This section of the book is from the "Introduction To Public Finance" book, by Carl Copping Plehn.
But while the modern State has surrendered the extractive industries, a great many others have been undertaken, not so much as sources of revenue as because of the importance of the public interests involved. Before this century the most striking instances are of the production of some commodity needed for the public service or of articles of an artistic and costly character. Examples of the latter are the Gobelin tapestries and the Sevrés ware. In supplying arms, forts, vessels, public buildings, and the like there is no uniformity of practice among the nations. In only a few cases is the method regularly that of government production. There is a similar absence of uniformity in practice in regard to all those industries which involve large public interests for the conservation of which there is under private management no good guarantee. In some cases, as the water supply, there is a general tendency in the direction of public ownership. Whenever, as in this case, a public interest is absolutely paramount to every other consideration, there is little attempt to make the industry a source of revenue beyond what is necessary to maintain the service. These industries, therefore, tend rapidly to be supported by fees , or taxes. Inasmuch as it is generally the importance of the public interest that led to the assumption of the industry by the government, this tendency is universal. Roads, canals, the water supply, the post office, telegraph, telephone, and the railroads all pass more or less rapidly through these stages according to the importance ascribed to the public interest in them. As already seen, the post office is now primarily supported by fees. The funds for the support of water-works are generally collected from the users, as fees, or from certain classes of persons as special taxes, but seldom as prices for the service. The experience of nations with State-owned railroads is too recent and too varied to be very instructive. States have been led into the ownership and operation of railroads : first, because the roads needed the support of public credit; second, because of military interests ; third, because of the failure of private companies to protect public interests. Railroads have more often been a source of public expenditure than of public revenue. In Prussia alone have the financial results been such as to add materially to the income of the treasury. The question of government ownership of railroads is one involving considerations broader than merely fiscal ones and does not properly belong to our subject. In no case is it at all likely that merely fiscal considerations will have more than a deterrent effect upon the solution of the problem of the government's action in regard to the management of the railroads.
While the industrial, commercial, or other economic functions of the State are of continually growing importance, they are not likely to be largely a source of net revenue. Nowhere do we find principles that would lead us to anticipate that revenues of this character will ever supply the place of taxes. Indeed, if the usual evolution continues, these functions may be performed, by the State without a special charge upon the benefited persons, and, while the liberties of the people in respect to the enjoyment of these facilities will be greater, the burden thrown upon general taxation will be equally so. If a city now supplies a sewer system to citizens free of special charge except for first construction, it may with the same logic supply water. If a State furnishes roads at common cost, it may certainly so far modify the management of railroads as to apply the fee system and forego the collection of any surplus, though in this case, as in that of the post office, there would seem to be as yet no sign of any tendency to go beyond the fee system.