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The Historical Forms of Taxation

THE HISTORICAL FORMS OF TAXATION. 403 scanty remnants to recall an odious memory, has become the special object of attack of modern radicalism as producing a relative tax exemption of the rich.

§ 268. The increase of wealth, which showed itself in the con sumption of many articles not necessary to subsistence, drew the attention of statesmen more and more strongly to the Excise. Even Colbert' united with his efforts for the reduction of the salt tax a heavy taxation of tobacco, wine and similar articles. While he was occupied throughout his fiscal administration with successful attempts to lighten the salt tax because salt is a neces sity of life, he laid stress on the propriety of the wine tax as being a taxation of what is not necessary to life. He turned his attention to tobacco, and established a tobacco monopoly in 1674, and sought consistently to increase the revenues from it —the tax was so much the more equitable as anybody was free to smoke tobacco or not, as they chose ; he points out that the revenues from the tobacco tax in the states bordering on France were higher, and sets as his goal a sum of one and one-half million livres, while the receipts had so far been only half-a-million.

The tax-reform project of Marshal Vauban (1698) was directed to a great simplification of the existing French tax system through the, employment of his Dime royale; but from an inclina tion to favor the people, the tax is laid primarily on the many new articles consumed by the wealthy. He wishes to retain or to reintroduce the taxes on tobacco, spirits, tea, coffee, choco late, dress, carriages, wigs, wine and beer, because they are impots volontaires, because they fall on consumption which is a matter of choice ; indeed they are only penalties on luxury, vanity or extravagance.' These taxes on consumption and on articles of luxury were at that time already highly developed in the country which surpassed all others in wealth. The number of taxes was so enormous that the English ambassador, William Temple, (1672) was able to state that anyone who ate a dish of fish in Holland paid thirty different taxes on it.' Even Justi says there is no article of subsistence or necessary consumption to be had in Holland which has not paid taxes five or six times.

It was the example of Holland and of the Electorate of Saxony, bordering on Brandenburg, which gave the decisive impulse to the fiscal policy of the Great Elector and his succes sors.

269. From the close of the seventeenth century the General Excise [General-Accise] became a national tax institution. Its collection was originally entrusted by the prince to the existing organs of municipal self-government (the directors chosen from the Council and from the body of citizens). The mechanism necessary to its collection was afforded by the inclosing city wall or by the barriers more recently erected to supplement it. Any product whatever that was carried in through these barriers paid a consumption tax. In particular there was the so-called Umschut tegelder levied on grain at its entrance, and it was afterwards taxed again at the mill in different ways according to the differ ent uses to which it was put. Cattle intended for slaughter were placed in custody after entering the town, and when slaugh tered they were taxed differently according to their kind and weight. But more than that, things of the very slightest importance paid a gate-toll at entrance : eggs, cheese, strawberries, huckleberries and mushrooms. In most parts of the country, butchers and bakers were not tolerated in the open country at all.

The principle underlying the Prussian excise was that the entire country was to be taxed through the towns. The excise was intimately bound up with the guild system, to the extent of presuming that handicrafts were carried on only in the towns, and that the open country was supplied with domestic and foreign goods and manufactures only through the towns, and that both town and country would therefore have to pay the consumption tax levied in this way.

The excise varied from one province to another, as was the case with all the other institutions of the state, but it was well administered in detail, afforded a large net revenue and was "one of the most effective means for the aggrandizement of Prussia, through the supplies of money which it furnished for carrying on war."' At the same time the Minister of State, Struensee, declared that the toll and excise system, of which he had the direction, was like a chaos brought about by blind chance. In the year 1817 there were in force, in the old provinces alone, 57 toll and excise tariffs, comprising 2775 taxed articles.' In Prussia and outside of Prussia, the excise was condemned on account of the bother and annoyance which it involved, according to Finance Minister von Billow's declaration. The abolition of the earlier organization of industry and of the industrial privileges which it afforded the towns, gave the towns an added grievance in con nection with the excise and so increased the dissatisfaction.

