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§ 297. In taking up the consideration of objective taxes, the concept of which contains implicitly a contrast with subjective taxes, we are treading the historic ground of the scientific period of tax development.

The consciousness of this contrast is absent in earlier times. It was not until the nineteenth century theory brought it forward that it came into the foreground ; its logical consequences have become evident only very recently. Objective taxes, however, considered as a distinct group of taxes, are of so great importance, their presence in the modern system of taxation is of so great conse quence that at least the leading types of the development deserve to be noticed.

The scientific epoch in the history of taxation, although it partakes largely of the character of the eighteenth century and of the new science of political economy, and although it very boldly opposes and criticises the abuses of the earlier political and financial system, is still, in one respect, affected by the sobering influence of experience, and that to such a degree that it is only very lately that the idealistic view of life and of the science has been able to set aside the realism of that early day. There took place a sobering of the views on personal taxes. Very much in the same manner as the small city republics brought the idea of popular sovereignty into disrepute in the eighteenth century, so that a considerable further development in theory and experience was necessary in order to reinstate it in the position of importance which it holds at present, so also in the case of the personal taxes. The days of the republican virtue, and of its tax system, such as Macchiavelli found it existing in the German cities alone, were by this time past in those cities also. It is the abuses of the tax which obtrude themselves on the notice of any observer of the state of affairs in the eighteenth century. The best that we can expect to find will be exceptions from the demands and presumptions which arise out of the greater size which is normal to the modern commonwealth. Theoretical writers, like Justi and Smith, combat the predilection for personal taxes by citing the unfavorable experiences of the past.' The teachers of Finan cial Science followed in their footsteps for a hundred years.

The tax theory of the entire abstract school of the Physiocrats, in whose theory empirical knowledge plays but a negative part, afforded a staunch support to this direction of the develop ment of financial theory ; for their doctrine of the single tax became the foundation of the whole of the modern European system of objective taxation.

It is not exactly praiseworthy, although it is excusable in a youthful science, to have gone on in this direction long after the new epoch in taxation, though unrecognized in theory, had been introduced into practice by the course of events. The greatest of Adam Smith's disciples among practical statesmen, William Pitt, is far in advance of his teacher on this point.

§ 298. Justi' sets up the fundamental principle of taxation that the taxes must rest on a secure, stable and unequivocal basis, and must consequently be laid on objects from which it cannot only be collected expeditiously and with certainty, but with regard to which fraud and concealment on part of the subjects, and peculation on part of the tax collectors, cannot easily take place. These requirements are best fulfilled by the tax on landed property, and this tax has consequently come to occupy a prom inent place in the fiscal system of every civilized people. In com parison with this land tax a general income tax' is condemned by Justi, for the reason that it involves a publication of the amount of the taxpayer's property, which is detrimental to the credit of merchants and is annoying to all men. Such an income tax could scarcely be adopted by a wise government. There is a warning in the example of the city of Nuremberg, at one time wealthy and beautiful, but whose population is now dwindling daily, which must be attributed mainly to their employment of this class of taxes.' We are familiar with the similar views held by Adam Smith.

The historic structure of the French tax system prepared the way for the Physiocrats and for the development of French tax ation along the lines of their theory ; a development which came to serve as, a model for Germany and for other states.

Even under the old regime there is distinctly perceptible a tendency toward the transformation of the burdensome system of personal taxes into the less burdensome and less arbitrary form of objective taxes. The taille, by tradition the cardinal form of the personal tax, was, according to an official expression dating from the year 1772," "arbitrary in point of apportionment, solidaire in the method of collection pursued, a personal, and not a land tax in most parts of France, and subject to continual changes in conse quence of alterations occurring every year in the pecuniary means of the taxpayers." The office of tax-assessor and tax-collector was held by a member of the commune, and since it was looked upon by everybody as a misfortune, it was held by each one in turn, for a year at a time ; the miserable incumbent was surety with his person and his property for the payment of the prescribed amount. Turgot says of this office that its consequence was desperation and, almost invariably, the ruin of the incumbent ; whence it came that the well-to-do families were, one after the other, reduced to beggary, while in their relation to the lower classes it was a fear ful incentive to the exercise of arbitrary power. Under this sys tem it was everybody's interest to conceal his own wealth and to keep a watch upon his neighbors and inform the assessor.

Such was the state of the case in the greater portion of France. But there were, even at that time, particular provinces in which —in connection with certain survivals of self-government' that had been preserved by good fortune — the Taille had not assumed this oppressive character because it had remained an objective tax, in fact a tax on realty. In the Languedoc,' for example, one of the most fortunate of the provinces under the old regime, the case was such as we have described. The Taille rested only on landed property ; it did not change with the changing fortunes of the landowner ; its basis was a hard and fast cadaster, which was constructed with great care, and was revised once in thirty years. By this means every taxpayer knew beforehand exactly what part of his net receipts he had to pay yearly. There was no personal or other security for the tax, except the plot of ground on which it rested.

