Partly owing to the proved injustice of the general property tax, but partly also owing to the recent great growth of the corporate form of business enterprise, there has been in the last quarter of a century a considerable development along the line of taxation of corporations. In some cases, as in New York, there are two taxes thus laid, one upon the organization of such corporations, and another upon their annual business. In some cases, taxes are laid only upon special forms of corporate business, such as banking and railway companies and the like, while in other cases the tax is broadened to include all corporate business. It has been found much easier to reach the revenues of such businesses directly than to reach them through the taxation of the stocks and bonds of the corporations in the hands of individual owners. New York, Pennsylvania, Vermont, and Massachusetts are among the states that have come nearest to abandoning the general property tax, and developing in its stead taxation of corporations.

License Taxes. Another form of state taxation that has undergone a considerable development in recent years is that of business licenses. License taxes, which have at rare intervals been levied by the Federal government, are now exclusively used by state and local governments. When, as is the case in our Southern states, licenses are required for many different kinds of business, serious disturbance to business results. But much may be said in favor of a system of taxing by license a few industries which it is generally believed the state should regulate. The most important of such license taxes are those laid on the sale of liquor. The state of New York, which divides the proceeds from liquor licenses between the state and the community, received $4,221,671.99 as its share of such revenue in the fiscal year 1902.

Inheritance Taxation. Still another form of taxation to which increasing resort has been had in recent years is that of inheritances, collateral or direct. In the levying of inheritance taxes, or " succession duties," there are many and wide differences of detail which we cannot stop to consider. In many cases such taxes are progressive or graduated on a twofold basis. Thus, a small bequest to a wife or son or daughter would be taxed at the lowest rate, while the bequest of a large fortune to distant relatives or strangers in blood would bear the heaviest burden. This form of taxation is winning increasing favor from economists and from statesmen, both on account of its conformity to the " faculty " theory of taxation, and because of its practical ease and certainty of collection. The large part which the tax already plays in the finances of New York State is shown in the table. Fifteen commonwealths, including New York, Ohio, Illinois, Massachusetts, and Wisconsin, raise a part of their revenue from this source.

The Income Tax. Income taxation calls for more extended comment. First of all we must point out the peculiar situation in which the matter of such taxation now stands in our country. More than a century of experience in many states has demonstrated that under our form of government, income taxation cannot be successfully practised by the state governments. If New York State should levy an income tax, its wealthy citizens could easily escape it by acquiring a legal residence in some near-by state which would be likely to bid for such action. It follows that the only practicable plan of reaching incomes is through taxation by the Federal government.

Federal Income Taxation. The Federal Constitution requires that representatives in Congress and direct taxes shall be apportioned among the states " according to their respective numbers." Under early decisions of the United States Supreme Court, it had been held that direct taxes, within the meaning of the Constitution, did not include income taxes. But in passing upon the income tax provision of the Revenue Act of 1894, the Supreme Court, by a majority of one and after a change in the personnel of the court during the consideration of the case, reversed the earlier finding and held that income taxation must be levied, if at all, upon the states in proportion to their population. Under this ruling it becomes practically impossible to find a place for the taxation of incomes anywhere in our financial system ; for the injustice of laying a Federal income tax upon the basis of population becomes apparent at once when we recall the great per capita wealth of New York and Pennsylvania as compared with that in Nevada and some of our Southern states.

The Income Tax in Practice. But, it may be asked, Is it not well that income taxation has thus been made impossible, at least until a possible re-reversal of the opinion of our highest court ? To answer this question, we must consider the claims for and against the tax. First of all, it is to be noted that in England, Italy, Prussia, and other German States in which the income tax has been given a trial, (1) experience has justified this form of taxation, according to the majority opinion of those who have considered the matter. Moreover, it is especially noteworthy that income taxation (2) gains in economy and productiveness, and wins increasing approbation as the years go by. This is in sharp contrast with the experience of all States in their use of the general property tax, which has grown more unjust and less workable, the longer it has been tried.

The Income Tax in Theory. In the third place, (3) there is little question that an income tax, assuming it to be fairly enforceable, conforms almost perfectly to the ideal of taxation, that men should pay the expenses of the State in proportion to their "faculty " or ability, since income is by all means the best single mark of such ability. Where the tax is applied uniformly upon all kinds of income, (4) it cannot be shifted easily if at all, and in any event, the tax on rent and monopoly privileges of all sorts cannot be shifted. This itself is a strong recommendation of the tax.

Exemption. It is usual to exempt small incomes from income taxation, for the reason that possessors of such incomes already pay a disproportionate share of other taxes, and for the further very practical reason that the expense of collecting the tax on such incomes bears too high a proportion to the return to render such taxation economical.

Practicability. The question of the possibility of a fair enforcement of income taxation is best answered by the English experience. We cannot here explain the English system in detail, but may simply state that the laws there provide for the taxation of all incomes grouped into five classes, and that the tax is laid in the greater number of cases "at the source." For example, dividends of a corporation pay the tax before they are distributed to the individual shareholders.

Conclusion. The objections commonly urged against income taxation, that it is inquisitorial, impracticable, etc., must be left to the study and discussion of the class. Whatever may be the weight of such objections, it remains a fact that the underlying justice of the tax, coupled with its proved practicability in other countries, is leading an increasing body of Americans to favor this method of securing revenues for the Federal government, and making large fortunes pay their just share of the expenses of government.