The reform took the direction of an abolition of the old system and its replacement by a few, productive and not oppressive consumption taxes (flour, meat, beer, wine, spirits, tobacco). According to Billow's scheme, the tax was to be confined to the place of production, and where that was not practicable, as in the case of the consumption of meat in the open country, it was to be replaced by other taxes. In its report of June 20, 1817, which took up Billow's plan, the tax commission of the Staatsratk went still further and proposed to abolish the grist tax entirely,'" condemned the tax on meat, at least in the form proposed, modi fied the few remaining consumption taxes included in the plan, as being too burdensome, and reduced the revenue to be derived from them. They disputed Billow's view that the grist tax was to be regarded simply as an advance on the part of the working classes, the burden of which they could shift to their, wages ; they also found that the other consumption taxes, although not falling on articles as necessary to subsistence as bread, still imposed a proportionally heavier burden on the poorer classes than on the wealthy. Further, they objected to the method of collecting the grist tax (at the mill) as being ill suited to the purpose, but favored a taxation of the wheat bread consumed by the wealthy by means of a fixed furnage levied on the bakers. The taxes on beer and on spirits were likewise to be fixed, and the former also lowered. (The scheme proposed to levy a tax of about eighteen per cent. ad valorem in the form of a malt tax.) The report of the Council therefore takes a position as far opposed as possible to the old system of excise. While it accepted Biilow's proposition of a moderate protective and fiscal tariff system (for the most part on a basis of ten per cent., in exceptional cases rising to thirty per cent. of the value, but levied by weight), it sought to avoid as far as possible any internal tax on consumption, partly to obviate over-taxation of the lower classes, partly to avoid interfering with business. It was inclined, even to a much greater extent than the finance ministry of those years, to a simple system of direct taxation, quite in the. spirit of the times, which was much influenced by the youthful science of Political Economy and Finance.

§ 270. The results of many years of discussion were finally embodied in the legislation of the years 1818-1820.

The aggregate annual expenditure of the Prussian govern ment amounted at that time to 51 million thalers. Of this, ten millions was covered by the receipts from domains and the like ; the remainder, amounting to 41 millions, had to be provided for by taxes, eight millions from import taxes levied under the law of March 26, 1818, five millions from the internal taxes on spirits, crude wine and leaf tobacco, collected under the law of Febru ary 8, 1819 ; nearly four millions from the salt business ; three and one-half millions from stamp taxes (Act of March 7, 1822) ; ten millions from the old land tax ; six and one-half millions from the class tax (Act of May 3o, 1820) ; one and three-fourths millions from the trade-license tax (Act of May 3o, 1820) ; and finally (under an act of the same date) two and a quarter million thalers from the grist and slaughter tax.

It appears hereby that the form of legislation finally adopted was a compromise between the views of the Ministry of Finance and those of the Staatsrath, between the views which agreed more nearly with practice and sought to retain the excise in an amended form,' and the abstract liberal views of the times as expressed in the report of the Staaisrath (Wilhelm von Humboldt presiding). Instead of the taxation of flour and meat proposed in the original plan, was substituted a personal tax in the form of a class tax. Only in the case of the larger cities (the Act enumerates 132) the grist and slaughter tax were to be added as supplementary, for the reason that the mobility and the great numbers of such a city population was held to render the assessment of a class tax impracticable.' But in these cases the tax on flour and meat was to be collected in the form of a gate toll.

In addition to this, five million thalers was counted on from internal consumption taxes on spirits, beer, wine and tobacco, and four millions from the salt monopoly. There was from the outset much greater unanimity as to the import duties (amounting to eight millions). The taxes on consumption accordingly yielded in the aggregate about one-half the tax revenue.