All these provisions, remarks Tocqueville, correspond with precision to those which we apply today ; no improvement has been made since that time in the provisions, but they have been extended to apply to the whole country uniformly. And this historical fact is not all ; it is an integral part of what Tocqueville aims to prove—namely, the intimate connection between the political machinery of old France and the new—but he also goes on to argue from this development of the new French tax system to the permanent adequacy of the tax reform ; so excel lent a historian is he, and so excellent a Frenchman..

§ 299. In view of this historical relation the objective tax system of the French Revolution appears in quite a different light from what it does when viewed from the standpoint of the modern German tax system and its theory. For that epoch and that people, it was a great deliverance and a great step in advance.

The prominent place occupied by the tax on realty in this system is due to causes which had, for hundreds of years past, acted to make landed property the chief object of taxation ; it was the chief element of wealth at the stage of industrial development which was then prevalent, it is the most palpable object at every stage of industry, and there subsists, in an emi nent degree, a connection between landed property and the wel Tocqueville, L'ancien regime, p. 211 ; cf. p. 347 ; cf. Parieu, Trate des impBts, vol. i. pp. 223-224.

fare of the commonwealth. This view was expressed in scientific form by Justi, and Adam Smith and his school afterwards spread it abroad. The Physiocrats are advocates of the same doctrine, only in a cruder, more abstract, more exaggerated form. In view of all that we observed with regard to the legislation gener ally, and particularly the tax legislation, of the French Revolu tion, it seems improbable that the authority of the Physiocratic doctrine alone would have been sufficient to establish the tax on realty as so essential a factor in the French tax system, if that tax had not at the same time fitted in so precisely with the facts of the case.

The law of November 23 and December I, introduced a tax on realty, to be assessed in proportion to the average net rental. The net income from property was to be found by an appraisement, taking account of the character of the soil and the kind of cultivation, and with deduction of the cost of culti vation. For city property (buildings) the basis of the tax was to be the rental, after deduction of one-fourth for wear and tear, etc. The sum to be raised by the tax was to be determined beforehand by a legislative act, so that the officials having charge of the assessment would simply have to distribute the aggregate amount of the tax among the individual parcels of property.

The tax was to be collected beginning with January I, 1791. The uniform appraisement of net income from the land met with great difficulties. The provision that the tax must in no case exceed one-sixth (1791), afterwards one-fifth (1793) of the net rental was not found sufficient. It appeared that resort must be had to a cadaster, in which each particular property was regis tered, specifying the character of its cultivation, its net rental and its boundaries. The cadaster was begun in 1807 and was not finished until 185o. But inasmuch as this painstaking and tedious task was carried out without taking into consideration changes in cultivation and in the net rental, it presented only a picture of the situation at the moment of the first assessment, no account being taken of any change except changes of owner ship, changes in tax exemption, and the destruction or con struction of buildings. But in consequence of the lapse of time since the beginning of the cadastration, it came to pass that the cadaster was not an accurate expression of a real situation with respect to net rental, even at the time of its inception. Imme diately after the cadastration was concluded it was officially ascertained that the tax on realty in France varied from 3.74 per cent. to 9.07 per cent. of the net rental. It amounted on an average to 6.o6 per cent. of an appraised revenue of 2645 mil lion francs.

In addition to all this, changes in the net rental have also taken place, and (according to official enquiries, 1851-1880) the net rental varies greatly with variation in the kind of cultivation.' The intention of the legislators to establish a distribution of the tax on realty in proportion to the net rental was therefore not accomplished by means of the cadaster either.

At the same time the harshness of these inequalities have been, to a slight extent, made more tolerable by avoiding any increase of the aggregate amount of the tax. In 1790 the aggre gate was fixed at 210,000,000 francs, in 1804, at 184,000,000, in 1821 it was lowered to 154,000,000, in 1859 it was 162,000,000, in 1884, 175,700,000 francs. Of course the supplementary taxes for departments and communes are a factor of some importance, and of growing importance (1838, 70.78 millions, 1851, 96.3 millions, 1885, 192 million francs). If the question were simply that of increasing the tax to correspond with the increase in net rental that has taken place during the century, this increase of the com munal supplementary taxes might probably be regarded as a the tax beyond this proportion would be quite feasible and proper. The inequality that is properly to be complained of is that which results from the imperfect character of the cadastra tion.

§ 300. Even at the outset the tax legislation of the Revolu tion did not proceed on the Physiocratic doctrine that the land tax was to be the sole tax. On the other hand there was intro duced at the same time (December 5-19, 1790, January 13, and February 18, 1791) the "Personal and Personal-Property Tax" [imp& personnel a mobilier].

The purpose of this latter was, to supplement the land tax by reaching incomes which are not drawn from landed property. In. this case, too, the problem was to divest the taille of the arbitrary character it had hitherto borne, by the addition of objec tive, impersonal specifications. As such an external aid, the amount of rent paid by the taxpayer had been favorably con sidered even before this time. After some tentative experiments, among which was also a personal class tax, the law of April 24, 1806, incorporated as permanent elements in the tax : (I) a per sonal tax amounting to the value of three days' labor (minimum 50 centimes, maximum 1.5o francs); (2) the personal property tax [impot mobilier] based on the rent of dwellings.

