This section of the book is from the "Introduction To Public Finance" book, by Carl Copping Plehn.
Since the revenue from the tariff was not to be increased, the only resource available was internal taxes. That these internal taxes should have taken the same general form as the taxes used during the Civil War, and consequently more or less familiar to people and officers, was but natural. Under the stress of war it is unwise to attempt to organise entirely new taxes, such, for example, as an income tax. Though an income tax had been used during the Civil War, that form of taxation was under the shadow of an adverse decision from the Supreme Court. Even if an income tax law which would have been constitutional, according to the recent decision of the court, could have been drawn, it is doubtful whether it could have been made productive within any reasonable period of time. Recourse might have been had to direct taxes, apportioned among the States according to population. These taxes could then have been raised in any manner which the State authorities chose.
But there are two fatal objections to this plan. The apportionment of taxes according to population is fundamentally unjust and unequal. What it amounts to practically is a graduated poll-tax. The different commonwealths vary so in wealth per capita that any per capita tax, however raised, would be unfair. Although the census estimate of wealth in 1890 was anything but satisfactory, yet the method used in that estimate was uniform throughout the country ; and such differences as that between South Carolina, with about $350 per capita, and Nevada, with $4,000 per capita, show how utterly inadequate the constitutional method of raising direct taxes has become. Then, again, the method of taxation by which most of the States raise their revenues, and which they would probably follow in raising their share of any apportioned taxes, is the worst in use in any civilised country, and the injustice of the apportionment would have been enormously increased by the injustice in collection. The second objection to this method of raising direct taxes prescribed by the constitution is that it takes an inordinate length of time, and war taxes should begin to yield a revenue as early as possible.
The only available plan was, therefore, to seek additional revenue from the existing, indirect, internal taxes, the excises or, as they are called in the United States, the " internal revenue " taxes, and to supplement these still further by new taxes of the same sort. Briefly summarised the revenue bill nearly doubled the existing rate of taxation upon beer and other similar fermented liquors ; it imposed special taxes on bankers, brokers, pawnbrokers, theatres, circuses and other shows, bowling-alleys and billiard rooms ; it raised the rates on tobacco of all kinds ; and it placed stamp taxes on stocks and bonds, commercial papers, legal documents, checks and drafts, proprietary medicines, toilet articles, bills of lading, insurance policies, and a number of other things. Special direct taxes were imposed on the oil-trust and the sugar-trust, and on legacies and distributive shares of personal property.