THE FINANCES OF SELF-GOVERNMENT.
§ 143. The assertion has repeatedly been made that the material means required by self-government are necessarily, or at least properly, to be correlated with the personal services required ; the tax system of self-government should correspond to the system of personal requirements.
This, however, holds true only to a limited extent ; and this for reasons which have been indicated in the preceding chapter.
It is right that that same manly vigor which is under self government called on to partake directly in the discharge of the business of the vicinage, should likewise be immediately respon sible for raising the funds necessary for the purposes of the vicinage. The patriotic sense of a free man demands that the immediate circle of his life-interests should rest on his own shoulders, much as does the wider circle of the general common wealth.
There are also other less sentimental reasons that go in the same direction.
So, for example, other things being equal, the necessity of raising the funds required for the purposes of self-government will undoubtedly always exert a wholesome pressure on the local administration in the way of economy ; whereas, for obvious reasons, the disposal of revenues that are turned over to the local organization from without involves the danger of wasteful extravagance.
Also, the local character of the levy will favorably affect its collection, much as if it were within the circle of a large house hold. Of course, all past experience goes to say that it will not by any means entirely overcome the immaturity of the civic sense, which shows itself in a particularly crude form in the tax payer ; but it will go some way toward helping out the weakness of human nature, in that the more direct and obvious connection between the common burden and the personal advantage of the individual citizen belonging within the local jurisdiction seconds his sense of duty, at the same time that it sharpens the vigilance of the taxing authorities. As an example, in the cantons of Switzerland, where a simple local, communal board of assessors has charge of the property tax (levied by the commune) and the income tax (levied by the canton), the board is found to have an appreciably keener perception for " property " than for "income," in the taxation of which latter the canton alone is interested (though the canton is small enough, and extends but little beyond the limits of the commune). It is sufficiently notorious how, in the administration of the Prussian income tax, the individual communes have developed a local patriotism—deplorable on moral and political grounds alike—which, through the means of the (local) assessment boards, takes care that the commune shall not fulfill its duty toward the state, in the payment of the legally established tax, in any more liberal measure than other com munes. The result being that, in the absence of any adequate representation of the national interests on the board of assess ment, a tacit understanding has been established that the assess ments are to depart as widely from the truth as practicable. And the oft-mentioned supplementary local rates added to the national income tax are, at least in part, nothing else than the form under which what is withheld from the state is turned over to the commune.
§ 144. But while the reasons Mentioned speak for a close correspondence between local taxation and local administration, there are other weighty reasons against it, which considerably hamper the possibility of this ideal scheme.
The first and most obvious of these reasons is the scanty financial means of the local organization, in consequence of which it finds itself obliged to fall back on the support of a larger organizatiOn to which it belongs. We have already seen reason to believe that with increasing culture and increasing political development the solidarity of parts and whole also increases, in such fashion that any indigence of this sort on part of individual minor divisions comes to be met by aid from the other parts. So that in this direction, too, it becomes apparent that a self-sufficing local self-government—in the sense made familiar to us by current democratic vagaries—is a thing of the past, while in the actual political development of today this ele ment is to an increasing and gratifying extent giving way to a growing centralization.
A second reason is an intimate connection between the busi ness of the local administration, or at any rate some parts of this business, and the affairs of the commonwealth. Here, too, we are met by the fact of an increasing centralization that goes hand in hand with the progress of society and of industrial life. A striking instance is the administration of poor-relief. The greater the mobility of the populace—the more freely the mass of the laboring classes, and therefore of the classes that lie nearest to pauperism, move about from place to place in the search for employment, the greater the industrial area within whose limits this shifting back and forth goes on, the smaller is the ground for hope that a merely local provision for the relief of the poor, supported by local financial means alone, will meet the requirements of fiscal equity as between the locality and the state. The question concerns an obligation resting on the nation as a whole, and every attempt to shift the responsibility to the shoulders of the individual local divisions runs counter not only to the dictates of equity but to the requirements of expediency. The outcome is an overburdening of many of the local organizations, and a consequent resort to the superior organization for relief and remedy.