The aggregate amount of this tax for the whole country, as well as its repartitiott among the departments, is determined yearly by the budget ; the departmental quotas are then distrib uted among the arrondissements and communes, and the com munal quotas are distributed among the individual taxpayers. The personal tax, limited by law to the value of three, days' work, is the fixed element in the tax ; the product of this is deducted before distributing the amount of the tax among the individual communes, arrondissements and departments, in pro portion to the rent paid for dwellings. From the tax so dis tributed are exempted industrial and business establishments together with the usufruct of furniture in dwellings which are rented furnished.

This Personal and Personal-Property Tax is therefore, in part, a very moderate poll tax, which, in spite of repeated attempts at its development in the direction of a Class and Income Tax, still remains in an embryonic state. In part—and this comprises the greater part of the entire tax—it is an ordi nary tax on dwellings, based on the rental of the dwelling.

Here, as well as in the case of the tax on realty, it follows from the inflexible form of the tax that the revenue has devel oped but slowly and not in proportion to the development of the national expenditures and the people's taxpaying capacity. The national tax was, in 1832, 39.41 million francs ; in 1870, 55.51 millions ; in 1885, 70.26 millions. The repartition of the aggregate amount of the tax among the departments has remained unchanged since 1832. Within the arrondissements and communes there is a greater flexibility ; the supplementary taxes for communal purposes showing the more vigorous devel opment : the supplementary taxes have risen from an aggregate of 9.13 millions in 1838, to 32.86 millions in 1885 ; the communal supplements have increased during the same period from 4.04 million to 28.97 million francs.

A modification of the tax is possible, in that the communal quota may be in whole or in part paid out of the receipts from the octroi (on resolution by the common council and authoriza tion by the national government), and in point of fact this is the practice in the larger cities. Paris, for the payment of the portion not covered by the receipts from the octroi, lays a rental tax of a strongly progressive character (while the rate of the ordinary impot mobilier is a proportional rate), rising from zero (for rentals of less than 250 francs) to 9 per cent. (for rentals of 1500 francs and upward).

§ 301. Originating in 1798 as a supplement to the impot mobilier, the Door and Window Tax presently became a tax on realty, by making the landlord surety for the payment of the tax. The owner's name alone is carried on the tax list. It is left entirely to him to recoup himself from the tenant for the pay ment of the tax. But this is not commonly done ; so that the tax is, in practice, a house tax, which may, under given circum stances, be shifted to the tenant, but is not primarily expected to be paid by him.

The schedule of rates under this tax was fixed by a law of April 21, 1832. The rate is graduated in proportion to the size of the dwelling and the number of openings and windows of the house, with a slight reduction on the windows of the upper (third, fourth, etc.) stories in the larger cities. This tax, also, therefore, is levied by a hard and fast schedule, and based on out ward symptoms as far as possible with0ut any attempt to pene trate into the personal circumstances of the taxpayer ; it is an objective tax of characteristic French precision. But the precis ion is a negative one, so to speak, in that it defines very clearly what are the rights and liabilities of the taxpayer (though it leaves room for a good deal of casuistry in individual cases), rather than positive in the sense that the particular external specifications on which the tax is based are well chosen, or even favorable to the development of proper housing of the people.

In 1802 the aggregate sum to be raised by the tax was arbitrarily fixed, because the receipts had been too low during the years immediately preceding. But inasmuch as the data were wanting for a proper repartition of the tax among the departments, etc., it was quite in order (March 26, 1831) to replace this repartition tax by a proportional tax, which increased the receipts and drew more heavily on the portions of the country that were better able to pay. But by April 21, 1832, the favorite system of a repartition tax was reinstated, the aggre gate receipts being now fixed at 22,000,000 francs (instead of 16,000,000 francs in 1802). At the same time greater flexibility wa,s given the tax (1835, 1844) by graduating the schedule of rates according to the size of the establishment, and by taking account of new buildings.

The aggregate receipts have therefore increased — 1870, 40,000,000 francs ; 1885, 47,000,000 francs. The number of houses (and factories) in 1876 was 8,630,182 ; so that the average amount of the tax is quite moderate.

§302. Finally, there is the Trade-License Tax [Gewerbesteuer] (contribution des patentes). This was originally based on the rental of the place employed for the trade (decree of February 19-25, 1791). It was abolished in 1793, re-established by a law of July 22, 1795, altered during the years following, especially by the law of October 22, 1798 ; it was further developed and adapted by the law of April 25, 1844, and later by the law of July 15, 1880.

It is contrasted with the other three taxes spoken of in not being a repartition tax, but is like them in being based on external indications which, during the development of the past century, have been the subject of a progressive casuistical treat ment. The name (contribution des patentes) is due to the fact that the governmental concession under the rule of free choice of employment established by the Revolution, involves the obtain ing of letters patent, the granting of which was based on purely fiscal conditions, namely, the payment of a yearly tax. But as a uniform annual payment, incumbent on all persons following a trade, could at best be but very low, there came to be gradually introduced an ever more exact gradation in the rates of the tax. This was accomplished in part by graduating the fixed yearly license fee, in part by means of the Proportional Rates combined with it and based on the rental of the place employed for the trade or of the dwelling.