§ 271. The grist and slaughter tax, which continued in force in Prussia for half a century, was regulated as follows: It adopted the traditional form of the gate toll ; even at that time there was a very general apprehension that the price of bread and meat would not fall in proportion if the tax on those articles were abolished. On the other hand, personal taxes, such as the class tax, were an unfamiliar burden, which demanded at stated times and in a lump sum what had previously been paid penny by penny in the price of bread, meat, etc. At the same time the method of levying the tax on flour and meat depended on the differentiation of industries and the concentra tion of the work of grinding and slaughtering in a few places ; at that time this process of concentration had not developed to any extent in the open country or in the small towns of Prussia. The greater part of the inhabitants slaughtered what was needed for their own consumption ; to a great extent they even had their own corn ground for their own use, and took their own dough to the bakers. The personal tax was preferred to the still greater annoyance which would have attached to a grist and slaughter tax under these circumstances. In the western provinces, even in the larger towns and without this special incentive, the preference for the personal tax was relatively very great. Alto gether the class tax was paid by about six-sevenths of the population of Prussia and the grist and slaughter tax by the remaining one-seventh.

The rate of the slaughter tax was about three pfennigs (old style) per pound of meat ; the average annual consumption of meat was seventy pounds per capita of the inhabitants of Prussia liable to the tax ;' the rate of consumption varying greatly from one place to another (Berlin, 113.33 lbs., Rhine provinces 75 lbs., Pomerania 52 lbs.). The annual revenue from the tax was one and one-sixth million thalers (counting the average of the years 1833-1838).

The grist tax amounted, on rye, to about 9.50 per cent., on wheat to 18.66 per cent, of the average price. It was estimated that in the year 1821 the average annual consumption per capita of the population liable to the grist tax was 77 pounds of wheat and 191.5o pounds of rye. The receipts from the tax (counting the average of the years 1833-1838) was one and one-half million, and was distributed among the various parts of the country in such a way that the province of Brandenburg paid 357 pfennigs (old style) '—Berlin 410, Saxony 304, Pomerania 289, .Prussia 235, Silesia 225, annually, per capita of the population liable to the tax.

§ 272. Under the earlier Prussian tax system the brewing and distilling industries' were untaxed outside the towns, while within the towns they were subjected to considerable taxes. It therefore became desirable, on fiscal grounds, to reserve these two industries to the towns, which was possible only so far as the landed estates had not, as was often the case, secured the privi lege of brewing and distilling. By an edict of October 28, 181o, the urban taxes on brewing and distilling were extended to the rural establishments. As in other matters, so also at this point, the provisional tax reform of 1810 was revised in detail after the war, and was permanently regulated by the Act of February 8, 1819 ; with respect to the method of collecting the tax on spirits this Act was further supplemented by the regulations of December I, 182o, and January to, 1824.

The tax on spirits was to amount to 15 pfennigs (counting 288 pfennigs to the thaler) per quart of brandy of 5o degrees proof. It was to be levied on the capacity of the mash-tub, that is to say, of the vat in which the materials were mixed in order to develop the spirits, and it was to be levied anew every time the vat was filled. The computation in the year 1820 was that a quart of brandy requires a mash-tub capacity of twenty-five quarts. As early as 1824, and again in 1838, it was found neces sary, on account of a more effective utilization of the capacity, to increase the rate of taxation (one-fifteenth thaler perquarts mash-tub capacity, according to the order of June 16, 1838). A reduction to eight-ninths and afterward (1838) to five-sixths of the full rate of taxation was made in favor of the small rural distilleries. The receipts from the tax were, on an average for the years 1833-1838, 5.25 million thalers, of which Brandenburg alone paid one million.

