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The Justice of Compensatory Taxes


§ 229. Just as the conflict of tax claims between competing public bodies served as an occasioning cause to the investigation of all taxation, so it has latterly happened that a peculiar kind of tax has arrested attention and directed it to a general class of taxes. This particular tax has led an unobtrusive existence, and it is only during these late years that it has attracted a great deal of attention and has found an extended acceptance, through a widespread impression that it is peculiarly equitable. The tax of which I am speaking is the military-service tax [ Wehrsteuer]. The general class whose chief exemplification this tax is, and to the consideration of which it has afforded the occasion, is the class of Compensatory Taxes (or " special " taxes—as contrasted with " general " taxes).

Taxes of this class have been adopted through a feeling that they are equitable. This feeling has been aroused by the per ception that certain persons are not capable of rendering the per sonal services required by the commonwealth. These personal services may be said to form a parallel series with the taxes, and are levied on the citizens in proportion to their capacity to render such services. Where this capacity is absent, it being impossible to levy such services, a defect in the equity of distribution of public burdens arises, favoring the part of the population not capable of performing such services ; this defect must accordingly be covered by the requirement of a material contribution (taxes) which shall draw on the economic capacities instead of the (missing) personal capacity.

Although the principle which comes into view at this point has been much disputed, it seems to be making its way and to be gaining ground both in practical life and in the science. It is the office of the science to develop the vague sentiment of a new tendency in the growth of equity to an ever increasing certainty and consistency ; to clear up the foundations of this sentiment ; to ascertain the value of doubts and objections ; and so bring the unmistakable trend of legislation in the large modern states into closer and firmer relation to the foundation of all taxation and of all equity.

§ 23o. The sentiment of the new epoch at this point again demands a new sort of equity (perhaps, rather, it is but an old idea that is brought up from the forgotten past and applied to institutions already established). But if this is so, it is neces sary at the outset to meet a certain objection, superficial but widely accepted.

It is asserted that there is at this point no real occasion for demanding an equalization of the public burden, and that the whole agitation is but a new example of the mistaken efforts of the French leveling system. It is not rational equality of taxa tion that is aimed at, but the unreasonable egalite whose dangers the world learned by the French Revolution.

This objection is very effective with an audience of the right kind. Science, that is to say, thinking that is not hampered by national antipathies, is unable to discover the alleged contrast between " Gerinan " and " French " equality. But it does appre ciate the imperishable services which the French nation has ren dered, towards the development of the great concepts of equity and equality in taxation, and in political affairs generally, and also that Germany would in all probability not yet have reached the stage of development in the concept and practical application of equity at which it now stands, except for these services.

So far as regards taxation in particular, France is not to be censured for having pushed equity and equality too far, but rather for not having gone far enough in this direction, so that there is still much left undone before the demands of the science are satisfied.

But if any blunders have been made, in the direction of an exaggerated equality either in practical affairs or in theoretical speculation, it is unbecoming to lay the blame of the mistake on a single country or a single nation. Rather, every country and every nation should do what it can towards remedying its own errors. And the question as to where such errors occur is not a question of geographical or national boundaries, but is to be solved by dispassionate argument and discussion.

As regards the particular matter under discussion, it is the German-Swiss who have gone farthest in the direction of the new equality, both in thought and action. And their example has been the occasion of the Austrian legislation, has called forth a project for similar legislation in the German Federal Council, and has provoked like efforts in Italy, without having come to anything more in France (apart from the abortive efforts of the Napoleonic era) than that a project has tardily been put forward, modeled on the projects and laws of these other countries.

§ 231. We already know that the aggregate of what the indi vidual citizen contributes to the state (in its various gradations) falls into two great groups, personal services and material con tributions.

These personal services are of just as indefinite and problemat ical a nature as the material contributions are simple and definite. These latter differ only in form, to the extent that they may be contributions in kind or in money. The personal services, on the other hand, are based on a medley of psychical factors, ranging from the very highest motives of civic virtue to the meanest calculations of pecuniary greed. In the case of a material con tribution (taxes), we have the unquestioned definiteness of eco nomic value ; in the case of the personal services we have an uncertain fluctuation between the high motives of loyalty, honor, duty, on the one side and the grievous burden of labor on the other.

Wherever we look, this contrast faces us. It is most strongly marked where the political system comprises a highly differen tiated, highly civilized social life, which is struggling to realize the exalted ideals of free political life and self-government, in the midst of the difficulties inherent in such a situation. From a very early day the contrast between honores and munera was marked in the Roman state. The former term was used as quite synonymous with magistratus and was employed in speak ing of the higher offices, the honor attaching to which affords a contrast to the burdensome character of the munera. The funda mental signification of the word munus is apparently : to work at compulsory labor [schanzen, frohnen].' This word properly denotes those required services which were considered the burden of citizenship. They are to be classed with the simple economic burdens, the taxes ; that the taxes were classed with the munera is evident from the fact that exemption from taxation is termed immunitas.