To the trade-license tax are subject trades and occupations, in the conventional sense which excludes agricultural pursuits. It includes, however, the chief liberal professions, in so far as these are carried on independently. Exempt are the business establishments on the smallest scale (without assistants, appren tices, or the like).

In the case of occupations serving the needs of the local population only, the rate of taxation is graduated according to the number of inhabitants of the place. All occupations are classified (in four classes) according to the character of the industry, and within each class the establishments are classified according to the rental paid. The maximum tax paid as a trade license, as, for example, by a Parisian banker, may amount to three or four thousand francs. For the great majority of per sons liable to this tax, the rate (assessed anew every year fluctu ates between two and four hundred francs. To this is to be added the supplements levied for the purposes of the department and of the communes.

The aggregate receipts have increased considerably. The revenue going to the state increased from 31 million francs in 1838 to 107 millions in 1885. But the supplementary additions, which at the outset were quite low (6 millions), have now risen to 65 millions ; the total has accordingly increased from 37 millions to 172 millions.

The efforts of the French legislation to base the amount of direct taxes on external indications alone, have met with greater success in the case of the license tax than in that of other taxes, even including the tax on realty, because, in the first place, in this case the changes undergone by these external indications from year to year are taken into account ; second, because the great number of indications taken into account is being contin ually more and more developed and better classified ; third, because this more accurate ascertainment of the actual incomes of taxpayers enables the taxing power to augment the demands made on the taxpayer in proportion as the needs of state and commune increase. That perfection has been reached in this direction no one will assert. Rather, this legislation is to be looked upon as an experiment to ascertain the limits which tax legislation of this class must not exceed. Within the limits of a simple income and objective tax, however, the French trade license tax is probably to be taken as a relatively successful solution of the problem ; the problem in this case, analogous with that of the tax on realty, being to determine the average (that is to say, without regard to variations in individual cases) net income, regard being had to objective, external indications alone, and to fix the rate of taxation on this basis.

§303. The unity of presentation of the matter which must be preserved in such a brief survey of the history of taxation, and for the sake of which we have constantly kept the Prussian German tax legislation in view—this unity is not impaired if, as in the present case, developments of tax legislation in foreign countries are introduced into the discussion, so long as they are developments of such importance for the history of financial science, and at the same time closely related to the practical measures through which the tax system of the Fatherland was built up. The science of taxation and the practice of tax legis lation have for nearly a hundred years past been incorporating into the French model which we have briefly described such ideas as our century has found to afford the most satisfactory solution of the tax problem.

We shall now take up Prussia, and first of all, the legislation dealing with taxation of realty.' Here, as in France, the eighteenth century prepared the way for the nineteenth century in the matter of a carefully constructed cadaster of rentals and usufructs, and land taxes apportioned on the basis of such a cadaster. The prevalent abuses of the taille in France, as a personal tax varying from year to year, are not a feature here, but the oppression of the lower classes of the rural population and the exemption of the nobility are present here as they were there. Differences in the taxes on realty from one place to another are a more prominent feature here, in conse quence of the relative newness and imperfect centralization of the political organization. It is also not entirely due to differ ences in our favor, that the burden of taxation resting on the lower classes was lighter here than in France. The persistence of serfdom even down into the nineteenth century, shielded a large part of the lower classes of the rural population from the incidence of the land tax, by depriving them of the possibility of ownership ; whereas in France villenage disappeared centuries ago, and the widespread peasant proprietary was the prerequisite of a general incidence of the land tax.' In strong contrast with what happened in France, the idea of the new century (expressed in the Fiscal Edict of October 27, 181o), that equality of taxation was to replace the inequity of the olden time, failed to make good its promise. This is a point at which the Revolution shows itself superior to the peaceful methods of reform which prevailed in the Prussian state. The peaceful reform requires another half century to overtake the Revolution.

The land taxation which immediately preceded the reform period in the Prussian territory varied greatly from place to place. An attempt had been made as early as the times of Fred erick William I. to terminate the cruder inequalities in the dis tribution of taxes ; he sought to adjust the Hide Tax [Hufen sch,oss], and the Horn and Hoof Tax in East Prussia to the real productive capacity of the property, whereas the quality of the fields had hitherto been left out of account, and this mechanical uniformity of taxation had resulted in the grossest inequality in the burdens imposed. In this attempt was included an endeavor to tax the nobility and the peasantry on the same basis,' as also to impose an income cadaster, of the nature of an objective tax, which should take no account of incumbrances on the land, etc. Reforms of the same nature were in progress in Pomerania and in Citerior Pomerania at the same time. In Silesia the Austrian government had begun the construction of a cadaster in 1723, and Frederick the Great had, since 1743, tried to introduce a uni form tax on land instead of the numerous burdens that had accu mulated in the course of time ; dating from 1748 he had estab lished a cadaster which was in part based on an extremely artificial method of computing the income. For West Prussia a cadaster was established in 1773. In the duchy of Magdeburg, Freder ick William I. introduced order into the rural tax system, with such effect that at the end of the eighteenth century Klewiz, the historian of the Magdeburg tax system, very significantly expresses the opinion that the people could from that time on rely upon the immutability, the fixed and stable character of its taxes ; every farmer knew the amount of the tax and could plan his work and his expenses accordingly.'

