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Popular Science Monthly/Volume 53/May 1898/Principles of Taxation: Theory and Practice of Income Taxation XXVII

PRINCIPLES OF TAXATION.
By DAVID A. WELLS, LL. D., D. C. L.,

CORRE8P0NDANT DE L'INSTITUT DE FRANCE, ETC.

XVIII.—THEORY AND PRACTICE OF INCOME TAXATION.

COMMENCING with first principles, the general taxation of incomes is theoretically one of the most equitable, productive, and least exceptionable forms of taxation. What can be fairer than that each citizen should annually contribute an equitable and just portion' of his net gain or income for the support of the government or State under which he has elected to live, and in default of which he would not be likely to have either gain, income, or property? and such a method of supporting a government would therefore seem to be in accord in the highest degree with those canons or maxims of taxation which are regarded by nearly all economists and jurists as the highest embodiment of human wisdom on this subject.

And yet the proposition is hardly open to dispute that a general income tax, with such administrative features as are essential to make it desirable as a revenue measure, can not be successfully administered under a free and popular form of government. On this point the comparatively recent experience of the United States, which few now remember, ought to be most instructive. Thus, in 1869, under a Federal law assessing all incomes in excess of $1,000, and with a corps of trained officials to execute it, only 259,388 persons out of a population in that year of about 37,000,000 acknowledged the receipt of any taxable income; and in 1872, when the exemption had been raised to $2,000 and the population had increased to over 39,000,000, the number of persons who had an income tax ran down to 72,949—leaving a presumption that every one of those who did not pay and was made subject to inquisition by the officials in respect to his income, made oath that he was not in receipt, from wages, salary, interest, or profits, of an income liable to taxation in excess of $2,000. From an economic point of view it would be a misnomer to call such a result "taxation"; from a moral point of view its characterization as "appalling" would not be inappropriate.

Another point which may also be accepted as theoretically beyond dispute is, that if all were willing to live up to and carry out the correct and rational theory of an income tax, there would be little use for tariffs, customhouses, internal revenue departments, and excises. But that is exactly what human nature, as we find it, will not agree to have done in the one case, or to do in the other. In fact, there is hardly any other one thing which human nature so much dislikes to do as to pay taxes, although it is capable of demonstration, even to a most obtuse intellect, that there is no one act which can be performed by a community that brings in so large a return to the credit of civilization and general happiness as the judicious expenditure for public purposes of a fair percentage of the general wealth collected under an equitable system of taxation.

Now, an income tax is the very essence of personal taxation, and although in respect to a specialty of application it has been decided by the Supreme Court of the United States not to be a direct tax, it comes to the ordinary taxpayer most directly; and this is the first or one of the most influential reasons why human nature, as ordinarily constituted, does not like it. The world's experience is to the same effect in respect to a "poll" or "head" tax. This in a popular sense is almost universally regarded as a direct tax, and altogether personal in its incidence. It has accordingly always been most unpopular. Its collection has been the occasion of great civil disturbances in the world's history, and it has been denied a place by popular vote or constitutional provision, in the tax system of most of the States of the Federal Union.

A second and more important reason why a general income tax powerfully antagonizes popular sentiment is that its efficient administration, or revenue productiveness, requires that every person liable to taxation in respect to his annual net gains, profits, or income shall make to a Government official an exhibit of the financial condition of his estate, business, or profession; for, in default of such an exhibit, any basis for assessment must be a mere matter of conjecture on the part of the assessor, with a result devoid of any pretense to correctness or equality. But such an exhibit, necessarily disclosing to a greater or less degree his financial condition to his business competitors, and to a curious, gossiping public, no man will willingly make; and he naturally regards it as in the nature of an outrage on the part of the government that seeks to compel him to do it. Hence the successful administration of an income tax involves and requires the use of arbitrary and inquisitorial methods and agencies, which, perfectly consistent with a despotism, are entirely antagonistic to and incompatible with the principles and maintenance of a free government.