We find something quite analogous, though without the con trast in the official titles, in the multitude of personal services required by the modern state. Here too there is a relatively small number of honores contrasted with a great mass of services that are appreciably burdensome. And the contradiction which the latter class involves is heightened by the fact that, at the present stage of industrial development, they are no longer to be called statute labor [frohndienst], but are to be considered as honorary burdens, however grievous they may be in reality, and however little the honor involved may appeal to the consciousness of the majority of the persons liable to them. And what makes the matter still worse, even in those infrequent cases where the con sciousness of the honor is present, the pecuniary circumstances of the persons liable to render these services are not such that they can unreservedly yield to the sentiment. The pressure of their necessities keeps them in mind of their pecuniary inability, which makes it necessary to obtain some compensation in pecu niary means as an indispensable condition to devoting their life to the service of the state.

§ 232. A not altogether definitive mark, but still for the most part a characteristic feature of the " burden " in public contribu tions, is public compulsion. The presence of compulsion implies that the burden involved in the required contribution, the absti nence, the sacrifice, the trouble, are so great as to deter from the voluntary performance of the duty, at the same time that the sense of honor, and the like, is not so great as to incite to its performance.

Compulsion, according to the letter of modern legislation, now applies high up in the grades of honorary offices. The state is not satisfied with using compulsion to enforce payment of taxes, military service, and the like ; it also, for example in the latest legislation concerning self-government, prescribes penal ties for anyone declining an election to an honorary office. The Prussian Act regulating Towns' says (sec. 74): Every citizen entitled to vote is bound to accept an unsalaried position in the communal administration or in the communal representation, and to perform the duties of the office accepted for at least three years ; in order to decline or to resign such an office, none but the following reasons are sufficient for an excuse: (a) con tinued illness, (b) business which requires frequent or long con tinued absence, (c) an age of over sixty years, (d) the administra tion of an unpaid office during the previous three years, (e) the administration of another public office, (f) medical or dental practice, (g) other peculiar circumstances which in the opinion of the municipal council constitute a sufficient excuse ; whoever, except for some one of these reasons, refuses to accept an unpaid office, either in the communal administration or the communal representation, or to continue in the duties of an office until the expiration of three years, as also anyone who, in point of fact, evades the performance of the duties of such office, may, by resolution of the municipal council, be declared to have forfeited his rights as a citizen, for a period of from three to six years, and be assessed at a higher rate for the direct communal taxes, by an addition of from one: eighth to one-fourth.'

That this is not simply a question of good will, but that pecu niary embarrassment may stand in the way of the performance of the duties of an honorary office, may be inferred from the fact that there have, in recent years, been organized associations for mutual support of jurymen, which pay a daily allowance' to citi zens that are drawn on the jury, in consideration of an annual mem bership fee. It appears then that the honorary office, on account of the pecuniary detriment to the citizen's ordinary occupation, is regarded as a mishap, against which an insurance association is organized among those threatened by this class of disasters.

But if this holds true with respect to offices which are rela tively so slightly burdensome, and so distinctly honorary, how much more will it be true of the heaviest of the citizen's duties—the universal military service—where the question con cerns first the years of military drill, and then, further and espe cially, the onerous burden of a campaign (or even of a mobiliza tion) for the man of maturer years who is enrolled in the reserve, the Landwehr, etc.

There is nothing whatever derogatory to the honorable char acter of these civic duties in pointing out the palpable facts of the case and computing the weight of these burdens in adequate, that is to say pecuniary, terms.

§ 233. The claim is made under the general rule of universal military service that equity demands that the large number of male inhabitants of a country who are exempt from military service on account of some physical defect should be required to assume some compensating burden of a pecuniary kind in return for this exemption. And in point of fact, this demand falls in with a sense of fairness which is traceable in history for a long time past.

The most obvious method of compensation would be by a per sonal service of another but equally onerous kind. But as this would be practicable only for a small portion of all the people exempted from military service (sick-nursing or the like), there apparently remains no other method than that of a compensatory tax.