§ 304. The edict of October 27, 181o, on the national finances and the new revenue regulations, made the following promise : "A new cadaster will be put in force as expeditiously as possible, by which to regulate the land tax ; our intention in so doing is by no means to increase the amount hitherto levied, but simply to effect an equal and proportional distribution of the tax among all taxpayers ; still, all exemptions are to be abolished, as they are no longer consistent either with natural equity or with the spirit of tax administration in neighboring states ; the lands hith erto exempted from the land tax will accordingly be subjected to it without exception, and it is our pleasure that this decision shall apply also to our own domanial estates." The inequality of the taxes on land in the different parts of the country was such that the five provinces, East and West Prussia, Posen, Brandenburg and Pomerania, which comprised an area of more than three thqusand square miles and a tion of nearly 4.5o millions, yielded a revenue of only three million thalers, while the provinces of Silesia, Saxony, Westphalia, Cleve Berg and the Lower Rhine, which had not quite two thousand square miles and something less than 6.33 million inhabitants, yielded a land-tax revenue of over seven million thalers.' The Lords-Lieutenants of the western provinces declared in the dis cussion of the tax-reform projects laid before the Privy in 1817, that they considered the imposition of uniform tax burdens in the form of personal and consumption taxes through out the country to be impracticable, so long as a uniform taxa tion of land was not also introduced. The disparity in the land tax in the old provinces had, down to the introduction of the reform, been measurably neutralized by differences in the other taxes. Of the three million thalers, it is true, two million was borne by Silesia alone ; but Silesia yielded scarcely 2.50 millions of excise out of an aggregate excise revenue of 7.5 millions (1810), many occupations properly belonging to the towns being, in Silesia, suffered to be carried on in villages free of excise. Of an aggregate of 18.25 million thalers, in 1810, Silesia's con tribution was 6.25 millions, although it comprised two-fifths of the population of the entire state. All this was changed by the reform of the excise. Still the state department declared, Jan uary 1, 1820, in its report on the tax-reform law, that it would be impossible immediately to abolish all inequality in the land tax, if for no other reason, because a new distribution of the land tax would have to be preceded by long and expensive surveys and appraisements. It was therefore proposed to equalize the burden by making a change in the other kinds of taxes, whereby the amount required of each taxpayer would be reduced by as much as it had previously been too great. The difficulties of such an equalization (which the majority of the Council, under the lead ership of von Billow, formerly Minister of Finance, pointed out lay in the absence of a universally applicable standard of appor tionment such as was not afforded by the number of the inhab itants alone. The recognition of this difficulty resulted in the reference of further consideration of the matter to the provincial assemblies, which were presently to be called together, and so postponed it to an indefinite future date, as the law dealing with imposts was adopted on May 30, 1820.

It was only in the two western provinces, where there was .a demand for an equalization of taxes on land as between indi vidual taxpayers, as well as a need of equalization as between provinces, that an improvement was made in the distribution of the land tax, based on a survey and assessment and without increasing the aggregate revenue from the tax. It was an improvement over the uncertain assessment on which the land tax in those parts of the country had been based at the time of the French governments, an assessment which even at the time it was made, was regarded as .provisional only, and was coupled with the promise of a future, more accurate survey and assessment of the individual parcels of land.' The aggregate income from the land tax in the whole of the Prussian territory was, in 1821, 9,878,752 thalers ; in 1838, ro,163,942 thalers. The amount per capita of the population has varied from 11.5 silver-groschen (in the province of Prussia) to 35.5 silver-groschen (in the province of Saxony). Westphalia and the Rhine province made a good second (34 and 33 silver groschen). Brandenburg paid scarcely 16 silver -groschen ; Pomerania, 15.33, Silesia, § 305. The movement of 1848 and immediately succeeding years, which pushed on so many of the arrears of the reform period of 1810-1820 towards a solution, brought up again also the demand for a settlement of this old legislative debt. The exemptions from the land tax and the inequalities in taxation remained in force afterwards as they had been before ; the abso lute amount of the land tax had remained unchanged (10,085, 387 thalers in 1855) although the population had increased from I I to 17 millions during the period 1821-1855, while the expend itures of the state had risen from 86 million to 105 million thalers during the years 1849-1855 alone The state and local bodies were alike deprived of the chance of making an adequate use of this tax. While the purpose of the reform in 1810 had been simply a better distribution of the tax, it was now, after a lapse of half a century, and in view of a great increase in popu lation and wealth, quite fair and equitable that some increase in the amount to be raised by the tax on land should be made. To this is to be added that the taxation of cities, relatively to the rural districts, still bore plain marks of the tax methods of the eighteenth century. As an equivalent of the land tax there had been introduced into the towns, after the abolition of the earlier excise, an increased billet tax [Servislast] (as a contribution towards the expense of quartering the troops).