Practically, as John Stuart Mill has expressed it, "the fairness which belongs to the principle of an income tax can not be made to attach to it in practice"; and, "while appparently the most just of all modes of taxation, it is in effect more unjust than many others that are prima facie more objectionable" And again he says, "The tax, on whatever principles of equality it may be imposed, is in practice unequal in one of the worst ways, falling heaviest on the most conscientious" and "should be reserved as an extraordinary resource for great national emergencies, in which the necessity of a large additional revenue overrules all objections."

Mr. Gladstone, speaking in 1853, also said, "I believe it" (an income tax) "does more than any other tax to demoralize and corrupt the people" And Mr. Disraeli subsequently in Parliament expressed his agreement with Mr. Gladstone by saying, "The odious features of this tax can not by any means be removed or modified"; and with these opinions nearly all educated financiers and economists are in complete unison, except a comparatively few persons who, educated in Germany, have embraced the idea that because income taxes are effectively collected in countries having a despotic form of government, they can be equally collected in countries under a popular government.[1]

In support of these conclusions attention is asked to the following historical evidence. It is well known that one of the principal causes which led to the great French Revolution was the inequality (class exemptions) and multiplicity of taxes; and one of the first acts of the National Assembly of 1789 was to repeal all inquisitorial and arbitrary taxes of every name and nature; and this repeal was based on the report of a committee of some of the most eminent members of the Convention—La Rochefoucauld and Talleyrand being of the number—which commenced with the following proposition: "Every system of taxation which necessitates personal and arbitrary inquisitions for its execution is inconsistent with the maintenance of a free people" And although, from that day to this, France, by reason of a national debt greater than that ever borne by any other nation, has been compelled to resort to almost every expedient for obtaining revenue, it has, theoretically at least, endeavored to maintain a system of general taxation not inconsistent with the above principle.

Under the head of indirect taxation, however, which includes the general direction of the stamp tax, "domainal public land" revenues, customs, duties on imports, salt and sugar taxes, and monopolization of the manufacture of powder and the sale of tobacco and matches, the so-called communes of France have a right to "levy a tax of three per cent on the annual income (interests, dividends, etc.) of personal property, such as French or foreign securities, shares, bonds issued by departments, industrial establishments, independent of the stamp or transfer tax, but not affecting the bonds of the state (or rentes), nor associations of partnerships in a collective name, nor private obligations, mortgages, and the like." "Religious societies are taxed five per cent on the income of their capital" In 1886 the revenue derived from the above taxes was returned at 47,200,000 francs ($9,400,000), representing in 1886 a capital of 1,500,000,000 francs, of which 131,000,000 francs represented properties situated in France.

Again, it is not generally known that Alexander Hamilton, as a member of the conventions which framed the Constitution of the United States and the first Constitution of New York, gave all his influence in favor of the restriction of all internal or local taxation to visible, tangible objects, and to the assessment of these specifically, and by some uniform and simple rule. The language used by him in one of his papers (The Constitutionalist) on this subject is as follows: The genius of liberty reprobates everything arbitrary or discretionary in taxation. It exacts that every man, by a definite and general rule, should know what proportion of his property the State demands. Whatever liberty we may boast in theory, it can not exist in fact while (arbitrary) assessments continue.

The following sentiment or legal principle, laid down by the United States Supreme Court in the case of Boyd vs. United States (116 United States Reports, 631, 632), though often apparently little regarded by the legal profession, would, however, seem in itself to constitute a complete and insuperable barrier against any resort in the United States to the prosecution of arbitrary or inquisitorial inquiries, which must of necessity be instituted and prosecuted by tax officials for the obtaining of any personal and warrantable data for the correct assessment of an income tax, the language of the court being as follows:

"Any compulsory discovery, by extorting the party's oath or compelling the production of his private books and papers to convict him of a crime or to forfeit his property, is contrary to the principles of a free government. It is abhorrent to the instincts of an Englishman. It is abhorrent to the instincts of an American. It may suit the purposes of despotic power, but it can not abide the pure atmosphere of political liberty and personal freedom."

