But the faculty theory, while offering some difficulties, is on the whole more satisfactory. The faculty theory is well illustrated by the history of the English poor law, to which reference has already been made. At first the attempt was made to supplythe wants of the poor by voluntary contributions. But it soon became apparent that all were not contributing "as God had prospered them." The idea that the support of the poor was a benefit to the other classes, except, perhaps, so far as almsgiving was supposed to ensure a man's salvation, did not appeal to the legislators. They anxiously avoided making the contribution compulsory because it would be hard to justify such a policy by pointing to any benefit. But they felt that fairness demanded that each should contribute according to his ability. Indeed, this was their understanding of the Divine command upon which they were consciously acting. The Justices of Peace were, without any very definite instructions as to the mode of procedure, authorised to see that each person contributed fairly according to his ability.1

What then constitutes ability? The original idea seems to have been that the possession of property constituted ability. But the valueof property depends upon its power to yield the owner a revenue. If we consider landed property only, we find historically the greatest un-1 Ashley, Economic History, II., p. 360.

certainty as to whether men should be assessed according to some estimate of the salable value or according to its annual yield. This uncertainty arose from the nature ot things. The salable value of landed property was, of course, determined by the annual produce or revenue-yielding power. In the middle ages land was not salable property; hence, it was the custom to value it for purposes of taxation according to the annual produce, or the annual rental value, which was determined by the produce. The history of taxation in the American colonies is very instructive as to the method of determining what constitutes faculty or ability to pay. Here for the first time in history, or at least since the fall of Rome, was a country that enjoyed almost absolute free trade in land. When the Connecticut proprietors bought in fee simple lands in Vermont, which they had never seen, to be sold again on the same terms to settlers, whom they had never seen, often for prices which the same lands would not bring to-day, they were doing what was not possible in any European country at the time and what is only partly possible in most of them to-day, i.e. selling land as one sells wheat or any other commodity. The New England colonists, therefore, had the choice of two methods of assessing property in land : they could follow the older method to which they were accustomed at home, which assessed the rental value of the property, or they could take some method suggested by the fact that lands were really sold, in fee simple, for a price. In general they chose the latter, although there are numerous traces of the old method both in the tax laws and in other regulations that are of a similar character. It is unfortunate that none of the investigations into the history of this period have been specially directed toward this point. Vermont furnishes one of the best examples of the principles underlying the colonial ideas of taxation.1 There the conditions were very simple. Taxation was intended to cover all male inhabitants. Every male between 16 and 60 years of age, with a few definiteexceptions, was "rated" at 6 onhis person. That is, everybody was considered to be able to contribute something, whether he had property or not. Then the different items of property were "set in the list" over against the name of the owner at fixed rates. For example, each acre of improved land, 10s. ; an ox or steer four years old 4 ; three years old, 3; two years old, 2 ; one year old, 1 ; a horse three years old or over, 3; all "horse kind" two years old, 2. Money on hand, or due, was listed at 6 in the 100. Then all persons were listed "for their faculty," according to occupation and earnings : attorneys at from 50 upwards, as the value of their practice increased ; all tradesmen, traders, and artificers "proportionally to their gains and returns."

1 Wood, History of Taxation in Vermont. Columbia College Studies, IV. 3.

Other items of property were entered in the list in a similar way at fixed rates. The sum total of all the different items over against the name of each person was supposed to represent his total ability or faculty. The notable thing about all this is that only revenue-yielding property was listed. It was not a property tax purely, nor an income tax. But the thing which it sought to ascertain was how much ability or faculty each person had. All property that was regarded as indicative of faculty was listed, and many other things that were also indicative of faculty were included. Later, however, Vermont adopted a form more nearly in accord with the idea that property alone indicates faculty.

There are then two ways of ascertaining faculty. In the one the base is primarily the propertyirrespective of the revenue the property yields. In the other it is income from property or from other sources. There are, also, two ways of completing the measurement: We may assume that faculty is proportional to property or income ; that is, that it increases in exactly the same ratio as property and income increase. Or we may assume that it increases more rapidly than either property or income. The choice of base and the choice of rate have given rise to long and weary discussions and hair-splitting distinctions. In regard to the first, it is sufficient to say that at present the most widely accepted view is that, from the standpoint of abstract justice, income forms a better starting-point for the determination of faculty than property. But we cannot avoid entering the discussion as to whether faculty is in proportion to income or increases more rapidly. The widespread advance of democracy, and of sympathy for those in the lower walks of life, led to the desire to justify if possible the exemption of smaller incomes, especially the minimum of subsistence, and this desire found means of fulfilment in the newer theories of value, the conception of final utility, and the discussion as to the relative urgency of different wants. If we classify certain wants as absolute necessities, then the conclusion is near that the possessor of the minimum of subsistence has no ability to pay taxes. The possessor of a great deal more than the minimum of subsistence can in proportion bear more taxes than one who has only enough to obtain a few comforts in addition to the necessities. That is, the test of justice is found in equality of sacrifice, and we impose a greater sacrifice if we take away from the labouring man with $1500 a year 10 per cent of his income, than we impose on the capitalist with $15,000 annual income by taxing him in the same proportion. Moreover, if we look upon faculty as identical with general economic power, then it is clear that, as the control of wealth increases, the ease of further increase is greater. Thus it is easier relatively for the millionaire to double his fortune than it is for the daily wage-earner to rise to independence.