The tax on beer was levied in a manner similar to that on spirits. It was levied on the malt, at the rate of two-thirds of one thaler for each hundredweight of malt mashed. As a concession to rural breweries producing beer for household consumption, they were permitted to come to an agreement with the tax officials as to a lump sum to be paid annually. The income from the tax on malt amounted (after deducting drawbacks) to 1.25 mil lion thalers, counting the average of the years 1833-1838 ; of this Brandenburg paid 282,000 thalers, Prussia 180,000 thalers, Posen 67,00o, Pomerania 49,00o, Westphalia 5o,000, the Rhine Province 199,000. Hoffmann estimates that the average annual consumption at his time was very near ten quarts of brandy per capita, together with thirty quarts of beer in Prussia (1833-1838). "Somewhat considerable" is the consumption of beer in the large and busy towns ; reaching 55 quarts in Brandenburg, and 53 quarts in Saxony, as contrasted with 20 quarts in Pom erania, 19.5 in Posen, 12.75 in Westphalia. This was at the time preceding the development or the resuscitation of skilled brewing in the German towns. Later events have shown how readily the consumption develops with the development of skill in production and the growth of wealth. The tax on spirits was the heavier also in point of rate of taxation ; it amounted, in fact, to one-half the average price, while the tax on beer amounted to one-sixth.

§ 273. The Act relating to the tax on beverages, February 8, 1819, also regulated the taxation of domestic wines.

On account of the burdensome and annoying measures of control involved, it was decided not to adopt the more produc tive form of, tax which is employed in the true wine-producing countries (South Germany, Switzerland), viz., the taxation of the goods at the point of entrance into the wholesale or the retail trade. At the same time the great variation in annual yield (from I to 2o) would not admit of taxing on the basis of the area planted in vines. The basis chosen was the quantity of wine produced each year, the rate of the tax varying by six gradations according to the quality of the land cultivated (varying from one fourth thaler to one and one-sixth thaler per bucket of 6o quarts).

The income from the wine tax was, for example, in 1829, 204,000 thalers ; 1830, 9,000 thalers ; 1831, 16,500 thalers ; 1835 224,000 thalers ; being on an average .for the years 1829-1838, 116,000 thalers.

The disproportion between this revenue and the great diffi culties of its collection, as well as the annoyance to which it subjected a great number of wine-growers, for the most part very poor, was recognized even at that time. But at the same time it was recognized that expediency here was in conflict with equity, if any account were taken of the heavy taxation of spirits as well as of beer.

The taxation of domestic tobacco was treated in a not dis similar manner. The Act of February 8, 1819, prescribed a tax of one thaler per hundredweight of the dried leaf, to be paid by all persons cultivating more than five square rods (from 1828 the specification was : more than six square rods). The objection able means of control necessary to hinder concealment of the taxable tobacco occasioned the issuance of a Cabinet Regulation of March 29, 1828, which made the superficies of the land culti vated in tobacco the basis of the tax ; arranging the land in four classes according to its average yield, and taxing it at the rate of three, four, five and six silver groschen per six square rods ; the assessment of the land was to be made by the officials of the circle. The revenue derived from the tax, on an average of the years 1829-1838, was 150,000 thalers, of which one-half was paid by the province of Brandenburg.

§ 274. To these objects of the internal taxes on consumption, which were established at the time of the revision of the Prussian tax system during the early decades of the nineteenth century, later decades have added another article of consumption ; a product of the modern application of science which has greatly affected the course of German agriculture and industry, and has triumphantly replaced a colonial product by a domestic one.

This is beet-root sugar.

Even as late as 1841 J. G. Hoffmann' was of opinion that the replacing of the consumption tax on Indian sugar by a tax on domestic sugar production is not to be thought of. The pro duction of sugar from beet-roots could be profitable only so long as the price of Indian cane-sugar was abnormally raised by tem porary circumstances. Moreover an industry which was carried on in a great number of small establishments scattered over the whole country could never be taxed so as to yield revenue to compare with the productiveness of the import duty on foreign goods. Cane-sugar was at the same time, fiscally, the most pro ductive of all the articles of consumption imported into the Ger man Zollverein, etc.