So much, then, for what may be termed the philosophy of an income tax. Consideration of some of its most instructive experiences is next in order.

The old Romans, who never gave much place to sentiment in their laws or policy, had an income tax in the days of the empire, and they overcame all difficulties connected with its administration in the following manner: They authorized their tax officials, in cases where the citizen did not in their opinion make a satisfactory payment, or was suspected of false statements in respect to his income or property, to administer torture; and the historian Gibbon, in writing about this feature of Roman history, justifies it in a measure in the following language:

"The secret wealth of commerce, and the precarious profits of art and labor, are susceptible only of a discretionary valuation; and as the person of the trader supplies the want of a visible and permanent security, the payment of the imposition, which in the case of a land tax may be obtained by the seizure of property, can rarely be extorted by any other means than corporeal punishment."

That the Roman income-tax system was successful as respects revenue is probable, but it was also destructive of the state; for the testimony of history is that its people finally welcomed the inroad of the barbarians as a lesser evil than the continuance of their tax system.

As has been already intimated, there has been nothing corresponding to a general income tax, with personal inquisitorial features, in the fiscal system of France since the Revolution of 1789, In place of it, taxes are levied on the indicia or signs which each citizen presents of his possession of income or personal property; and the rents or rental value of the premises he occupies for residence or business, and the doors and windows of buildings, are regarded as such signs or indicia. This tax applies to the doors and windows into streets and courtyards and gardens of houses or workshops. In general, all openings giving light or air to houses and buildings for human habitations, shops, workshops, sheds, warehouses, etc., are taxable, whatever their shape, dimensions, or fastening may be. Thus, all openings to afford light to the stairs, to a habitable room opening on a covered yard, of a habitable house used for rural purposes, or the door of a garden leading to a dwelling, all are taxable. The openings to new buildings become taxable as soon as they are habitable. If at the time of making the tax roll some rooms in a new house are not yet habitable, the openings of such rooms are for the time exempt. If the entire front of a room or atelier consists of windows, the number of windows to be taxed is determined by their solid divisions of either iron, wood, or stone. Exempt are the doors and windows to light or air of barns, sheepfolds, stables, cellars, etc., not intended for human dwelling. Further exempt are doors or gates not locked; also interior doors of communication from one yard to another. Doors as well as windows of manufacturing establishments are not taxable except to those in the dwelling part.

Again, what is called a mobiliary tax of France is governed by the amount of rent paid or the rentable value of the dwelling of the taxpayer. That portion of a house used exclusively for trade or a similar purpose and not for a residence is not counted in the valuation of the rentable value like a furnished house or a private chapel; but premises or dependencies of dwelling houses, courts, stables, and carriage houses of luxury, clubs, societies, and Masonic lodges are counted in.

In assessing the mobiliary tax it is not necessary that the figures taken as a basis for taxation should be the real rent; it is sufficient that the proportion of the assumed rent, the basis of the tax, and the real rentable value of the dwelling should be exactly the same for all taxpayers; so that a taxed citizen can convince himself whether he is overtaxed or not by comparing his own rent with that generally charged in his community.

The theory which underlies the French system of taxation is that the rent or rental value of the premises occupied by the taxpayer as a residence is proportioned to the amount of his property; and this generally speaking, would seem to be a not unreasonable assumption. At all events, it would seem to possess this great advantage—namely, that the rent payable by every citizen may be readily ascertained, while the amount of his means can not, if he chooses to conceal it.[2]

Russia seems to have abandoned the idea of an income tax, and in place of it would appear to have substituted what is known as a "hearth" tax, which is collected from each separate building inhabited, or used for any commercial or industrial purpose.