Third, there is to be considered the technico-fiscal side of the matter. In view of the difficulties visible on every hand today —difficulties attending a system of taxation which is at once effi cient and adjusted with a view to the least possible friction and the easiest possible meeting of the tax requirements of the com mune, the state and the empire=it will not do for a system of taxation to neglect any method that may go to make it as effi cient a tax system as possible. This factor of fiscal method will largely decide for success or failure in meeting the growing demands for revenue in modern communities without too serious dissatisfaction on part of the taxpayer. A skillful selection of the proper means and method will enable us to construct an elastic mechanism that will adapt itself to new requirements as they arise.
We therefore conclude that it is imperative for the finances of local self-government to submit to this demand of expediency. If the most efficient means of raising the revenue required by one of the minor civil divisions are to be found only under the control of a political unit of larger compass than that for whose needs the revenue is required, then the larger body should prop erly become the taxgatherer for the smaller, and it would be a piece of vicious doctrinarianism to sacrifice this consideration of expediency to an abstract ideal of self-government as applied to taxation. It is true, the assumption on which this argument proceeds holds by no means invariably. On the contrary, the conviction is spreading of late that in a sober, commonsense system of taxation the communes, too, have a useful part to play, and that in this respect we have much to learn from the French l— who are practical as well as conservative in matters of taxation.
§ 145. The reverse of the situation here contemplated may occur if there is some motive of public policy for administering local affairs by the central organization of the state. In such circumstances the same public interest which calls for the manage ment of local affairs by the central authority, will also justify some contribution out of the national funds toward defraying the local expenses. But, on the other hand, since the fact remains none the less that the purposes of the local organiza tion are served by the administrative department so constituted, although it may be under the control of the national administra tion, it follows that the central finances should combine with the local in meeting the resulting expenses.
The administration of a city's police by the national authori ties is a case in point, in the form in which it occurs, or has occurred, abroad and in Germany (in Prussia, in the former king dom of Hannover, etc.). When a city reaches a certain size and degree of importance, the national. government believes the 'administration of its police can no longer be left to the local authorities, without danger to the commonwealth. It therefore reserves to itself the right to direct this branch of municipal administration through its own agents. Not only is there no warrant for unconditionally condemning this centralizing of the municipal police as being opposed to the principle of local self government—local self-government is not an end in itself — rather it is an open question in each particular case how far the powers and the services of local self-government are adequate to the needs of the state, and what are its proper limits, and where it needs to be supplemented by an organ of the national administration.'
Nor are we justified in making the national management of a branch of the municipal administration a decisive reason for national payment of the resulting expenses, for the fact of its being primarily a municipal purpose that is served is not set aside by the further fact that the municipal interest in the matter coincides with and is further enforced by a similar interest on the part of the commonwealth ; still less so if —as may readily be the case—the motive for the national government's action is the knowledge that the measures taken by the local self-govern ment are not sufficient to insure the peace and security of the city itself.
§ 146. After all the reservations made in the preceding paragraphs there remains an undoubted sphere of independent financial action for local self-government. But even within this sphere it must so choose its ways and means as to conform to the spirit of the modern state and fit into the structure of the larger whole. Just as we must not confound local self-govern ment with local autonomy, so also there is no place in the modern state for a sovereign taxing power vested in a local organization. The tax system of a local self-governing body, as well as that body itself, is part and parcel of the sovereign state.
It follows, in the first place, that the question as to whether we are to adopt the more highly centralized method of supple mentary communal rates [Zuschlage] or the more decentralizing method of special communal taxes reduces itself to a mere secondary question of fiscal-technical expediency. It is a con sequence to be expected that countries with a highly centralized organization, as, e. g., France, have made use of the supplementary rates ; and that, on the other hand, countries like England, with a predominantly decentralized organization, have granted to their local self-governing bodies a great measure of independent tax ing power, or rather, what is historically the more accurate view, they have not carried the development of local autonomy into local self-government proper beyond the early stage at which this method is tolerated.
For all practical purposes the question is essentially a ques tion of expediency. The end to be sought is a serviceable method of distributing the aggregate financial burden of the state, com mune, etc., so as to make it bear equally on the different sup porting points by means of a shrewd selection and combination of the various forms of taxes. It is not out of any considera tion in favor of centralization or decentralization, but simply because of its inefficiency as a fiscal apparatus, that the modern Prussian method of superposing a direct communal tax upon the national tax, is so much in need of reform. The reform needed is a relief of the unequal pressure of the burden, and of the dis proportionate strain that falls on one branch of the tax system— and on a defective mechanism at that.