The development of half a century past speaks a different language.' In the fiscal year 1836-1837 there were in Germany 122 beet-root sugar factories which produced an aggregate of 1408 tons of raw sugar, while in the year 1884-1885 there were 408 factories which produced 1,146,740 tons. At the outset we had an average annual product of 11.50 tons for each factory ; it is now 281 I tons for each factory (I ton = 20 cwt.). The beet-sugar has not only crowded the colonial sugar out of the domestic market, but is competing with it on an equal footing in the world's market. This development has been appreciably

furthered by the taxation, in that it on the one hand favored the infant industry as against the foreign product, and on the other hand furnished an incentive to a progressive perfection of the method of utilizing the beets, by levying the tax on the beets.

The first tax on beet-sugar in Prussia was laid by the ordi nance of March 21, It was quite moderate : three pfen nigs per hundredweight of the crude beets, that is to say, according to the sugar equivalent of that time (2o cwt. of beets= 1 cwt. sugar), one-sixth of one thaler per hundredweight of sugar, while at the same time, under the Zollverein tariff of October 24, 1839, Indian cane-sugar paid five thalers. Gradually, as the new industry secured a footing, and with the progress in the utilization of the beets, the rate of the tax was raised. After an agreement had been reached, on April 4, 1853, according to which this tax was to be made general and uniform throughout the Zollverein, the rate was fixed (dating from September 1, 1858) at one-quarter of one thaler per hundredweight of beets. With the sugar equivalent obtainable at that time (1:11) this meant the same as 2.75 thalers per hundredweight of raw sugar, while the import duty on raw sugar amounted to 4.25 thalers.

The duty on raw sugar yielded in. 1847, 7,000,000 thalers, and in 1860 only 393,000 thalers. Contrariwise the tax on beet sugar amounted in 1845 to 194,500 thalers , and in 186o to 9,477,000 thalers.' The change which supervened during the course of these twenty years is sufficiently indicated by these figures.

§ 275. In connection with the preceding we may properly discuss briefly the chief import duties of the period preceding the present.

As is well known, the purpose of the Prussian tariff of 1818 apart from a moderate protection of domestic industry, to impose a consumption tax. on foreign goods at such a moderate rate as would comport with the difficulties of superintendence of so disadvantageous a tariff boundary. The duties were based on the weight of the goods, as there had been sufficient opportunity in earlier times to learn to appreciate the. annoyances of an ad valorem tariff. The duties were for the most part calculated on a basis of ten per cent. of the value, rising in the case of articles of lukury as high as thirty per cent. and over. In general, as com pared with the wealthier foreign countries (England, Holland), the duties determined upon were regarded as low, out of consid eration for the limited means of even the better situated classes in Germany at that time. The opinion was better founded at .that time than now, that articles of consumption coming from abroad could bear a relatively higher taxation than those pro duced at home because they were to a greater extent articles of luxury and were therefore consumed by the wealthier classes.

International trade in the great 'staple products of daily con sumption, such as we see it was atthat time so far removed from the thoughts of those best able to judge, that Hoffmann, even as late as 1840, declared' it quite impossible for Great Brit ain to import from abroad as much as 33,000,000 bushels of corn in case of need, whereas by 1871 Great Britain was already importing as much as 44,333,000 hundredweight of wheat and wheat flour alone, and in 1883 almost twice that quantity-84,500,000.' The import duties, therefore, furnished the chief field for the impbts volontaires which experience 'had commended even in earlier times. It also appeared from experience with the internal taxes on consumption that several of them (wine, tobacco) met with difficulties of administration which were much greater even than the difficulties attaching to an unfavorable tariff boundary. A tax payment which must be regarded as moderate and equit able in view of the tax-paying capacity which showed itself in the consumption of the goods, could not be collected without great annoyance on these articles in the form of an internal consump tion tax, but quite readily in the form of an import duty.

§ 276. The chief articles were sugar, coffee, wine and other spirits, and tobacco. Of the average annual revenue of 8.5o million thalers which the import duties yielded during the years .1822-1828, these four articles furnished appreciably more than 3 Lehre von den Stenern, p. 360.

one-half (4.80 millions); sugar coming first (2 millions), then coffee and wine (each rather over I million), and last of all tobacco million). The rates of duty were : raw sugar 5 thalers, cof fee 6.5o thalers, wine 8 thalers, tobacco 5.5o thalers (manufac tured tobacco IT thalers).