An income tax has existed in Austria-Hungary since the beginning of the nineteenth century. It was repealed in 1829, and reenacted in 1849. This tax is divided into three classes. "Under the

first class, the tax in force in 1887 was from eight and a half per cent to ten per cent of net income." Under this class the following income was taxed: income derived from all those trades and occupations which are subject to a license tax; the income of mining and smelting establishments, and the profit made by the tenants of agricultural lands. In the second class, which includes income from services rendered or labor performed in occupations not subject to a license tax, the rate reported is exceptionally high. Under the third class, which embraces interests from loans, from invested capital, savings banks, and life-insurance companies, the rate is reported to be ten per cent. The exemptions under this latter head are very extensive, and include the pay of officers and soldiers in active service, interest on deposits in savings banks, and a great number of public securities—as five per cent Austrian stocks and bonds, certain bonds of the Tyrol bonds of all railroads subject to taxation, lottery loans of 1859 and 1860, and a large number of other corporation securities.

Servants are only taxed under the second class and in case their total income exceeds six hundred and thirty florins ($226.16).

In case a party subjected to an income tax makes either a false return or neglects to make any, thrice the amount of the tax is imposed, the payment of which, however, includes the tax itself, so that the fine proper is double the amount of the tax.

Denmark.—The income tax of Denmark was recently fixed at two per cent of the taxpayer's income. The tax is collected by authorized agents, who are obliged to give ample security for the faithful performance of their duties, for which they receive a remuneration of two per cent on the amount collected, together with an allowance for house rent in return for the obligations imposed upon them of having residences and offices in the taxing districts. This income tax does not seem to be objectionable in the sense of undue burdensomeness, the only complaints made being in regard to the publicity of the pecuniary conditions of the individuals taxed.

Switzerland.—A resort to an income tax for the purpose of defraying state expenditures seems to find especial favor in

Switzerland, though it does not seem probable that the systems adopted for its enforcement will ever be found satisfactory to the people of other countries. Thus, in the taxation of incomes, the average rate does not generally exceed four or five per cent, but in some cantons the rates rule as high as seven and even ten per cent. By a comparatively recent law established in the canton of Vaud, which in point of population and wealth ranks third in the Swiss confederation, progressive taxation has been established, and the property of the canton is divided into three classes which are taxed in the following proportions: One per cent 1,000 for estates under $5,000 capital value; 11/2 per cent 1,000 between $5,000 and $20,000, and 2 per cent 1,000 for estates exceeding $20,000 in value. Personal property is divided into seven classes, the lowest class being under $5,000, the highest exceeding $160,000 capital value. The rates of taxation on these classes are to be in the proportion of 1, 11/2, 2, 21/2, 3, 31/2, and 4 per cent 1,000. Incomes from earnings are also divided into seven classes, but in arriving at the net amount to be taxed, a deduction of $80 is allowed for each person legally dependent on the head of the family for his support. The result of this is that while a bachelor earning $1,000 a year would pay a tax of $15, a married man with the same income and ten children would pay but fifty cents, and if he had twelve children nothing. The Vaudois law was carried by overwhelming majorities when submitted, as was necessary, to a "referendum" vote of the whole people, and at every subsequent stage of its progress.

The only one of the great governments of the world at the present time which can prefer a claim to a large measure of success in administering an income tax is that of Germany, and especially that of the kingdom of Prussia; and the methods by which such success has been attained, and which seem to be based on the precedents established by the old Romans so far as the changed conditions of civilization will permit, ought to be most instructive to those who think this tax can be administered and made notably productive of revenue in the United States. The tax in Germany is levied, as it were, in duplicate, or under two forms: first, by towns and cities, and termed "communal"; and, second, by the state, under the designation of "class" tax. An entire exemption from these taxes is granted only to the very poorest and humblest of the population.

