wealth devoted mainly to consumption, but existing as the stock in trade of individuals. Even in our most western commonwealths, where the communities are still mainly agricultural, it is an acknowledged fact that the personalty exceeds the realty. The auditor of Washington tells us that if a true valuation could be reached it is "clear and incontestable that the wealth of the territory in personal property, for the purposes of taxation, would largely predominate over that of real estate." And if this is true of the far West, how much greater must be the relative proportion of personalty in the busy marts of the East. Yet the more differentiated the industry and the more predominant the personalty, the less does the latter contribute to the public charges; until in the foremost state of the Union realty pays more than nine-tenths and personalty less than one-tenth.

The taxation of personal property, I repeat, is in inverse ratio to its quantity. The more it increases, the less it pays. The general property tax thus sins against the principle of universality of taxation even more than against the principle of uniformity. In the middle ages whole classes were exempt by express provision of the law; in our time and country whole classes are exempt by the inevitable working of the law. It is the law which is equally at fault in both

cases.

3. Incentive to dishonesty. One of the worst features of the general property tax is that any attempt to enforce the taxation of personalty by more rigid methods results in evasions and deceptions. The property tax necessarily leads to dishonesty, and this for two reasons. In the first place, under our system whole classes of personalty are exempt from state taxation. The most familiar examples are imported merchandise in the original package; United States bonds, notes, checks and certificates; property in transitu; goods produced in another state sent on commission; deposits in savings banks, etc. The temptation for the taxpayer to convert his property temporarily into these classes is generally irresistible. Not only does the law hold out to indi

viduals inducements to practice fraud, but it sustains them in its commission. Secondly, wherever any pretense is made of enforcing the tax on personalty, and especially where the taxpayers are required to fill out under oath detailed blanks covering every item of their property; the inducements to perjury are increased so greatly as to make its practice universal. The honest taxpayer would willingly bear his fair share of the burden; but even he cannot concede his obligation to pay other men's taxes. The only result of more rigid execution of the law is a more systematic and universal system of deception. Official documents tell us that "instead of being a tax upon personal property, it has in effect become a tax upon ignorance and honesty. That is to say, its imposition is restricted to those who are not informed of the means of evasion, or, knowing the means, are restricted by a nice sense of honor from resorting to them. The tax commission of New Hampshire declares that "the mere failure to enforce the tax is of no importance, in itself considered, in comparison with the mischief wrought in the corrupting and demoralizing influences of such legislation. The Illinois commission asserts that the system is "debauching to the conscience and subversive of the public morals a school for perjury, promoted by law." The Connecticut commission maintains that the resulting "demoralization of the public conscience is an evil of the greatest magnitude." The West Virginia commission tells us that "the payment of the tax on personalty is almost as voluntary and is considered pretty much in the same light as donations to the neighborhood church or Sunday-school." And almost every annual report of the state comptrollers and assessors complains bitterly that the assessment of personalty is nothing but an incentive to perjury.

4. Regressivity. Taxes are progressive when their increase is more than proportional to the increase of the property or income taxed, i. e., when the rate itself increases with the increase of the property. Taxes are regressive when the rate increases as the property or income decreases. The general

property tax in its practical effects is regressive. For the tax on personalty is levied practically only on those who already stand on the assessor's book as liable to the tax on realty. Those who own no real estate are not taxed at all; those who possess realty bear the taxes for both. The weight of taxation thus rests on the farmer. In the rural districts the assessors add the personalty, which is generally visible and tangible, to the realty and impose the tax on both. We hear a great deal about the decline of farming land. But one of its main causes has been singularly overlooked. It is the overburdening of the agriculturist by the general property tax. What is virtually a real property tax in the remainder of the state becomes a general property tax in the rural regions. The farmer bears not only his share, but also that of the other classes of society. Thus official documents tell us that "the class of property that escapes taxation most, is the class of property that pays the largest dividends.' And in general it may be said, with our state auditors, that "the property of the small owner, as a rule, is valued by a far higher standard than that of his wealthy neighbor." Or, as it is put by others:

In every portion of the State we find the most unproductive property, and that of the lowest real value, assessed at the highest ratio. The rule holds good that those who have to battle hardest with life for subsistence, are compelled to pay the most onerous taxes on the real value of their property.