Apart from the change wrought in. the production of sugar, a great increase has also taken place in the consumption of sugar in Germany. In the Zollverein I the per capita consumption was : The consumption of coffee in the Zollverein rose from two pounds per capita during the years 1836-1840, to near five pounds during the years 1881-1887. The increase in consump tion is appreciably less than in the case of sugar, besides which a change in the habits of life greatly affects the increase in the consumption of coffee without its necessarily implying an equally decided increase in wealth. It is otherwise with the consumption of sugar. The latter is a clear indication of the prosperity which the industrial life of Germany has experienced during the century, although the cheapening of sugar has also contributed its share to the The amount of the sugar tax (including the duty) was, dur ing the years 1844-1855, .57—.61 marks per capita, while in 1882 1883 it was 1.47 marks or, counting the aggregate revenue, it rose during that period from 18 million marks to 67 million marks.

Bienengriiber,Statista des Verkehrs and Verbrauchs ion Zollvertin logo bis t864t (1868), p. 33.

StatzstischesJahrbuch far das deutsche Reich, published by the Imperial Statistical Bureau (1888), p. 132.

3The price of a cwt. of refined sugar was, in 1836, 28-30 thaler, in 1867, 16-18 thaler.— Bienengrither, p. 33.

rate of taxation was, from and after Sept. 1, 1844, .15 marks per cwt. crude beets, from and after Sept. 1, 185o, .3o marks, after Sept. 1, 1853, after Sept. I, 1858, .75, after Sept. 1. 1869, .8o, after Aug. 1,1886, .85 marks.—Statist. Jahr buch des deutsche" Reicher, 1888, p. 192.

The amount of the duty on coffee rose from .43 mark per capita during the years 1836-1840, to .98 mark on an average during the years 1883-1887. During the early decades of the Zollverein the duty was 6.50-6.66 thalers per hundredweight, but was afterward, from and after January I, 1854 (in con sequence of the inclusion of Hanover and Oldenburg), reduced to 5 thalers.

In earlier years' wine was subjected to an import duty in the Zollverein of 8 thalers per hundredweight, but from 1854 it was reduced to 6 thalers (8 thalers for wine in bottles). The tariff of July I, 1865, reduced it again to 4 thalers on wine, whether in casks or bottles, but in later years it has again been consider ably increased. In May 1885 it was fixed at 48 marks per hun dred kilogrammes for wine in casks (equal to the original duty levied by the Zollverein) and a somewhat heavier duty on wine in bottles and on champagne. The amount of the duty on wine in 1836-1840 was .16 mark per capita of the population, as com pared with .31 mark in 1882-1887.

Tobacco, raw and manufactured, yielded an income in import duties of .15 mark per capita of the population included in the Zollverein in 1836-1840, as compared with .78 mark in 1885 1887 (aggregating in 1887, 38 million marks). Both the duty and the internal tax on tobacco were cpnsiderably increased by the Imperial legislation of July 16, 1878. On raw tobacco the duty is 85 marks per hundred kilogrammes (previously 24 marks), on manufactured tobacco 180 marks, on cigars 270 marks. In order to be able to increase the rate, the internal tax on tobacco was again levied on the weight of the leaves (45 marks per hundred kilogrammes), and yields, 1882-1887, .87 mark per capita (aggregating in the year 1886-87 47.5o million marks).

§ 277. The brief survey just given of the development of taxes on consumption is primarily intended to afford the sub structure for a further discussion of the system of taxation. It Bienengraber, p. 83.

is only at a later point' that questions regarding the existing Ger man and Prussian legislation will be taken up and discussed in connection with the development of the system and policy of taxation in other countries. We will now give some attention to one phase of the old-time excise, in which it shows its tenacity as well as its expediency under all the changes of times and cir cumstances.

