Home >> The-science-of-finance >> Administration Of The Tax to Voluntary Aids >> Revenue_2

Revenue

REVENUE. The more difficult analysis respecting a schedule of charges for a public industry presents itself in connection with those industries in which revenue is more or less inci dental to service. These industries, it will be remembered, are such as determine in large measure the conditions of living for the great body of the people. The post-office, for example, while properly classed as an industry undertaken for the service which it renders, is nevertheless administered with a careful regard for revenue. Public railways, also, both territorial and municipal, while they may permit more freedom to the desire for a commercial profit, are acknowl edged to be industries in which social considerations properly influence all questions of development and administration.

(a) The Post-office. The rule for regulating postal rates seems to be pretty well established, and, allowance being made for slight modifications to meet the variety of social and political opinions entertained, to be generally followed by civilized nations. It may be expressed as follows : the aggre gate of receipts must cover the aggregate of cost; but in the attainment of this result greater regard should be had to volume of service rendered than to the charge upon the unit of service. Postal charges present three peculiarities: In the first place, rates are remarkably low; two cents, for example, for the collection, transportation, and delivery of a letter. In the second place, the charge is uniform irrespective of dis tance; in the United States, for example, two cents is asked whether a letter is carried three miles or three thousand miles. Involved in this uniformity of price is the significant result that the profit accruing to the service in a densely populated portion of the country is used to cover the deficit which arises on account of rendering a similar service in portions of the country more sparsely settled. Thus the excess over cost in New York and Ohio goes to pay part of the cost for Kansas and Colorado. The third peculiarity in postal charges is thatthe classification of packages to which the schedule of uniform rates is applied is determined rather with a view to protect the ser vice against unduly heavy packages than for the purpose of harmonizing the charge with the cost. Not only is the postal service an exclusive monopoly within the limits of the pack ages it chooses to handle, but it adjusts its charges so as to make careful selection of the packages to be handled. There is perhaps no better illustration of a social solution of a finan cial problem than the one presented by the postal service.

The familiar history of the postal reform which began in England in 184o, and which subsequently spread to all civilized peoples, need not be here repeated. The reduction in charges to a uniform penny postage payable in advance was followed by a corresponding expansion in the ser vice; and while the financial results did not during the first years conform to the expectations of the extreme advocates of the measure, the many incidental advan tages of a highly organized and comprehensive postal system are so marked that the wisdom of the measure is no longer questioned. One point only respecting it de mands attention : What, it may be asked, is the secret of the success of a uniform rate irrespective of distance? The signi ficance of this query lies in the fact that many writers, interpreting the success of this rule when applied to the transmission of letters to mean that an industrial service can be rendered without regard to specific cost, have argued for its application to all sorts of communal or social services. The mistake involved in such a generalization lies in the assumption that the postal charge is determined without regard to cost. The fact is that the cost incident to the postal industry consists in collection and delivery at terminal points, the expense of transportation being in the United States less than one-third of total expenditures. It is the pecu liarity of the industry rather than of the rule of charges which warrants a uniform rate irrespective of distance. So long as this is held in mind there is no danger of a false ap plication of the principle.

(6) Territorial Railways. The problem of railway rates has not, like that of postal charges, passed beyond the domain of current discussion. This is in part due to the fact that rail ways are universally regarded as a source of profit, to com panies when privately owned, to the State when public property; but it is in larger measure due to the fact that the social significance of railways is not yet clearly under stood. The problem of railway rates is a problem by itself, and

stands as one of the most important of the unsettled problems of the day. Of the many questions that arise there seems to be harmony of opinion respecting two only. It seems to be universally conceded that the first step in drawing a schedule of rates lies in an appropriate classification of the services ren dered, and it seems to be equally well established that no in vidious discrimination can be allowed between individuals or places in the transportation of goods or persons. Beyond this the practice of states shows little that is clear, definite, and systematic.

The Germans have perhaps proceeded farther in the direc tion of a scientific solution of this problem than any other people, and this they have done, not so much by a study of rates as by an attempt to organize the interests that are in volved in the adjustment of rates. We shall not undertake to characterize this organization, but venture the remark that the relation of the railway itself to the clients whom the railway serves must be clearly appreciated before the es sential relations and social principleS can be discovered upon which to base a schedule of railway rates. Assuming railways to constitute a public property, rates should be proposed by the shippers and accepted or rejected by the government. In the proposals submitted by the ship pers (we assume the shippers to be properly organized) the primary social interests will find adequate expression; in the acceptance or rejection of the proposals by the government not only will the general social interests be guarded, but the financier also will be enabled to provide for such income over and above operating expenses as it may seem proper that the business of inland transportation should contribute to general revenues. It thus appears that the problem of railway rates on State railways, so far from leading to a dis cussion of an appropriate price to be adjusted by commercial rules, comes to be a question of the organization of com mercial interests by means. of which a just schedule of charges shall emerge, and with this suggestion we drop the question.

Sufficient has been said to suggest that the public ownership of railways opens up a domain of industrial integration and governmental administration with which English-speaking people are not familiar.

(c) Municipal Railways. A municipal railway or tramway is peculiar in the character of the traffic which it carries. The social results of a passenger traffic, especially if confined to the limits of a municipality, are easily traced and may be statistically measured. Moreover, this traffic, inasmuch as it involves few terminal expenses, and is entirely free from the cost of loading and unloading, is a most remunerative one, and the returns from it increase enormously in proportion to density of traffic. Under such circumstances there is no reason why the rate should not be adjusted with some regard to the revenue that may be derived from it. For it is a well known fact that a price which becomes a burden to any class in the community, the importance of the service being taken into the account, will tend to deplete revenue by cur tailing use, while the price at which cars are used to their full capacity will probably yield a large return upon the cost of construction. Now it is evident that, under such conditions, the financier is furnished with ample lati tude for harmonizing the social and the financial interest. Indeed, it is scarcely conceivable that the financial interest, which looks to street railways and analogous industries for a very considerable portion of its general revenue, can be jeopardized by the adjustment of rates in harmony with the social function which such railways perform. Not only may the price for transportation be low, but it may discriminate in favour of long-distance travel, for only under such condi tions can the demand of industry for a high degree of centrali zation and the demand of healthful living for room, light, and air be harmonized.

We may then conclude that the process of determining the price to be charged for industries in which revenue is more or less incidental consists in adjusting the financial purpose to the social end for which the industry is under taken. This is neither very definite nor conclusive, but it at least has the merit of providing the proper approach to the question in hand.

social, rates, postal, service and railways