The following table shows the Federal revenue classified by sources for the fiscal year ending June 30, 1903 :

Customs...............$284,479,582 Internal revenue............230,810,124
Postal service.............134,224,443
Miscellaneous: Profits on coinage, bullion deposits, and assays......$ 8,254,740
Fees, consular, letters-patent, and land.........4,048,833
Sales of public land......8,926,311
Tax on national banks.....1,647,429
Sale of Indian lands, etc.....2,393,269
Part payment Central Pacific Railroad indebtedness .... 4,066,350
Other miscellaneous.....15,770,036 45,106,968
Total revenues.............$694,621,117

Customs Taxes. As appears in the table, the government derives a very large proportion of its whole revenue from customs duties, which are taxes laid upon imported commodities. In earlier days, and particularly before the Civil War, the customs duties constituted nearly the whole of the Federal revenues ; and even now, in times of peace, about one-half of the ordinary tax receipts of the national government are from this source.

Customs duties are either specific or ad valorem. Specific duties are duties laid in proportion to weight or number, without regard to value, while ad valorem duties are levied in proportion to the value of the commodities imported. Ad valorem duties are open to the objection that they offer a greater temptation to fraudulent valuations, and hence make more difficult the work of the customs officers. Specific duties, on the other hand, while they can be more easily administered, are open to the serious objection that they impose a relatively heavier burden upon less valuable goods of any class. Owing to their greater ease of collection, however, such specific duties now play a larger part than ever before in our tariff system.

Although long use and practical convenience have given the customs duties a large and apparently secure place in our financial system, there are certain evident objections to such taxation which must be borne in mind by the student in considering the general question of tax reform. These objections call for a word of explanation.

Objections to Customs Duties. 1. Their Regressive Character. First of all, it is an objection against such taxes that they are regressive in character. Customs duties, to yield a large revenue, must be levied upon goods of very general consumption, and moreover fiscal reasons lead to the imposition of high rates upon such commodities. But it is for precisely such commodities that people of only moderate incomes spend a greater proportion of their income than do the rich. Therefore the tax is regressive ; it lays a disproportionate burden upon poor people and people of moderate means.

2.Effect upon Industry. In the second place, such taxes, if they are " protective " in character, interfere with the natural disposition of the nation's labor and capital. Moreover, it regularly happens that such a tariff takes much more from consumers than ever finds its way into the Federal treasury, since only imported goods yield a revenue, while all goods, imported and domestic, are sold at a higher price to the consumer.

3.Inelasticity. The two objections just explained are based chiefly upon social and industrial considerations. A third objection is directly financial in its nature. One mark of a good tax is its elasticity. Now few taxes are more inelastic than customs duties. Frequent changes of tariff rates are fatal to that stability of industrial conditions without which business cannot prosper. Unusual demands upon the Federal purse cannot be met by changes in the tariff schedules.

4. Uncertainty. And hence results still a fourth objection, also financial in character. It is a serious defect of such taxes that they are likely to yield least when government need is greatest. A war, calling for unusual expenditures, is certain to curtail international trade and hence revenues from customs duties. Moreover, recurrent industrial depressions affect most seriously the government's receipts from this source.

As we have already said, in spite of the serious defects of customs duties as a main source of revenue, long-established usage and the great fiscal needs of modern government are certain to maintain a prominent place for this form of taxation for a long time to come. Meantime, nations usually seek to compensate for these objections by supplementing their customs duties with other forms of taxation.

Excise Taxes. One such form of taxation, as practised in the United States, is that of excise taxes, the revenue constituting part of the " internal revenue " of the government. Excite duties or taxes are those levied directly upon certain classes of goods produced within the country. Down to the Civil War, these taxes were bitterly opposed in the United States, and very little revenue was derived from them. The enormous cost of the Civil War required a resort to this form of taxation, and when the strain of war had passed, much of the popular opposition to excise taxes was found to have disappeared, with the result that the Federal government now secures from this source revenues second in amount only to those from customs duties.

Method of Collection. The method of collecting excise taxes has been developed into a simple and effective system. Producers of tobacco, cigars, whiskey, etc., must purchase revenue stamps from the government and put these upon the packages containing the goods in such a way that opening the packages will destroy the stamps.

Excise taxes are regularly classed with customs duties as indirect taxes, because, while they are laid directly upon producers, it is supposed that they will be shifted to consumers in the enhanced price of the commodity. In some other respects, too, excise taxes are open to the same objections that lie against customs duties. They are regressive in character, though as they are laid chiefly upon liquors and tobacco, the injustice of their regressive character is less grave. But, on the other hand, excise taxes have proved very productive, and they offer relatively little difficulty in collection. Moreover, they form a more reliable source of revenue than do customs duties, in that they fluctuate less in times of war and in periods of industrial depression. Hence these taxes are also likely to form a considerable part of the national revenues for a long time to come.

Taxes on Transactions.In times of urgent need, as in the War of 1812, the Civil War, and the late war with Spain, the Federal government has imposed taxes upon various sorts of transactions. Thus the War Revenue act of 1898 imposed " stamp" taxes on bank checks, telegrams, freight and express receipts, transfers of stocks and bonds, bills of exchange, etc., the method of collecting the revenue being similar to that described in the case of excise taxes.

Though such taxes may be made the source of large and easily collected revenue, they are not likely to be resorted to except in times of emergency, since their general effect is to impede business; and a check on business activity soon lessens the revenue from other sources. In most cases, as was shown by our recent experience, taxes on transactions are borne by the consumer or purchaser, though in some cases, if the tax be a small one, the producer or seller will "pocket the loss."