The taxation of both property and income is a most obvious form of double taxation; but while in the case of the taxation of property and debts there is always from the nature of things double taxation, whether the taxation of property and income will be liable to such an indictment will depend on the nature of the system. Income itself is always properly taxable, but when it is derived from property it cannot be regarded as a tax subject independent of that property. The value of property, in general, is imputed from income therefrom obtained. So it is evidently unjust to tax the whole once and a part twice, as would be the case with a general income tax and a general property tax.1 The possessors of property would pay two rates over a part of their income, i. e., over that derived from property. This seems indisputably to be a case of double taxation, yet the opposite view has been held apparently by most distinguished authority." You cannot classify individuals justly as property holders and non-property holders, because, income being the basis, there is but one class.3 If property and income taxes both are used, the income tax should be general, with a deduction for property taxed, if double taxation would be avoided. To tax "all income regardless of source, even if that source has already been taxed," may be a practical measure, but it is primâ facie unjust. Income taxes are special as well as general. A special income tax may be laid on the revenues of property or the gains of business. Disregarding questions of incidence, such taxes are unjust where they are not balanced by equal taxes on other sources of wealth or income. Income taxes may be distinguished by their scope, and their modes of assessment and rating. Practically, the chief forms are general income taxes, taxes on the gross or net receipts of business, and graded rates based on various criteria of income.

1 F. A. Walker, Political Economy, p. 502.

2 Seligman, Taxation of Corporations, Pol. Sci. Quart. v, 638.

3 Cf. Bastable, Public Finance, p. 303. Rept. Md. Tax Com., 1888, p. 183.

It has been seen that a general property tax and an income tax would not involve double taxation, if all income came from property. So, under a system of property taxation, two property taxes would not involve double taxation if they were levied on the same basis or in such a manner as to cover the same ground. This would be repetition, merely, without inequality. Specific double taxation of property, eo nomine, is seldom found, but there are two conspicuous kinds of taxation which shield themselves under economic fallacies or legal fictions. Such are some of the taxes on franchise and capital stock. Franchises consist of certain forms of actual property of an intangible nature, which are legal rights or privileges. Like debts, they are intangible, but they are distinguished from them by the fact that while debts have real value and virtue as property only through the existence of certain actual or tangible values on which the debt is a claim, franchises and similar properties have an existence independent of other property.'1 Illustrations of franchises are charter rights of corpora

tions, patent rights, privileged occupations, etc.2

1 In economics property is thought of as a thing, and may be divided as follows: Tangible property, e. g., lands, cattle; intangible property, e. g., notes, shares, franchises, etc. The legal view is more philosophical; property consists in a right or a congeries of rights which have an economic value. Thus, property in land is the right to exercise a certain control over it and reap its fruits; in a franchise, to do certain advantageous things; in a bond, to claim something valuable from an. other. Property is thus tangible and intangible, positive and negative. Debts have been termed negative, and are clearly so. But in a broad sense there is a negative in all private property Thus, in land, the use is restricted. Looking at a franchise, here also a social loss appears; perhaps it is a direct and conscious surrender of the free and "natural" activities of the rest of the community. The best example is the patent right. It is quite apparent again in certain rights, such as servitudes. The use of the term negative, as applied to choses in action, consists in this, that in so far as they involve a claim for tangible values from a private person, they are a deduction from his taxable ability; they are always a proper subject of taxation themselves, even when held against the public treasury, just as a franchise ought to be.

Franchises of real value are, of course, properly taxable.' This has been admitted by the advocates of the doctrine of tax

ation of tangible things. The state would be guilty of injustice in exempting them. They are often treated, however, in quite a different manner. By calling a tax a franchise tax, an arbitrary valuation may be made and grossly double taxation produced. Engaging in certain occupations may be declared to be a privilege, without any just economic ground for the distinction, and thus the person pursuing it be doubly taxed. An important point in the franchise tax is the determination of the valuation. There are many methods adopted, and generally they are arbitrary, or at least purely empirical. The true franchise value is something superadded to the property. Where the franchise is held by a corporation, the total value of franchise and property is generally ascertainable with considerable accuracy. Subtracting from the total value the value of the tangible property, gives us an amount which may be said fairly to represent the value of the franchise. So, similarly, we can often apply this principle to individuals. The sale of the good-will of a mercantile house or of a professional practice is a familiar example of the valuation of intangible things of this character.