It is no wonder that in their desperation the small farmers should cry out for the equal enforcement of the laws taxing personalty; it is no wonder that they should attempt to stem the current in ignorance of the impossibility of the task. They have forgotten Walpole's saying, that it is safer to tax real than personal estate, because "landed gentlemen are like the flocks upon their plains, who suffer themselves to be shorn without resistance; whereas the trading part of the nation resemble the boar, who will not suffer a bristle to be pluckt from his back without making the whole parish to echo with his complaints."

5. Double taxation. Double taxation is of two kinds: that which is prima facie double-double taxation in itself— and duplicate taxation arising from interstate complications. The second form will be omitted here, as it is not peculiar to the property tax but may arise in connection with almost any direct tax. The existing chaos on this point will be discussed in another article. I confine myself here to the first form.

Perhaps the greatest weakness of our general property tax, and the one which has given rise to the most interminable discussion, is connected with the subject of debt exemption. On the one hand it is maintained that an offset should be made for all indebtedness, whether mortgage debt on real property or general liabilities on personalty. Individuals should be taxed on what they own, not on what they owe. To tax both borrower and lender is double taxation. This is the view of the Connecticut commission, and the practice of a few states accords with it. On the other hand the majority of American investigators assert that deduction for indebtedness results practically in such injustice and deception as to be utterly unendurable. They therefore demand that there should be no offset of debts against property. This is the view of the Massachusetts and New Jersey commissions, and the practice in many states.

Both these views are correct. To tax both lender and borrower for the same property is plainly double taxation, and therefore unjust. The fallacy of the contrary opinion consists in looking at the property rather than at the owner. What the state desires to reach is primarily the individual. It taxes his property simply because it considers this a test of his ability to pay. But his ability is manifestly reduced pro tanto by his debts. His true taxable property therefore consists in his surplus above indebtedness. Otherwise one would be taxed for what he has, and another for what he has not. This is the view accepted by all European authorities. The only American scientist who holds to the contrary opinion, Amasa Walker, does so in a half-hearted

way; for he bases his view on utterly arbitrary data, confesses that much hardship will ensue, and finally concludes that the income-tax principle is the only just one. To tax both property and credits, both lender and borrower, is plainly incorrect in principle, and inequitable in practice.

On the other hand it is equally true that deduction for debts is thoroughly pernicious in its operation. It is the universal testimony that no portion of the tax laws offers more temptations to fraud and perjury than this system of offsets. The creation of fictitious debts is a paying investment. In the states where such deductions are permitted, attempts to obtain immunity from taxation in this way are universal and generally successful. And they are most successful in the case of property which already bears less than its share of the burdens. The great majority of officials cry out against debt-exemption as an utter abomination.

If we sum up all these inherent defects, it will be no exaggeration to say that the general property tax in the United States is a dismal failure. No language can be stronger than that found in the reports of the officials charged with the duty of assessing and collecting the tax. Whole pages might be filled with such testimony from the various states.

79. THE TAXATION OF SECURITIES.

Among the problems of taxation none press more insistently for settlement than that having to do with the taxation of stocks, bonds and other intangible forms of wealth. The inequalities and unfairness which result from the attempt to apply the general property tax to this form of wealth are clearly set forth by Professor F. W. Taussig in the following selection: [1899].

The common mode of taxing securities in our states and cities is familiar enough. They are taxable like other property. The taxpayer is confronted with a formidable document, on which he is expected to set forth all his possessions, from his house to his watch, from his stocks and bonds to the pennies in his pocket. On the basis of such a