This section of the book is from the "Introduction To Public Finance" book, by Carl Copping Plehn.
There is the closest sort of connection between fees and the industrial and commercial earnings of the State. In the case ofthe sale of goods or services by a Statethe private persons pay the price of the wealth which they obtain. The priceis fixed by economic conditions. It cannot exceed a certain sum, for if it does the citizen will not buy. But in most cases considerations of a public character induce the State to enter upon the industry or commercial enterprise, and these very considerations are inducements to a lowering of the charges. As the public element comes to be more clearly recognised, a part of the economic forces fail to act. The State sacrifices part or all of the gain, but makes no loss. As the public element presses still more to the front, the State pays at the general cost, a part of the expense, and charges the particular persons specially benefited merely a fee for the service. Many modern public institutions have gone through a process of development from one stage to the other, and the different stages are found contemporaneously in different countries.
1 For definitions and classification see Chapter II.
But while this is the order of progression in new functions, it is not the historical order of the rise of these two forms of payment for public services. Fees are the older of the two.
Fees are not to be found in the ancient civilisations, because of the intimate relation between the individual and the State. Only when there is a distinct consciousness of " public " functions can we have fees.
Payments in the middle ages for the services of the courts, of the church, of the schools, etc., were mainly of the nature of private remuneration. As soon, however, as any function comes to be recognised as public in character, fees arise. At first contributions are more or less freely and willingly rendered for the use of markets, roads, bridges, protection, and the like. Frequently there is an arbitrary assumption made that a special benefit is conferred and a fee is charged. As the State emerges from feudalism, the growth of public consciousness is marked by a rapid multiplication of these fees, which form a system of public revenues without taxes. After that the line of development is in the direction of the curtailment of the fee system and the growth of the tax system. Fees mark the transition stage in the division of labour in the public service. There is a growth of the conception of common benefits as distinct from special private benefits, and a corresponding removal of functions from one to the other category. At the same time new functions arise which are supported by fees, until finally the recognition of public interest outweighs that of the individual interest. Some fees, however, become fixed in character and are not subject to these transforming tendencies ; but the public interest is recognised in this case by limiting the fees to a very small part of the total cost. Thus many court fees are retained, but the larger part of the rapidly growing expenditure for the support of justice is now met from taxes. Those functions, in connection with which there are fees, are regarded as conferring a divided benefit. The individual pays for what he receives, the State for what the public gains thereby.