In the western provinces, where the sense of national soli darity was still slight, and where French-Liberal views prevailed, it was a constant source of complaint that the land tax bore more heavily on these than on the eastern provinces, and that the government showed no inclination to mend the difficulty ; a decree of the Diet with regard to Westphalia, dated December 30, 1834, embodied a distinct refusal to do anything about the matter. The new movement made the preference shown the estates of the nobility above the lands owned by peasants a prominent point of the agitation ; it became an eminently polit ical question ; the Liberals demanded an abolition of this medi aeval survival. As early as 1847 the committee appointed to consider petitions regarding the land tax expressed themselves (II to 5) to the effect "that the government should be requested to reorganize the land tax on a basis of equality and with the abolition of all privileges." In March, 1849, the proposal was brought forward simultaneously in both chambers of the new parliament by members of the Right (to which the owners of noble estates chiefly belonged), to request the ministry as soon as possible to submit bills for the abolition of existing inequalities in the direct taxation. On February 24, 185o, a law was passed which (through lack of time for consideration of details) simply declared the general principle that all exemptions and privileges in matters of taxation were forthwith to cease. The question of jndemnification was reserved for future decision. A bill brought in by the government in the year 1851-52, dealing with the exe cution of this law, fell through on March 7, 1853, because the Right was unwilling to content itself with an indemnity amount ing to only two-thirds of the value, while the Left refused to grant any indemnity whatever, at the same time that the govern ment had made unanimous consent on this point a condition on which the whole law depended.

The success of the project at this time, as in earlier years, was hindered by a variety of obstacles of a general character, but there was also the special objection, on grounds of administrative expediency, which J. G. Hoffmann' had brought out as early as 1840, and which K. G. Kries urged with decisive arguments in 1855,— the objection of the inexpediency of such a cadaster as had then recently been completed in France, after protracted labors, and which, instead of meeting the high-strung expectations with which it was begun, turned out to be a stupendous disillusion ment. It had been Hoffmann's wish that the existing taxes on land should be declared a redeemable rent, and that it should be replaced by a license tax on agricultural occupations. Kries pointed out that the experience of both the western Prussian provinces and of France showed that the newly constructed cadaster was of considerable service in equalizing the land tax within a relatively small area, but not as a basis for alterations in the contingents to be paid by large and widely separated regions. The officials in charge of the cadaster on the Rhine, as well as those in France, themselves admitted that any computa tion of net income was uncertain ; that the coincidence of the figures obtained by the cadastral computation with the actual net income could never be assured ; that the figures afforded by the cadaster were rather of the nature of a proportion, while uni formity of assessment was to be attained rather by observation of the business transacted than by depending on the figures obtained by computation. In every one of the various cadas trations that had to do with the ascertainment of the net income from business of any kind (classifications of soils, determination of the gross product, computation of the money value of the product, determination of the cost of cultivation) a considerable margin is allowed for estimates by experts, very appreciable divergencies appearing in the figures obtained from different persons and under different circumstances (especially in a large territory), even apart from any influence that may be exerted by practical interests ; to this is to be added the changes in the industry which take place from year to year.' Instead of the produce-cadaster [Ertragskataster], therefore, Kries sought to find a method of assessment that should be simpler, cheaper, more adequate, and should conform with the facts of industrial life and keep pace with industrial progress. He called attention to the importance and the necessity of a productive tax on land, and showed that the income cadaster was not an expedient means of assessment, whereas there were other means available which he thought were to be found in the example afforded by England and its local taxation, as also in the property tax system and the method of assessment in use in the United States. In both these countries a heavy burden of taxation rested on real estate, but it was not levied by means of an income cadaster. In neither of these countries, according to Kries, does the valuation of real estate involve either great expense or great difficulties ; complaints of unfair assessment are rare. The reason is that the assessment is based on data afforded by business transactions. In England the guiding principle is afforded by the rental, in America by the market price. The fact that the tax on land is by preference employed for local purposes only in both these countries simplifies the problem of assessment, in that it requires consistency of assess ment only within the limits of the minor civil divisions. Now, in Prussia it is an urgent question how the communal bodies and their functions may be strengthened and extended. At this point, therefore, a great principle of political reform falls in with the aims of administrative reform involved in the reform of the land tax. The depression prevalent in the western provinces, due to the oppressive character of the existing land tax, would be relieved just as soon as it should come to pass that the revenue from the income tax should be kept in the country for provincial and local expenditures. The flexibility of the land tax, which would so take the place of its traditional rigidity, would render it more available and more productive under the rule of the new method of assessment and expenditure.

These recommendations of Kries's have been spoken of here in detail, because they were not successful in finding acceptance. The example of the French income cadaster was still able to exert a decisive influence when, at the beginning of the regency (1858), the reform of the land tax was again placed on the order of the day with somewhat more of a prospect of success than before.