What I have in mind is the taxes on consumption levied for municipal purposes, which have experienced all the variations of favor that have affected consumption taxes and indirect taxes generally.' The period of liberal reform of the years 1808 and onward in was primarily a German version of ideas coming from France and partly from England. The leading statesmen concerned in the reform were filled with a high-strung doctrina rianism. Hardenberg declares straight out that he is going to introduce into Prussia the ideas of the French Revolution. Both he and Altenstein wished, among other things, to introduce the democratic principle of election in the army, so that the sub altern officers were to be chosen by the soldiers and the inferior officers by the subalterns. Even the more moderate statesmen, who have been more appreciatingly criticised by later historical research, such as Stein and Vincke, give in their adhesion to a far-reaching doctrinarianism, only they borrow their ideas from England, not from France. Stein's notions about self-govern ment are almost as highly overwrought as Hardenberg's French ideals. His opposition to the Prussian professional official class, his predilection for the administration of the state by burghers and farmers, is just as visionary an application of abstract notions as the enthusiasm for the French ideas.

In taxation we have already met with something similar. After the tentative efforts of the earlier years of the reform ' In Book III., omitted in this translation.

'Cf. von Reitzenstein on indirect consumption taxes by the commune (Conrad's fahrbucher, 1884, N. F., vol. viii. pp. 1-100, vol. ix. pp. 3 Ernst Meier, Die Reform der Verwaltungsorganisation unler Stein and Harden berg (1880.

are past and the reform of the years 1817-1820 finally achieved, the doctrinarianism of the new economic theory takes sides, as we have seen, on one side and on the other. One side enthu siastically demands unconditional abolition of the excise, exemp tion of the lower classes, freedom of internal trade ; the other side is occupied with arguing concerning the theory of the shifting of every tax on articles of necessary consumption to wages and to the consumers of the service rendered by the laborer. That side finally wins which differs least from the actual facts of tax administration and demands the least in the way of innovation during this time of returning sobriety. The concessions that were made to the other side were confined to a little patchwork, which, as was the case with so many other things in the constitution and the administration of that 'time, was not seen until a later day to be a necessary result of circumstances.

Such was the case with the remarkable arrangement by which the wealthiest and most advanced portions of the Prussian popu lation were exempted from the class tax in order to be subjected to an equivalent in the form of the grist and slaughter tax of the rehabilitated octroi.

The further development of the class tax must tend to an alteration of this condition of things, equally with the revival of French-English economic doctrinarianism that supervened at the middle of this century. But only the positive side of this development was calculated to last. The exemption of the towns from the new personal taxation, to suit Adam Smith's - pusillanimous theory of the income tax, was bound to disappear. On the other hand the dissatisfaction with indirect taxes, to which the grist and slaughter tax in Prussia became obnoxious (1873), was for the most part a symptom of that doctrinarianism which enjoys a popular triumph today and is replaced by its opposite tomorrow. The growing necessities of the municipalities which, together with the state, had made use of this form of taxation,' 'Of seventy-six Prussian cities which were consulted early in the sixties as to the expediency of abolishing the grist and slaughter tax, only a few had favored the meas ure.—Faucher's Vierteljahrschrift far Vollawirthschaft, 1864, p. 160.

brought them in the course of time to appreciate the permanent value of the old municipal Ungelt to the municipal treasury, and directed their attention to the instructive development of French legislation on this head.

§ 278. In the matter of tax legislation, as in legislation touching industrial matters generally, quite in contrast with the ever-recurring crises in its political constitution, France ordered its affairs in a stable manner immediately after the great upheaval of the first Revolution. This goes to show the sagacious character of the French administration, as well as the conserva tive side of French character.

