porations are taxed upon more than one hundred per cent of their property or business, while others take advantage of the absence of authoritative central control to assign, in their own accounting systems, excessive proportions of property and business to those jurisdictions in which taxes are lightest. While federal regulation is justified by the same logic which sanctions state regulation of local taxation, it is very doubtful how far federal regulation can or should go. If the national government should require some form of federal incorporation for companies engaged in interstate commerce, it is possible that it would have power thereafter to prescribe the methods by which such interstate companies should be taxed under state law. This has been done in the case of national banks, although the power of the federal government to control taxation of national banks is clearer and probably greater than its potential power to limit the rate of taxation of ordinary business corporations engaged in interstate commerce. But if the proposed federal regulation were elastic enough to permit the rate of taxation to vary in each state with the average level or burden of taxation in that state, and vigorous enough to suppress selfish state aggrandizement, it would represent a great reform. No form of federal control is expedient, however, that would deprive the states of adequate revenues from this source. The properties of interstate companies form a very large part of existing wealth. In a number of states one tenth or more of the entire taxes collected, state and local, come from railroad companies alone. Commonwealth revenue systems are adjusted to this condition and no revolutionary change is either practical or desirable. One important reform, however, could be accomplished at once. The Interstate Commerce Commission, or some similar federal agency, should at the earliest practicable date be directed to formulate and enforce some simple plan of allocating the revenues and expenses of interstate corporations to the several states in which they operate. This is required not only for the fair assessment of state income taxes, but for the valuation of the properties of interstate corporations, as these properties can 3 B never be satisfactorily appraised without taking their earnings into account. For reasons which appear in the preceding discussion, it would be misleading to formulate any clear-cut division of taxes among the federal, state, and local governments. A few forms of revenue will unquestionably be reserved for the use of one branch of government, but the pressure of increasing expenditure is likely to force a joint use of such major revenues as taxes on real estate, income and inheritance taxes, excise and stamp duties; and for these the ideal is joint administration, in which the relative impartiality and vigor of central administration may be supplemented and perfected by the more intimate knowledge of local officials. QUESTIONS 1. Why are the terms "direct" and "indirect" taxes particularly vague and equivocal? 2. Explain why no protection is given the home producer when the import duty is shifted upon the foreigner. 3. What is the greatest fiscal defect of American customs taxation? Can this defect be remedied? 4. Are excise taxes ethically justifiable? Do they materially check consumption when imposed upon alcoholic beverages and tobacco? 5. Do you know of any state which levies an income tax at the present time? Is the tax successful? 6. Should income which is saved and immediately reinvested be taxed? Is it not double taxation to tax savings and the earnings from such savings as well? 7. Should corporations be taxed at the same rate as unincorporated business concerns? Should any definite relation between the two kinds of taxes be maintained? 8. Contrast the taxation of national banks in your own state with the taxation of trust companies, ordinary commercial or manufacturing corporations, and unincorporated business concerns. 9. State as many reasons as possible why the separation of state and local revenues would be helpful. 10. Explain why many forms of property employed in business cannot be intelligently assessed for taxation without reference to the earnings of the business. II. Are assessors elected or appointed in your own state? Do they require taxpayers to declare their personal property in great detail? Do the local assessment rolls contain separate figures for real estate and improvements? Is the property of nonresidents specially designated? 12. Why is the general property tax particularly unsuited to the taxation of business and professional men? 13. Should the federal government, if it possesses the power, make the taxation of interstate commerce corporations uniform throughout the United States? REFERENCES BULLOCK, C. J. Selected Readings in Public Finance, Chaps. vii-xix; "The Taxation of Corporations in Massachusetts," Quarterly Journal of Economics, Vol. xxi, pp. 181–246. Commissioner of Corporations. Reports on the Taxation of Corporations; Special Report on Taxation. ELY, R. T. Property and Contract in their Relations to the Distribution of Wealth, Chap. xvii. HOLLANDER, J. H. (ed.), "Studies in State Taxation," Johns Hopkins University Studies in Historical and Political Science, Series xviii. Industrial Commission. Report. "Taxation," Vol. xix, pp. 1031-1069; "Taxation in Various States and in Canada with Special Reference to the Taxation of Corporations," Vol. xi, Part vii; "Taxation of Transportation Companies," Vol. ix, pp. 1006–1091. Reports of State Tax Commissions. Upon the topics indicated see "The Massachusetts Tax System and its Workings," Massachusetts Commission of 1897, pp. 1-73; “Public Service Corporations," Wisconsin Commission, 1901, pp. 72-121; "Taxation of Credits," ibid., 1903, pp. 88-144; "Mortgage Taxation," ibid., 1907, pp. 303 et seq.; "Railway Taxation," Ontario Commission, 1905; Committee on Taxation of the City of New York, 1915; Massachusetts Special Commission on Taxation, 1915. SELIGMAN, E. R. A. The Income Tax. WEST, MAX. The Inheritance Tax, Chaps. vii and ix. APPENDIX A HISTORY OF ECONOMIC THOUGHT Economic Ideas in the Ancient World. - The assertion is sometimes made, or at least the impression is frequently given, that there were no writings on economics before Adam Smith. This impression is erroneous, and derives its plausibility from the fact that before Adam Smith economic subjects were treated either disjointedly and in a monographic way, or else in connection with ethics and political philosophy. But in treating economics in connection with ethics and politics, the older writers were merely following an instinctive method of dealing with economic truths, to which in a certain degree later writers are returning. Indeed, if we are to derive the utmost possible benefit from this brief survey of the development of economic thought, it is necessary to begin many centuries before Adam Smith, with the Greeks. The Greeks. The three writers among the Greeks most interesting to the economist are Plato, Aristotle, and Xenophon. Both Xenophon and Aristotle (or, more probably, some unknown disciple of Aristotle) have treatises upon the specific subject of Economics, but these are devoted principally to domestic economy, or the management of the household; and the more important economic ideas of the Greek writers are derived from their works which deal primarily with political and ethical subjects. Plato describes a utopia in his Republic. His aim was to picture an ideal society in which the ills of society were to be corrected by a communistic State, and he included a communism even of wives and children, going farther than modern communists. The communism of Plato admitted, strange as it may seem, slavery, on which his social superstructure indeed rested as a base. The Laws of Plato is a more practical work. It aims to present not the best possible state, but a more practicable one, and deals to a greater extent with existing institutions. Aristotle's principal work for us is the Politics, and it is indeed one of the most remarkable books in the world's history. Its influence is strongly felt today, for it was carefully studied by theologians of the Middle Ages, and through them entered into the thought and life of their time; and the thought and life of their time can be seen by the careful student to have entered in a thousand ways into the institutions of the twentieth century. While Plato tacitly accepted slavery, Aristotle actively defended the institution of slavery, describing the slave as an "animated |