§ 147. Apart from and independent of this question, and back of it, the principle must be accepted as decisive that all taxation by the local administrative body should be subject to the right of supervision by the state ; that with respect to kind and scope the particular tax measures must be made to depend on the legislation and the sanction of the central authority. Not from any disinclination toward the free development of a spirit of local independence, but simply as a necessary consequence of the indispensable system and unity of the aggregate fiscal bur den of the members of the state.
While there is, in this connection, an inalienable duty resting upon the national legislature and the national administration to guard the interests of the commonwealth, there are also many other considerations, enforced by much and varied experience, going to show the shortcomings of self-government.
In the first place, in this matter as in all other matters of national concern, the duty rests upon the central authority of using its power to correct the trend of the social forces at work whenever that may become necessary. If, generally, and in every community, erring human nature is everywhere open to the danger that opportunity to influence public affairs will become the occa sion for exploiting this influence in the interest of one's own par ticular class, the remedy is nowhere so easily applied as within an organization which is not itself in possession of sovereign powers, but is part of a greater whole. While the sovereign state, if it suffers from disorders of this sort—and it does so suffer, to some extent, everywhere—can look for a remedy only from within itself and its own gradual development and approach to the ideal of national organization, every local organization on the other hand, as being a part of the whole, is subject to the authority of the whole, and may so get rid of these abuses, as it were by appeal to a higher court, at least in case the relation of the local administration to the national government is what it should be.
Protection of the lower classes of the population against class legislation and class administration in the interest of the upper classes, protection of the upper strata against the democratic tyranny of the penniless or the less well-to-do classes, who, in human fashion, are eager to turn the oppression and injustice which they have so long suffered into its converse, and to play the hammer instead of the anvil ; the one abuse or the other, if it shows itself in a local administration, may be set right by means of a proper control exerted by the central authority, unless the state suffers from the same ailment. The mission of the national administration in such a case is that of the unprejudiced third party, who, unbiased by considerations of interest, is to see that justice is done between the contending classes.
The antagonism is not always that between rich and poor, between the higher and the lower classes. There are also antag onisms within the limits of these groups—secondary class differ ences. So, e. g., the hereditary middle-class citizens of a in their assessment of property, will be tempted by their class interest to a criminal connivance as regards the members of their own class, coupled with an excessive vigilance as regards the taxable effects of the higher classes, the official class, or persons of alien birth. In such a case there is no remedy save through. the employment of national agents, who, it is true, will not be able to dispense with the knowledge of local affairs possessed by the local administration, but may nevertheless lend their moral support to the employment of this local practical knowledge on the side of truth and good citizenship. This holds with added force if the question concerns a function of the local administration which involves, partly or mainly, the interests of the national taxation.
§ 148. While there may be room for a variety of opinions as to the exact requirements of justice in the apportionment of the fiscal burdens of the commonwealth among the various classes of which it is made up, there are, at any rate, certain kinds of mis management that are too palpable to leave room for doubt. Unfortunately, there is no lack of experience of this kind.
We may call to mind the reckless expenditure that has been so dangerously stimulated by the modern development of public credit, and then has come to the end which waits on all reckless ness of this sort—bankruptcy. The greater the degree of auton omy exercised by the local self-government, that is to say, the less developed the national organization (not, as the erroneous. teachings of radicalism would have it, the more highly devel oped), the greater is the scope allowed for fiscal transactions of this sort.
The more completely the management of local affairs is surrendered to the dictation of the so-called public will ; that is, in point of fact, the more exclusively it lies in the hands of an irre sponsible organization of demagogues ; the more unquestion ingly will considerations of permanent public policy be made to yield to the exigencies of present party interests. As regards other pathological phenomena, so also with respect to this mat ter modern democracy has afforded a fertile field of experimenta tion'. Indeed, the experiences of democratic municipal finances" have furnished new topics for scientific treatises on modern jurisprudence.
It is the office of an adequate guardianship of the finances of communes and other local organizations, such as a well regulated national organization implies, to prevent such developments of demagogical financiering.