§ 306. The law of May 21, 1861, establishing the new order of things in the land tax, divides the aggregate taxation of real estate into the land tax proper, levied on property employed in agriculture or in forest industry, and the tax on buildings [Gebaudesteuer], levied on buildings and the attached courtyards and gardens (not exceeding one morgen).

The land tax proper was, from January 1, 1865, fixed at a yearly aggregate of ten million thalers, that is to say, two millions more than the old land tax produced, if deduction were made of the amount now to be paid by the tax on buildings (7,920,231 thalers). The ten millions were to be repartitioned among the provinces, local divisions, precincts, on the basis of a new valua tion of the net product differing from the earlier one. Exempt from the land tax are lands belonging to the state, the doma nial lands of the German barons, lands belonging to the prov inces or to local civil bodies and appropriated to some public service (roads, canals, cemeteries), certain lands belonging to churches and schools. All other lands previously exempt or privileged under the land tax are, from January 1, 1865, to be taxed on their net income, equally with other lands, but with the payment of an indemnity fixed by a special law of the same date. Authenticated exemption from taxation was to be indemnified at the rate of twenty times the new land tax ; otherwise an indem nity of two-thirds of this amount was to be paid.

A special ordinance was issued simultaneously with the new law, regulating the method of appraising the net income. Quite in contrast with the long-protracted work on the French cadaster, the limit was, at the outset, fixed at three and one half years, and this limit was in fact observed.' An assessment commissioner was to be appointed for each circle, who was to have charge of the business and to act as chairman of the circle committee, this latter consisting of from four to ten persons, according to the extent of the circle, one-half of the membership to be appointed by the representatives of the circle and one half by the central government. A department commissioner was to have the charge of the business for each department, assisted by a department committee of a composition similar to that of the circle committees. At the head of the entire organ ization was the central committee, under the presidency of the Minister of Finance. There were 302 commissioners appointed for the 342 existing circles, but by a further consolidation of circles the number was afterwards reduced to The valuation gave a net income, for the entire kingdom,' of thalers (an average of 34 silver-groschen per morgen over all ; for the province of Prussia, 19 silver-groschen ; for the Rhine provinces, 54 silver-groschen ; for Saxony, 62 silver groschen ). The average rate of the new land tax, therefore, amounted to 9.50 per cent. of the net income. Of this amount, Silesia, Saxony and the Rhine province have to pay about one half, in very nearly equal proportion ; the province of Prussia, 1.33 million thalers; Brandenburg, LI I millions; Westphalia, 0.96 million ; Posen, 0.73 million ; Pomerania, 0.82 million. The absolute increase as compared with the old land tax, was greatest in the province of Prussia (previously 0.55 million), and some what the same in Brandenburg (0.54 million). was relatively greatest in Posen, where the new tax amounts to nearly twice the old (0.73 million as compared with 0.37 million), and in Pome rania (0.83 million as against 0.41 million). A relatively moder ate increase also resulted in Saxony and the Rhine province (0.21 million and 0.15 million respectively). An absolute decrease took place in Silesia and Westphalia (0.16 million and 0.04 million respectively).

The cost of the cadastration amounted to 7.32 million thalers, that is to say, two silver-groschen per morgen on an average (whereas the cadastration in the western provinces, in 1818 1834, had cost nearly seven silver-groschen per morgen).

Simultaneously with the law introducing these changes in the land tax, a law was also passed, on May 21, 1861, establishing a general building tax.

This tax supersedes all the earlier taxes on buildings, where such had existed. Exempted are buildings belonging to the state, to the provinces, to the circles and communes, devoted to public purposes ; also unoccupied buildings which are intended to be used in agricultural industry only. The assessment of the tax is based on the annual usufruct of the property. The rate is 4 per cent. for such buildings as are used mainly as dwellings, 2 per cent. for such as are used mainly for industrial purposes. So far as possible the rents customary in the place during the previous ten years are taken as the basis for determining the value of the usufruct. The assessment of the tax on buildings is to be subject to a revision every fifteen years.

Both these laws were afterwards introduced in the provinces annexed in 1866. By a law of February I1, 1870, the land tax was introduced into the provinces of Schleswig-Holstein, Han over and Hesse-Nassau, dating from January 1, 1875. It was fixed at an annual amount of 3,200,000 thalers, and was distrib uted between the provinces in proportion to the net income on which the tax was paid. The building tax was introduced into the new provinces by ordinances issued April 28 and May I I, 1867.' The land tax has therefore maintained itself as a permanent and, apart from slight variations, unaltered burden, yielding, for a considerable number of years past, about 4o million marks. The tax on buildings on the other hand, better adapted to the exigencies of the situation in of assessment, as Kries has pointed out, has increased with the increase of wealth (1878— 18.84 million marks ; 1887-88 30.15 million marks ; I889— go, million marks).