"Petty hucksters with a small stock of potatoes, second-hand clothes peddlers, servant girls earning four dollars and twenty-five cents a quarter, pay the communal tax, and are also inscribed in the first (or lowest) grade of the class tax."[3]

Every foreigner staying in Prussia more than one year, but with no intent of becoming a permanent resident, must expect to be taxed on his income at the expiration of the first year, although none of the sources of such income may be within the territorial jurisdiction of Prussia. Up to the year 1891-'92 the income tax of Prussia was levied by a board of income-tax commissioners, one third of whom were appointed by the authorities and two thirds by the taxpayers. The assessing was done by the board on information and evidence obtainable; and in the absence of authentic proof as to the amount of annual income, "circumstantial id hypothetical evidence was accepted" Parties thus assessed might appeal from the conclusions of the board to another tribunal organized for that purpose, whose decision was final. Appeals are not often made to this latter board, as the methods adopted by it to bring unwilling or evasive taxpayers to terms are harsh and inquisitorial in the extreme and most peremptory. The modus procedente against delinquent taxpayers is very summary. If after three days' written notice payment fails to be made, a mandate is issued by the tax collector, and the property of the delinquent, especially his household goods, is seized and sold. By another curious provision in the German tax law the collector of taxes is made personally liable for any taxes lost by reason of his failing to mercilessly enforce the collection within a prescribed period. In 1891 some mitigation of the harsh proceedings involved in the assessment of the income tax in Prussia was made by the Government, and now every taxpayer is allowed to make a return.

Great Britain.—The idea of a general income tax as a means of raising revenue was first embodied in the form of a statute in Great Britain under the administration of Mr. Pitt, in 1798, and was proposed and advocated solely as a means for obtaining additional revenue for the prosecution of the war with France. It imposed a tax of ten per cent on all incomes in excess of £200 ($1,000). After the Peace of Amiens, in 1802, it was repealed on the ground that a tax of this character ought to be exclusively reserved for the exigencies of war; and for a like reason it was reimposed on a revival of the war during the following year. Subject to various modifications, it formed an important constituent of the fiscal system of Great Britain until after the battle of Waterloo and the peace of 1815, when it was again repealed. After this, nothing more was heard about it until 1842, when Sir Robert Peel reimposed it as a merely temporary measure—i. e., for a period of five years. It has, however, since remained a permanent feature of the British fiscal system, although its repeal has been promised and anticipated by various administrations, and in the general election of 1874 Mr. Gladstone, in an address to the country, especially asked that the confidence and continued administration of the Government be given him on the ground that he contemplated an early repeal of the income tax. Circumstances, however, have prevented any such action, and in subsequent years of office Mr. Gladstone has not hesitated to raise the tax whenever the necessity of additional revenue for the Government became imperative. That he has regretted his inability to abolish it is evident from his saying, in his financial statement in 1853: "I think some happier Chancellor of the Exchequer may achieve this great accomplishment, and that some future poet may be able to sing of him:

"He took the tax away,
And built himself an everlasting name."

From the outset the income tax has been more odious and unpopular in Great Britain than any other form of taxation. Among statesmen and economists there is hardly any dissent from the opinion that the tax is bad in principle, because unequal and unjust in its assessment, and incapable of being made equal and just; and this, too, although the administration of the revenue laws of Great Britain—owing to the comparatively small area of territory subjected to supervision, and the fact that the tenure of office on the part of officials is dependent solely on honesty and intelligence—is wonderfully efficient, far more so than can be expected under existing conditions in the United States. The annual reports of the British Commissioners of the Inland Revenue always mention extensive evasions of the income tax. For the year 1864-'65 the amount of such evasion was estimated to have been equal to about one sixth of the revenue collected under it. The demoralizing effects which are inevitably produced by the habit of making false returns respecting income are regarded by many British authorities as far more deplorable than those resulting from any inequality contingent on this form of taxation; as the transition from a fraud upon the Government to a fraud upon the public is comparatively easy. The reported product of the income tax of Great Britain for 1893-'94, was £15,200,000 ($76,000,000); an amount beyond the estimate.

