Principles Of Taxation

Since government, or social organization, is among the wants of man, as truly as food or clothing, we must recognize it in the science of political economy, and provide for it. Government implies functionaries and expenditures. How shall these be maintained? Evidently by the contributions of all, for all are interested in its existence.

It may, therefore, rightfully claim a share of all that labor and capital have created.

The aggregate of all sums collected by government is called its Revenue; the system by which it is collected is called Taxation.

Although the single object of taxation is to obtain a given amount of wealth (generally in the form of money), yet the modes by which that object may be secured are various.

In ancient times, taxation was often imposed by the arbitrary fiat of the ruler, with little or no reference to equity, or its effect on the prosperity and happiness of the people; but, in modern civilization, it has come to be regarded as altogether the most difficult and delicate task government is called upon to perform.

The question of taxation, in its various bearings, is now made the subject of examination and discussion in all legislative bodies; and taxes are imposed, in all constitutional governments, not at the caprice of the ruler, but by the representatives of the people.

Until within a few years, the people of the United States have been so fortunately exempt from heavy taxation, that it has been felt to be a matter of small consequence what the expenditures of the government amounted to, and still less whether they were wise and necessary. That day has gone by, probably not soon to return.

If, then, the property of the citizen must be taken to meet the exigencies of government, it becomes highly important that those from whom it is taken should feel that it is equitably done. Nothing in relation to all the acts of government is more to be desired than that its mode of raising a revenue should be so wisely and economically arranged, so manifestly just and equal, and so well understood by all, that no opposition to its demands shall arise from a sense of oppression.

Desirable as this would be under any form of government, it is manifestly quite indispensable in a country where there is no force superior to the public will, and where it is certain do taxes can be collected but such as are believed to be both necessary and just.

In the distribution of wealth, as has been before stated, government makes a peremptory claim to so much as its necessities, real or supposed, may require.

This claim is not only peremptory, but prior to every other claim. The laborer must contribute a part of his wages; the business man, of his profits; and the capitalist, of his interest, or rent.

Every man knows, or should know, that when he creates any kind of wealth, a share of it belongs to government. He, in fact, creates a fund out of which government is to be supported. For example, should a man pre-empt a section of land on the western prairies, and by his labor make it of the value of ten thousand dollars, government has a lien upon it equal to all the taxation it may choose to impose. The value of the farm is just so much less than it would otherwise be, by the burdens which it is known the government will lay upon it. For example, if the owner could sell it, free of all taxation, instead of ten thousand dollars, he could get, say, eleven thousand dollars for it. If we suppose that the annual tax imposed on the farm will be equal to the income on one thousand dollars, then the farm is worth one thousand dollars less on this account.

If the seller buys another farm, or any other property, with his ten thousand dollars, he gets it at just the same reduction as he sold his own farm; and, for the same reason, all property, whether personal or real, whether land or merchandise, is exchanged under these conditions; and therefore all parties creating wealth are placed on a level.

The paramount question, in regard to taxation, is, On what principles shall it be founded? Adam Smith, in his "Wealth of Nations," written almost a century ago, laid down four maxims, or principles, which have been so generally concurred in from that day to this, that, as J. Stuart Mill says, "they have become classic."

I. "The subjects of every state ought to contribute to the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue they enjoy under the protection of the state. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation."

In examining this proposition, our first inquiry is, What is meant by "subjects "? We answer, Every inhabitant, old or young, male or female. Women? Certainly: if they have a revenue or income, they are as justly bound to contribute to the government as men, and in the same proportion. Many women have large wealth: why should it go untaxed? Children? There are some such who are millionaires: why should they be exempt?

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Principles Of Taxation Continued

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