This is a repetition under our political system of what was always present in an analogous form in the differently consti tuted systems of earlier times. At that time the question con cerned the division of labor between classes—between those who rendered personal service to the state and those who paid taxes, or it concerned the shifting of the whole political system from the direct participation of the body of citizens to management by a professional civil service. In France, for example, the taille was originally a tax paid by those liable to military service, by which the king obtained the means for hiring mercenaries.' Similarly Gneist finds that the English communal taxes origi nated in a "commutation of court, police and military services required by the larger or the smaller civil division as the case might be."' Or it might be the ransom of a wealthy man who furnished and paid for a substitute in his own stead.

The modern State with its universal military service is past the stage of class contrast, past the system of mercenaries, that is to say of pure division of labor in military matters, and is also past the stage of a social contrast between the wealthy who are exempt from military service, and the poor who are required to bear arms. The modern State has outlived the one-sidedness of these distinctions but has retained and further developed the demand of equity which they contain.

Every citizen is today liable to bear arms without distinction of rank or of wealth, and with only a relatively slight recogni tion of the need of division of labor in the work of the State. Under this rule of generality and equality of military service, the only distinctions made are such as depend on capacity for the duties required. In the upper grades it is a question of differen tiation in training with a view to the demand for officers ; in the lower grades it is a question of physical powers, considered in the light of the necessary qualifications in point of health.

There is no reason why the purified sense of justice in politi cal life which characterizes an advanced century, as contrasted with earlier times, should not be as watchful of the inequalities that occur in the performance of duty today, as those earlier epochs were for their part.

§ 234. The compensatory tax for military duty is the chief example of this class of taxes. But it is by no means the only one.

The same relation of equity recurs wherever there is a com mutation of personal service due to the commonwealth, if it is not of a general character, based on a division of labor, but takes place only by way of exception for such persons as are for special reasons unable to render the personal service. The fire brigade service required of the citizens of a municipality has, for the most part (for reasons of technical efficiency), given place to the professional trained fire-brigade and so has given rise to • the payment of a general tax in place of personal participation by the citizen in extinguishing fires. But where this change has not taken place, justice obviously requires the imposition of a compensatory tax on those citizens of the municipality who are prevented., by reasons of health and the like, from rendering the personal service. So, e.g., the Wurtemberg law of June 6, 1885, enacts that all male inhabitants of a commune, between eighteen and fifty years of age, may be required, by resolution of the com munal board, to pay- an annual tax of from 1 to io marks towards the expenses of the fire department, in case they do not serve in the fire-brigade. In the canton of Baselstadt the fire-brigade tax and the so-called safety fee [Sicherluitsgebfiltr] show plainly a development from a compensatory tax to a simple income tax, similar. to the Swiss legislation on the military-service-com pensation tax.

Any difference which may exist between these lesser civic duties and the military duty does not touch the essence of the question in hand. So, while the requirement of military duty does not permit its rule of universality to be affected by consid erations of the wealth of any citizen, but is, for good reason, unwilling to exempt the better, more cultured and wealthier classes of the people, or to leave it to their choice whether they will serve or pay, the legal compulsion attaching to a duty like the fire service is of a more complaisant kind, and may easily permit a social differentiation in the manner of performing the duty whereby it comes about that the wealthy pay and the poorer classes serve. The latter tax therefore occupies a stage in the development which the modern military system has outlived. For.the purposes of the argument, however, this difference is not of much consequence ; the equity of the arrangement is only more palpable in the latter case than in the former.

235. This difference becomes important when we come to discuss the principle which is to regulate the rate of the compen satory tax. In case of the mere payment of a substitute, such as characterized the French and South German systems down to 1866, the rate is measured by the price of the substitute. On the other hand, a universally incumbent duty of citizenship which every individual is required to perform according to his personal capacity, and whose dignity and political significance do not admit of its being compounded for by anyone that prefers to make a money payment,—the equivalent for a duty of this char acter must be adjusted on the game basis on which all public duty rests, viz., the solidarity of every individual with the com munity and the consequent equal obligation of every individual to serve the community according to his ability.

But wherever personal capacity fails pecuniary capacity takes its place ; pecuniary ability is the proper substitute for personal capacity.

In the services required under self-government, as in distin guishing between the qualifications for justice of the peace and jury service, or between those of the foreman of the jury and jurymen, etc.; or in military service, as in choosing between the better educated, the half-educated, and those having an element ary education only, for service as officers, subalterns, corporals, etc., or in choosing mechanics, surgeons' assistants and the like, —the decisive fact within the field of personal services required for the state is invariably the capacity for the service. It is the same principle that demands recognition in taxation generally, in the compensatory tax as well as elsewhere.

It is therefore not by accident that the legislation of Switzer land on the military-service-compensation tax has continually been assimilated more and more to the Swiss property and income taxes. It is only that the logical consequence of the idea of the compensation tax is finding expression.

service, tax, services, military and personal