THE SINGLE TAX AND A PLURALITY OF TAXES.
§ 251. As old as financial science itself is the idea of embodying the whole system of taxation in a single tax.
The Physiocratic theory of taxation points to the tax on rent (assumed to be the only surplus of industrial production avail able for purposes of taxation) as being the direct and the only tax. Voltaire (in his L'Homme aux quarante ecus) ridiculed this as well as the other doctrines of the Physiocrats—the imp& unique was the impot inique.1 Still the interests both of the theory and the practice were on the side of the Physiocratic idea.
The Single Tax came as a great relief to the theory after the chaos of taxes which the historical development had been piling up for some centuries past. Aversion to the results of the his torical development seemed to offer special inducement at this point to a radical transformation of existing institutions. Sim plicity, which, as the adage has it, is an earmark of the truth, was in this case, as happens so often on the introduction of a new doctrine, urged as a strong argument for the truth of the doctrine put forth. The entire view of the state and of society which dominated the era of the Revolution, with all its rational istic, atomistic theory of the state and the man, favored and was attracted by this simplification. The administrative practice of the new era seized upon this simplification of an intricate prob lem with alacrity, and applied it in good earnest at the instant when the French Revolution was realizing its programme. And even after the legislation had discovered and attempted to rem edy the defects of the "single tax" the magic word retained its spell, and continued to figure as an article of faith in the radical party programmes. It was not only that the complete simplicity and intelligibility of the single tax fell in with the spirit of these programmes, but more especially that it recommended itself as of practical value for certain social-political purposes. It was only a secondary question whether the doctrine of the single tax was to be construed to mean an exclusive tax on rent (as was not usually done), or a "single progressive income tax for state and commune," in accord with the r9quirements of the most advanced thought.
The application of the single tax has, under favorable circum stances, even passed beyond the stage of party platforms and been adopted, at least with approximate completeness, into the fiscal administration of some smaller communities. The canton Zurich has afforded a notable instance for twenty years past.
§ 252. The question is, whether the ideal of radicalism which claims so very respectable scientific antecedents, is to be accepted by modern science. Is the single tax also our ideal, or are there scientific reasons which restrain us from availing ourselves of its apparent advantages.
It is in the first place to be granted that the necessity of at least a relative simplification has made itself felt and produced an effect in all the tax systems of Europe ; whether we look to the French, the German, the British, or even the Swiss tax legis lation, this proposition holds true. A great deal of the relics of the older tax system has been cleared away with the help of the light of financial science, even though this work of reform has not in all cases gone so far as in Great Britain, where the free trade movement gradually reduced the number of dutiable art icles from several thousand to half-a-dozen, or as in the cantons of Switzerland, the more advanced of which have cleared away practically the whole of the earlier tax system in order to make room for the income and property taxes.
Still, this relative simplification of the tax system always leaves room for some plurality of taxes, so much so that even in the experimental field of radicalism—in Switzerland —there is enough of it left to challenge reflection. It is to be noted that the increasing fiscal demands of canton and commune have for a number of years past found the "single tax" an intractable instrument which refuses to meet any considerable demands upon it ; as a consequence of this fact the necessity of meeting the growing outlays has compelled the refurbishing and exaltation of nominally obsolete and long-discarded forms of taxation ; at the same time the finances of the Swiss federation have never ceased to place their chief dependence on consumption taxes in the shape of a comprehensive taxation of nearly all articles of import, and under the pressure of new fiscal necessities these taxes have even been energetically pushed to a further development. It must therefore be said that even under the exceptional circumstances of national and constitutional activity which are to be found in Switzerland, the test of experience does not favor a "single tax." Observation of the practice of modern states would therefore go to show a general tendency toward simplification of the tax system, but not to support the doctrine of a single tax.
§ 253. The observation of the actual course of development of the tax legislation of modern states accords with the conclu, sions to which we have been brought by our previous discussion.
A single and exclusive tax to replace a system of diverse taxes fails to answer a series of requirements which are made from the standpoint of equity as well as from that of expediency.' (I) The payment of taxes rests, as we are well aware, on various principles of equity which cannot all be satisfied by a single tax. For example, if an owner of real estate is in fairness bound to pay for the advantage accruing to his property through the expenditures of the commune or the state, this object cannot be attained by means of the same tax which the same real estate owner is called on to pay toward the support of the public schools and of the poor, in proportion to his personal ability to pay taxes.
(2) When we come to consider the psychological character of every tax burden, we find ourselves per force entering on a lengthy discussion of practical questions of tax administration ; it being one of the practical problems in every tax administration to lighten the pressure of a given burden .of taxation as far as may be.