The taxation of capital stock is another common form of double taxation. To tax the property of a corporation and also its capital stock, broadly speaking, is taxing the property twice. The property and capital stock of a corporation are not, indeed, always identical, and in many corporations far from it; but the capital stock always stands in some measure for the property. To tax the capital stock, where the property is also taxed, and to declare it to be legally another kind of property, or to call the tax a franchise tax, does not justify it. The

1 Md. Tax Com. Report, 1888, pp. 17-18.

2 Wm. Endicott, The Taxation only of Tangible Things.

3 Seligman, Taxation of Corp., op. cit., p, 447.

▲ Ibid., pp. 642-3.

5 Ibid., p. 449.

actual relation of capital stock to the tangible property varies. The real taxable value of a corporation is the tangible property plus the franchise. Where no liability exists, the value of the capital stock will correspond closely with it. But if liabilities exist, they diminish the value of the capital stock, proportionably. If we should add the debts to the capital stock, the actual value of the property would be approximately determined.' We may express this idea in an equation: Capital stock + debts = tangible property+franchise. In certain cases the equations will stand: Capital stock tangible property + franchise, or debts = tangible property + franchise. The first is perhaps the normal condition of manufacturing corporations; the second is often the predicament of certain other corporations, especially railroads. It is a notorious fact that many railways are built on their bonds, and that their stock represents the value of the franchise only, which is of course largely speculative at first. Applying this analysis to the problem of taxation, it is plain that a capital stock tax and a tax on the tangible property may, or may not, according to the circumstances of the case, involve taxing a greater actual value than exists. If the debts equaled the tangible property the equation might read: Capital stock franchise. In that case, the taxation of both the capital stock and the tangible property would not only not involve double taxation, but would represent the actual value of the total property. Conceivably, also, it might represent less. But, in general, it may be safely assumed that to tax both capital stock and tangible property is double taxation in a large degree.

=

The second part of our subject deals with the taxation of the same property by two different jurisdictions. The question

1 Seligman, Taxation of Corp., op. cit.,p. 452; Md. Tax Com. Rept., 1888, p. 19.

2 Pacific Hotel Co. vs. Lieb (1876), 83 Ill., 602. 3 Md. Tax Com. Rept., 1888, pp. 18, 19.

may be viewed in its three principal aspects-political, legal and economie. We have to deal here with the nature of political allegiance, the conflict of law and the economic relations of persons to the communities in which they live or hold property.

What is the nature of political allegiance, and does this affect the principles of taxation? The state is based on two concrete objectivities, territory and people.' The first is by its nature fixed, the second is in flux. The control of the state over its territory is complete and absolute, but over the individuals of its population it is conditional. A state may lose control over the latter through emigration. As a practical ground for citizenship, birth has given place to residence; governments have become territorial instead of personal. The state can fix upon any principle consistent with its character for the basis of taxation. Its will is supreme, and the duty of the citizen is correspondingly great. The limitations of the taxing power are two: depending, first, upon the physical circumstances of the state; second, upon its purpose. The state cannot take more than it actually possesses, nor that beyond its actual jurisdiction or control; this is a natural limitation.2 It is further limited by its purpose, which is justice.

When the citizen or subject of a state removes to another state, he withdraws his person from its control, and if he also transfers his possessions, he exempts them likewise. To reach his person, it is necessary that the subject return. A similar rule prevails as to persons coming into the state. erty must also be within the territory of a state to be subject thereto, and an actual situs therein is sufficient to establish

5

The prop

jurisdiction. The law in recognizing this has merely accepted

1 Cf. Burgess, Political Science, p. 50.

2 Cf. Opinion of Justice Agnew in Washington Ave. Case, 69 Pa. St., 352.

3 Story, Conflict of Laws, § 540.

• Ibid., § 541.

5 Ibid., § 539.