While it may be true that the land-tax reform in Prussia was delayed for half a century beyond the date at which it was first seen to be a political and fiscal necessity, so that the adoption of the French example in its fiscal administration has often been spoken of as the result of an obsolete point of view, the recent measures taken by the Kingdom of Italy may be -cited as a striking parallel. In Italy, after the consolidation of the country, the differences existing in the taxation of land presented a situ ation not unlike what existed in Prussia at the beginning of this century.+ After the lapse of a quarter of a century, a law was finally adopted, March 1, 1886, dealing with the reform of the land tax. This law ordains a cadaster of the net product of land, with the double purpose of an authentication of ownership and an equalization of the tax on land. So we find that here again, and very recently, the French example has been honored.

§307. Another form of a' tax on profits was established by the tax reform in Prussia during the years 18.10-1820, earlier than the land tax. This was the license tax on occupations Gewerbesteued.

In the Prussian state, down to the year 1810, the pursuit of certain occupations was subject, here and there and with no uniformity, to licenses and taxes on occupations. But a general tax on occupations was for the first time introduced by the edict of November 2, 181o, which followed the French example in incorporating fiscal designs in its carrying out of the new princi ples of a free pursuit of occupations. The receipts were some what over 600,000 thalers. Permission to follow any occupation was to be had by the yearly purchase of a certificate of license from the government. Exempted were those who followed agricultural pursuits on their own account, day laborers, com mon servants, national and communal officials. The highest license fee was 200,000 thalers, the lowest one thaler ; it was impossible to effect anything but a very general classification of occupations in the schedule, the final decision being in the great proportion of cases left to the discretion of the local authorities.

After the close of the war the increased size of the Prussian state made it necessary to bring order and unity into the parti colored local provisions for the taxation of occupations, and to extend the license tax over the whole country. The license tax of November 2, 1810, however, called for a careful revision, the results of which were embodied in the law of May 30, 182o, dealing with the payment of the license tax. The provisions of the earlier la,w were so altered as to leave the liberal professions exempt from the license tax ; likewise the smaller handicrafts men employing not more than one journeyman and one apprentice.

In character, this tax is half way between a tax on profits and a personal tax ; indeed, it partakes somewhat of the character of the class tax (presently to be spoken of) which was intro duced at the same time, and in so far it diverges from the French pattern. Its purpose is to neutralize the inequality arising from the fact that an appreciable proportion of the persons following a trade are not taxed, either by the class tax or by taxes on consumption, in a fair proportion to their ability to pay. The law has accordingly, in the case of the greater number of taxable occupations, only imposed an average rate [Mittelsatz] to be paid by the aggregate body of persons carry ing on the same trade within a given department ; it leaves the persons subject to the tax to repartition the required aggregate among the taxpayers, by assessment through the agency of delegates chosen out of their midst. These average rates are divided into four classes, according to the wealth and prosperity of the place where the trade in question is carried on. The first class comprises the ten largest cities of the country ; the second class, cities of more than 6000 inhabitants ; the third class, places of more than 1 inhabitants ; the fourth class, all smaller places. The highest average rate (for merchants in places of the first class) is 3o thalers a year.

The rates of this tax have, in the course of years, been repeatedly altered, being generally increased (Order in Council of November 24, 1843, Acts of July 19, 1861, and March 20, 1872). There are at present three main classes : II) commerce and manufactures ; (2) hotels ; (3) handicraftsmen employing several journeymen. Within each of these three categories are a greater or smaller number of subclasses, according to the extent of the business. So, for example, the group A (com merce) has three subclasses, the two higher ones of which (A I. and A II.) each constitutes a distinct tax-paying association, assessing its own members, while the third (B) is assessed by the officials of the circle and commune in consultation with the merchants subject to the tax. The entire country is divided into two parts according to the greater or less preponderance of an industrial-mercantile character. One of these portions is sub jected to an average rate of 96 thalers for class A I., while for the other part the corresponding average rate is 72 thalers, but through out the country a minimum rate of 48 thalers for each taxpayer under class A I. is required.' The aggregate amount of the tax to be paid is found by multiplying the number of payers into the rate. It is then the duty of the seven delegates, chosen every third year from among the persons constituting the tax-paying association, to repartition this aggregate sum among the individ ual taxpayers. The other subclasses and groups fared some what similarly, but with lower average rates.

The receipts from the license tax increased during the period 1821-1826 from 1.70 million thalers to 1.85 millions ; from 1827— 1838 it rose very gradually from 1.95 million thalers to 2.3o millions. The assessment of 1864 aggregated' 3.68 million thalers ; that of 1878-79 amounted to 18.67 million marks ; for 1887-88 it was 20 millions ; for 1888-89, 20.62 million marks (of this amount Berlin paid 2.76 million marks).

The receipts from the license tax, as appears from these figures, have been nearly quadrupled during the period 1821 1889, while the population has increased to not quite threefold. This moderate increase of the rate per capita of the population (0.45 mark to 0.68) is certainly far from expressing the people's industrial progress and increased productivity, whether viewed from the standpoint of the volume of business or from that of the wealth of the people concerned in it.

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