As is the case with every sensation of pleasure or discomfort in economic life, so also the payment of a tax does not figure as a fixed mechanical quantity that may be mathematically meas ured in degrees of pressure on the taxpayers, but as an historical phenomenon influenced by the varying sentiments of the tax payers. The question here concerns the entire development of the sense of citizenship, intelligence, self-sacrifice, patriotism, as opposed to the individualist motives of private life, with its primitive crudity or its more refined love of gain and of pleasure.
This relation subsisting between the commonwealth which imposes the tax and the individual taxpayer, requires forms of taxation adapted to its purpose ; just as the development of the fiscal policy as a whole necessitates a series of grades, within each of which grades the tax is levied at a proportionate rate ; this being especially true after the tax has come to be the normal dependence for the public revenue (Book I, Chapter II.); so the tax system too requires a gradation in its development, which shall' correspond to the gradual evolution, the advance and decline, of the sense of nationality.
The rapid growth of the need of tax revenue, which ordinarily increases much faster than the consciousness of civil duty, con stantly urges the tax administration to invent suitable forms of taxation, whose flexibility is put to the test by the elasticity of the demand for revenue.
The result of all this is that we have a number of different forms of taxation, which, judged by the ideal of the single direct tax intended to make the tax-source the tax-object, may appear very imperfect in the eyes of abstract doctrinarianism, but which are, after all, nothing but the adequate expression of the nation's immature sense of citizenship.
§ 254. (3) It is to be added that even where the intelligence and sense of citizenship on part of the taxpayers is relatively mature, the practical difficulties . attaching to a single tax on income are so great as to necessitate supplementary taxes of other kinds in order to carry out the purpose of the single tax.
The mobility of modern life makes it difficult, or rather impossible, to levy accurately and in proper season on a large body of tax-paying ability, by means of this single form of tax ation alone. For this purpose, too, we need other more flexible forms of taxation, which will adapt themselves to these changes of residence.
But even when the great and hitherto rarely accomplished task of any income tax is achieved —the ascertainment of the income — that is not all that is necessary. The problem consists not alone in ascertaining the amount of the income, but also in finding the relation between the income and the aggregate necessary expenditure of each taxpayer. The inflexible standard afforded by the amount of the income alone gives no information as to the individual's tax-paying capacity, this latter depending on the peculiar conditions of his life. And to ascertain what these are, the tax legislation requires a deal of supplementing which must be got through other means than the income tax.
(4) The organization of a commonwealth under a system of larger and smaller civil divisions, especially in a federal state [Bundesstaat], gives rise to peculiar fiscal conditions, such as do not admit of our placing at the disposal of each of these civil divisions a single form of taxation which is to be used by all in common. Rather, the federal state has special reasons of Its own for discarding the single tax on income, reasons involving the innermost nature of such a state, and which would not be pres ent if the people in question were prepared for a national union.
(5) There flow into the treasury tax revenues which arise out of measures adopted on the ground of economic policy, and are. according to the views accepted today, desirable and judicious taxes. But the occasion for measures of this kind, we may assume, will recur in the future, and this class of taxes will therefore continue to be levied. The chief example of this class of cases is the tariff on imports.
§ 255. In order to clothe these introductory remarks with flesh and blood, it will be desirable to consider the historical forms of taxation.
It is only by examining the actual course of development that we come to appreciate the difficulty of progress in the direc tion of abstract ideals on the one hand, and the significance of the peculiar content and purpose of each particular group of taxes on the other. The gradual development of the historical institu tions is shown by the import duties, the stamp taxes, and the monopolies. These forms of taxation were made intelligible and acceptable to the childish understanding of earlier times by appearing in the guise of payment for an equivalent, and have disclosed their true character only at a later stage, after the dawn of an era of a more mature sense of citizenship, when it has appeared that what was so long taken for their substance is only their form. The successive stages in the historical development, and its wonderful changes and alterations, are manifested in a specially impressive way in the rise and decline, the fixity or instability, the disappearance or prominence, of the scot, the property tax, the income tax, etc. These most perfect forms of taxation attained relatively early to an energetic application, and flourished in a remarkable degree, and then, after half a thousand years, they have been taken up again as an ideal of taxation to be striven for. The introduction of the so-called " proceeds-tax " [Ertragssteuer], which was adopted at the beginning of the nineteenth century, especially in France, as a redeeming improvement over the old direct tax, brings out the same difficulty of historical progress. It presently manifested all its native ineptitude when compared with the old direct tax in its revised form, and has in many cases been altogether discarded.
The difference in content and purpose between the different historic forms of taxation will be brought out by a discussion of the historical material from the point of view of modern science.
In pursuance of this purpose, and referring back to the observations previously made on the National Economy in Proc ess of Becoming (secs. 52 et seq.), the present chapter will attempt an historical survey. The succeeding chapter will then go on to combine the historical data with the deliverances of theory, in order, in this way, to arrive at a tax system based on history and theory alike and adapted to the fiscal exigences of a modern European State.