Note.—The following incident, which has become a part of English political history, is curiously illustrative of the state of public opinion in England at the time of the first imposition of the income tax under the statute of Mr. Pitt, and is derived from the memoirs of John Horne Tooke: Mr. Tooke was an Englishman who participated actively in British politics during the latter third of the last century. He early espoused the side of the Americans in their struggle for liberty, and was persecuted, fined, and imprisoned by the British Government for publishing an advertisement for a subscription for the widows and orphans of the Americans "murdered by the King's troops at Lexington and Concord." After his release
from prison he naturally, and in connection with John Wilkes, made himself politically disagreeable to the Government, and the Government in turn made itself disagreeable to him; and accordingly the office of the commissioners for carrying into execution the act for taxing incomes addressed Mr. Tooke the following letter:

"May 3, 1799.

"Sir: The commissioners having under consideration your declaration of income have directed me to acquaint you that they have reason to apprehend your income exceeds sixty pounds a year. They therefore desire that you will reconsider the said declaration and favor me with your answer on or before the 8th inst.

"I am your obedient servant,
"W. B. Luttley, Clerk."
 

To this Mr. Tooke replied:

"Sir: I have much more reason than the commissioners can have to be dissatisfied with the smallness of my income. I have never yet in my life disavowed or had occasion to reconsider any declaration which I have signed with my name. But the act of Parliament has removed all the decencies which used to prevail among gentlemen, and has given the commissioners (shrouded under the signature of their clerk) a right by law to tell me that they have reason to believe that I am a liar. They have also a right to demand from me upon oath the particular circumstances of my private situation. In obedience to the law, I am ready to attend upon this degrading occasion so novel to an Englishman, and give them every explanation which they may be pleased to require.

"I am, sir, your humble servant,
"John Horne Tooke."
 

  1. As the opinions of English authorities (above referred to) have been disparaged on the ground that they represent old-time utterances and imperfect fiscal experiences, attention is here asked to the following extract from a letter of Prof. Thorold Rogers, late member of the British House of Commons and Professor of Political Economy, University of Oxford, under date of August 25, 1884: "Nobody defends the income tax. It was first imposed on the tyrant's plea that the administration can not do without it, and it has been continued for the same reason. Every Chancellor of the Exchequer has condemned it in principle and has continued it in practice. It is not wonderful, therefore, that, fortified by these avowals, people who can evade the tax do so."
  2. The following epitome which has been recently made of the burdens of taxation imposed upon an honest taxpayer in New York as compared with that which is borne by a man possessed of the same means or income in the city of Paris is believed to be approximately correct:

    Let us assume that the property of such an individual, if out of business, consists of personal estate, such as railway bonds and stocks of the value of $100,000, that the net annual income therefrom is $5,000, and that the rent paid by such individual amounts to one fifth of his income, equal to $1,000, or that being engaged in business his average annual profits enable him to occupy an apartment of the same rental value. In Paris the party in question would have to pay as contributions mobilières about 400 francs, or, say, $80, or, including his door and window tax, which he pays through his landlord, say, $90. If engaged in business or practicing a profession, he would have to pay a license tax or patente, which varies from 100 to 1,000 francs (we are speaking, of course, of the mass of the people, and not of merchants or companies occupying very extensive and costly premises, whose patente may run up to several thousand francs, and whose taxes are payable out of the profits of their business, and not out of the income derived from their investments). Such householder thus pays on an average, say, 1,000 francs as the total of his direct taxes. Supposing him to pay the sum of 1,000 francs indirectly in the shape of octroi duties on the provisions consumed by himself and family in the course of the year (and this allowance we consider a very liberal one), we find the total amount of his annual taxes, direct and indirect, to be, say, 2,000 francs, or $400; while in New York a person similarly situated would have to pay, if he made an honest and full declaration of his property, about 2.6 per cent on his principal, making, in the present case, his tax amount to $2,600. Even if we assume that the Parisian pays an additional $200 per year on an average in the way of succession and other exceptional taxes, his contributions to the expenses of the government would be at the utmost only $600 in place of the $2,600 levied upon the unfortunate New-Yorker.

