Perhaps the most common distinction is that made between direct and indirect taxes. This distinction first obtained theoretical importance in thewritings of the Physiocrats. By direct taxes they meant any of those taxes which were levied immediatelyupon the " produit net." There alone, they argued, could be the fund out of which taxes could be paid. To levy taxes anywhere else was indirect, because the burden would be shifted from one to another until it rested there. The assignment of any particular tax to one or the other of these categories was with them a mark of approval or condemnation. With the recognition that other economic processes besides those which added to the material property of the world created wealth, this peculiar theory of taxation drifted into abeyance. The same terms, however, have been widely used by officials and writers and have such prevalence that a recognition of them cannot be avoided.

Rau and Wagner have made the most elaborate attempts to define the modern usage. In this they were only partly successful, because of irregularities in official usage. But despite these irregularities the terms arevaluable. Wagner's distinction is practically as follows. There are two ways in which direct and indirect taxes differ. (1) In the case of direct taxes, at least in the expectation of the law-giver, the tax-payer is also the tax-bearer ; any shifting of the burden to another is not expected, not desired, and sometimes, even, forbidden, or subject to penalty. Indirect taxes are, vice versa, those in which the tax-payer is not permanently the tax-bearer, or is not intended to be ; but a shifting of the burden to another is expected and desired, and may even be prescribed.1

But this element of shifting is not the only one that is essential to the idea. The second characteristicis what may be called the technical, administrativeconception of direct and indirect taxes. It is based on the method of procedure. (2) Direct taxes are such as are regularly laid according to some fixed fact (or one so treated, and at least somewhat fixed), something regularly recurrent, and hence previously ascertainable, — a fact as of personality, of rank, of property, of earning, etc.,— and are, consequently, assessed according to some list or roll. (Cadastre.) Indirect taxes, on the other hand, are such as are laid according to some changing, temporary, more or less accidental fact which is, consequently, not previously ascertainable, — something the result of processes, events, transactions, — and are laid and collected according to tariffs.2

1  Wagner, Finanzwissenschaft, II., 1st ed., p. 269 ; 2d ed., sec. 97-100. Schőnberg's Handbuch, 3d ed., III., p. 171.

2  Wagner, Finanzwissenschaft, II., 2d ed., p. 239.

These two methods of distinction follow quite closely the usages of theoretical writers and of official bureaux. There are important exceptions in some countries. Thus in France the customs duties are not officially classed as indirect Exceptions in taxes, but form a class by themselves official usage. akin to direct taxes. In the United States at the time of the Civil War the income tax was viewed by the courts as an indirect tax, or at least not as a direct tax in the sense of the Constitution.1 This decision, however, was reversed in 1895 by a bare majority of the same court, which decided that a similar income tax was a direct tax in the meaning of the Constitution. This decision is in accord with the distinction made above.

The principal direct taxes are : the land taxes, building taxes, property taxes, poll taxes, class taxes, income taxes, industry taxes; the indirect taxes : the customs duties (with the exception of the French), internal excisetaxes, transaction taxes, most fees and licenses. The inheritance taxes, or death duties, as they are called in England, are not easy to classify. In the first sense they are direct taxes, and in the second they are indirect. This is, perhaps, the only important tax that cannot be easily classified. The inheritance tax wherever it exists is used because it is expedient and without much cost yields a large return. It is levied at a time when the persons paying it are not in position to demand a strong justification. It is sometimes justified on the ground that it compensates for previously unpaid taxes. If this justification holds, then the inheritance tax must be classed as a direct tax.

1 Springer v. United States, 102 U. S. 508. See article " The Direct Tax of 1861," Quarterly Journal of Economics, July, 1889 ; Seligman, "The Income Tax," Forum, 1895.