H. Finley, A.B. New York Thomas Y. Crowell and Co. London : Wilmer and Co. tions. This is strongly brought out by the example of the American property-tax,—a tax levied not on income, but on capital of every sort and kind. If we start with the axiom that each person should contribute towards the revenue in exact proportion to his wealth—i.e., the man worth 210,000 contri- buting ten times as much as the man worth 21,000—an axiom undoubtedly sound in the abstract, we are naturally led to the conclusion that the fairest tax of all is a property- tax under which each citizen is forced to declare his total wealth in lands, houses, money, and every other form of riches, and then made to pay a proportionate part to the necessities of the State. In the abstract, then, a property-tax seems perfectly just and reasonable, and appears to have a special advantage over most other taxes in making the rich man pay his exact share of the national burdens. If, however, we take the experience of those States of the Union which have tried a general property-tax practically—and the list includes almost all of them—we shall see that in reality the tax operates in a way exactly contrary to what might be predicted of it. In- stead of proving fair and proportionate, it in practice turns out to be the most unfair and the most disproportionate tax ever levied. Instead of the rich being made to pay their proper share, they escape with a trifling contribution, while the poor pay in comparison three or four times more than an equitable adjustment would demand. The only difficulty of proving this to our readers' satisfaction, arises from the immense choice of material in Mr. Ely's work. Here, however, is the opinion of "a gentleman of prominence in Wisconsin," addressed to Mr. Ely :—" You see in me a monument of the iniquity of our present system of taxation. When I was a poor and straggling young man, with five or six hundred dollars' worth of personalty, I paid on all that I had ; but now that I really have something, I keep still, and pay taxes only on part of my property. Indeed, when I think about taxation in our States and cities, I feel like turning anarchist, and blowing things up with dynamite." In other words, the property of the poor is visible, and so taxed; while the property of the rich, since it is often to a great extent of an incorporeal nature, is easily con- cealed. from the tax-collector, and so for the most part escapes. Since, too, the fiscal system of the States has acted as "a school of perjury," and made it a matter of course for rich men to swear false declarations in eases where the fraud on the revenue cannot be detected, there is really no occasion for a rich man to pay for anything beyond what the collector can see. It may perhaps be argued by an English enthusiast eager for a property-fax in this country,—' No doubt in America property. taxes work badly ; but then, all government is inefficient there. In England we should do the thing fairly ; and this can be proved from the fact that the English Death-duties, which constitute a perfectly comprehensive property-tax, can be collected without scandal or difficulty.' Unfortunately, the analogy of the efficient collection of the Death-duties in England proves no such thing. In England, the Death-duties are collected at a moment when concealment of property is very difficult, and, what is more, they are paid, as a rule, not by the parties interested, but by executors,—i.e., persons acting in a fiduciary capacity, who are often without any direct pecuniary temptation to defraud the revenue. Oddly enough, American experience enables us to show clearly that the English property-tax at death is only paid fairly because it is not paid by the actual possessors of the property. In America, all authorities agree that the only persons who really pay the property-taxes fully and fairly are trustees, guardians of orphans, and other persons holding property in a fiduciary position. A lawyer of standing in Columbus, who acts as trustee for many properties, told Mr. Ely that when he goes to pay taxes, he feels "capable of committing robbery, arson, and murder, because he is obliged to pay taxes on the full value of estates of two or three thou- sand dollars belonging to little orphan children, whereas he sees wealthy clients paying on 10 or 15 per cent. of what he knows they are worth." In fact, it is impossible to doubt that our general tax on capital is only paid without fraud because it is usually paid by the very persons who are found to pay in America,—i.e., persons in a position of trust.
To put the failure of the American property-taxes con- clusively before our readers, and to clench the arguments we have already given, we quote from a Report made in 1884 by the West Virginia Tax Commissioners, in which the effects of the tax upon rich and poor respectively are set forth at length :—
"It is a primary principle that the subjects of a state ought to contribute towards the support of the government, as nearly as possible in proportion to their respective abilities ; but it will be seen before these reports are concluded, that in West Virginia almost the reverse is the case, and that a man of small means pays, as a rule, more in proportion than a man of large means. The statistics bearing on this point will scarcely be credited by persons who have not investigated the subject, and they exhibit a condition of things that ought not to be tolerated. It will be found, for instance, that a house and lot worth $800 is valued at $700, while a house and lot worth $8,000 is valued at $4,000—in the one case at seven- eighths, and in the other at one-half; that is to say, the owner of the small property has $100 untaxed, and the owner of the large property has forty times that amount untaxed. Again, when a person dies, his entire personal estate is listed and valued by the appraisers, whose appraisement is recorded by the county clerk. By comparing a number of these appraisements with the tax assessments made next prior to the death of such person, we find that a man with a personal estate valued imme- diately after his death at $200, was rated immediately before his death at $178; while a man whose estate is appraised at $5,000, was rated at only $1,500; that is to say, if a man of small means was rated in the same proportion as the man of larger means, he would pay taxes on only $60, whereas he now pays on $178. At present all the taxes from invisible property come from a few conspicuously conscientious citizens, from widows, executors, and from guardians of the insane and infants ; in fact, it is a comparatively rare thing to find a shrewd trader who 'gives in' any considerable amount of notes, stocks, or money ; the truth is, things have come to such a condition in West Virginia that, as regards paying taxes on this class of property, it is almost as voluntary and is considered pretty much in the same light as donations to the neighbourhood church or Sunday-school. A merchant's stock of goods was worth $15,000; he gave it in' to the assessor at $2,500, and this conversation occurred :— Assessor . 'I can't take this valuation ; the law requires me to swear you.' —Merchant. If you swear me, I'll vote against you next time.'— Mr. A. paid $800 for his piano, and listed it as worth $100. Mrs. S. paid $250, and listed hers at $250. It is useless to continue these examples ; they are only too familiar to every citizen. It is idle to expect a man to meet the assessor in a proper spirit, when he feels that he is subjected to the alternative of either telling a falsehood or being swindled. If I am compelled to pay a tax which belongs to my neighbour, I am swindled, and I feel the in- justice as much as if robbed on the public highway. Under the present system (probably) four-fifths of the invisible property is not listed, and of the visible property that is on the assessor's books (probably) one-half is assessed at 40 per cent, lower than the other half. We frequently hear the remark : 'If a man is ten times richer than I, he ought to pay ten times as much tax ; whereas, the richer a man is, the less is his tax in proportion to his property.' " Space will not allow us to give our readers any fuller account of Mr. Ely's valuable, and to the fiscal enthusiast most fascinating volume. We must, however, before we take leave of his work, mention that he shows conclusively the reasons why an income-tax is not avoided as is a property-tax, and brings many good and sound arguments to prove that, on the whole, it is by far the best form of direct taxation. Mr. Ely also gives some extremely interesting figures in regard to the High. Licence system, and the plan of taxing railroads in vogue in some of the States of the Union. Those who make themselves acquainted with his work will find there a hundred other important problems dealt with in a most businesslike and straightforward way. No doubt here and there Mr. Ely makes blunders. He seems, for instance, somewhat inclined to hold wild and absolutely unhistoric theories about English land. These small defects are, however, outweighed by the fact that he has collected an immense amount of valuable facts and statistics in a form which renders them easily accessible to the inquirer into the arts of taxation.
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