    In return for what he pays, the Parisian enjoys well-paved and well-cleaned streets, wide and unobstructed sidewalks, shade trees with benches under them for the weary, public gardens kept in beautiful order, etc., while the New-Yorker gets—well, the less said on this subject the better. May we not entertain the hope that honest men of all parties will soon unite to secure a better system of taxation and a more efficient administration of the government in the most populous and wealthy city of the model republic? or must we accept as a melancholy truth that universal suffrage inevitably results (at least in American cities) in rabid democracy, dishonesty, and dirt?" Note.—M. Yves Guyot, in a report recently made on questions connected with proposals relating to the establishment of an income tax in France, regards the great fiscal wrong in that country to be the inequality of the assessments of real property in the different departments. This is increased by the fact that the French land tax is not levied at the same rate on all property, but the proportion of the whole amount which is to be paid by each department is fixed by the central authority; the departments allot the quotas to be paid by the several communes, and the communal authorities apportion their quota among the individual taxpayers. The tax is, to use the French technical term, one of répartition and not of quotité. If it were the latter, each taxpayer would pay in proportion to his property; the rate of the tax would be fixed by the Government instead of the amount to be raised from each department. The valuation on which this tax is levied is the net annual value, and was fixed unsystematically and imperfectly from fifty to seventy years ago; the value of real property has changed, but the original assessment is still in force. The result is that some departments pay from six to eight times as much as others in proportion to their real annual value. M. Guyot advocates a tax on the capital in place of on the annual value. There is, as he points out, a manifest injustice in taxing the same amount of capital at different rates, according to the mode in which it is invested. In France a capitalist might invest his money in building lots or other land temporarily unproductive, but held for resale at a profit. The investment, yielding no income, would practically escape taxation. If the same sum were invested in safe securities yielding an income of three per cent, the tax would be levied on that income, while if placed in business where, though it might temporarily yield twelve per cent, the loss of the whole would be risked, the owner would pay four times as heavy a tax as in the previous case. The same objections have been frequently urged against the income tax in England, but there a difficulty exists in the way of assessing the capital value of land—viz., that land is generally the subject of letting and seldom of sale. In France, however, not only are there nearly a million sales of land each year, but on every devolution by inheritance the capital value of the land is officially registered. The ascertainment of the capital value of the entire country would be an easy matter, and such an assessment would be of more durable benefit than an official estimate of the annual value, which, necessarily varying from year to year, would be a much more fluctuating and uncertain basis for taxation than the selling value. The reforms proposed by M. Guyot would increase the land tax in those departments which are undervalued; and he estimates that a revaluation for taxation would cost ten million dollars, and that it would take ten years to complete. He thinks the complaint by landowners of overtaxation generally is unfounded; but he would nevertheless relieve them in the interest of free-trade principles from the vexatious and heavy duties on transfers, which, with legal expenses, make the cost of sales amount to ten per cent of the price paid. This heavy impost prevents sales, and its removal should be supplemented by establishing a simple system of transfer on the record-of-title principle. These reforms, which involve equality of taxation and free trade in land, are, in M. Guyot's opinion, essential to the well-being of France, whose greatest wealth consists in her land. Fifty per cent of the population are engaged in agriculture, and, without releasing them from their fair share of the public burdens, they should be placed in such circumstances as will permit land to pass into the possession of those who are most capable of working it to advantage. (Rapport sur les questions relatives à l'impôt sur le revenu. Par Yves Guyot. Paris: Guillaumin & Cie. 1887.)

  3. United States Consular Reports, Nos. 99, 100, p. 461.