In this reaction of reason against the Revolution, approved expediency presently took the place of Physiocratic doctrine. The first act of violence of the Revolution ( July 12 and 13, • 1789) was the storming of the octroi offices of Paris. In the capital as well as in the provincial towns the system of gate excises was-enforced, differing from the old Prussian system in this, that ever since the thirteenth century, and especially since the fourteenth century, this tax had served the purposes of the communes and municipalities, while the state had only to a limited extent drawn a revenue from the octroi. The name, even, was derived from the royal authorization which it was necessary for each city to secure. Under this form there was in force a most comprehensive taxation of articles of urban con sumption, the rates and amounts of which may be inferred from the fact that in 1789 Paris alone paid 36 million franc, in spite of all the hardships and exemptions which characterized the ancient regime.

Turgot and the other Physiocrats, and the cahiers of the nobility and of the third estate, demanded its abolition. The National Assembly passed a resolution to that effect on May I, 1791, amid the rejoicing of the Parisian populace. But as no adequate substitute had been created, the failure of the customary revenue resulted in great confusion, especially in Paris and Lyons. The municipal supplementary real estate tax and the personal property tax established by the National Assembly were insuf ficient ; the administrations of the communes came to a stand still ; nearly all the cities demanded the re-establishment of the octroi ; as early as 1797 steps were taken by law in that direc tion ; in 1799 the octroi was re-established in Paris, and directly afterwards in the other cities, at first optionally. In 1805 the number of cities which collected the octroi had risen to 3262. The Laws of 1809, 1814 and 1816 gave this class of taxes their permanent form.

§ 279. The new features of this legislation, as contrasted with the arrangement under the old political system were such as were made necessary by the new political system itself, viz., uniformity of administration, abolition of class exemptions, removal of all obtrusive harshness, and rigor in respect of kind and scope of taxes on consumption. But the characteristic sub stantial nature of this taxation remains the same as of old, because it was found expedient under the new political regime as under the old. Its fundamental traits are as follows.

The object of the octroi, as contrasted with supplementary local taxes added to the national taxes, is to afford independent means for meeting the expenses of a local administration. It is levied on objects of local consumption. The selection of these objects of taxation, as well as the rate at which they are to be taxed, is left to the discretion of communal councils. All doubt as to this right of local discretion was removed in 1852 by decision of the Superior Court. In fact, the ordinances of 1809 and 1814 had, for the protection of the poorer classes, set a limit to the taxation of the necessary ,articles of sustenance. But this limit was removed by the law of 1816 and was replaced only by administrative advisory regulations. By tradition the number of taxable articles is very comprehensive ; it comprises beverages and liquors, food products, fuel, fodder, building materials. The general schedule of February 12, 1870, adds, as a sixth category, all other things. The same schedule prescribes maximum rates which in the case of each article are graded according to the number of inhabitants in the commune. The octroi is collected on articles imported from abroad at their entrance into the com mune, on articles produced in the place it is collected within the commune. Since 1814, however, it has been expressly provided that the latter class of goods are to be taxed equally high with similar goods coming from abroad, in order to secure freedom of trade within the country and to prevent local protective duties. A superposition of national and communal taxes is sought to be avoided. For this reason those things only are by preference subjected to an octroi in the general schedule which are exempt from national taxes, spirituous beverages being an exception from this rule, and an exception of very considerable importance.

In the year 188o, out of a population of 37.50 millions, in France, more than II millions were subject to the octroi ; the gross receipts rose from 54 million francs in 1831 to 277 millions in 188o (net 255 millions) of which nearly one-half was derived from beverages and liquors (122.5o millions). The cost of col lection is lowest in Paris (5 per cent.), where the receipts from the octroi are as great as those of all other communes taken together. Heavily taxed articles, as for example wine (12 francs per hectolitre), have been increasing in consumption in spite of the high tax (the consumption in Paris in the years being loo litres per capita of the population, in the years 1892 1877, 215 litres).

All considered, this class of taxes is a striking example of the triumph of expediency over doctrinarianism, originating in France, but bound to seek and to find a foothold in other countries.

tax, consumption, taxes, thalers and sugar