In what has gone before, we have not dwelt upon the question whether any forms of revenue are particularly appropriate to different divisions of our government, or whether there is any gain in a balanced system for the different governments considered together. A moment's reflection should convince the student that no part of our revenue laws can be finally judged until it is considered in its relation to the whole system. To emphasize this fact, it may be well to suggest here a balanced revenue system, in which Federal, state, and local revenues will be placed in the right relation one to another.

Federal Revenues. In the first place, it is to be noted that the Federal Constitution itself prescribes the place of customs duties in the system. Again, excise taxation could not be practised by the state governments, since any state that should begin such a practice would promptly drive the taxed production into the jurisdiction of other commonwealths. To these two natural sources of Federal revenue may be added the taxes on transactions, though these should be rarely and sparingly levied ; taxation of interstate commerce, which would be a peculiarly appropriate source of Federal revenue, and would offer an excellent opportunity for the regulation of interstate business; and income taxation, which is now unconstitutional, but which may again become constitutional, as it has been before. At present no one of these last three forms of taxation is demanded by urgent fiscal need; but it may be expected that when such need arises, the government will resort to one or all of these sources rather than increase much further the present customs and excise taxes.

Moreover, it may even be hoped that there will in any event be a gradual lessening of the proportionate dependence upon customs duties and excises, and an increasing resort to interstate commerce and income taxation, which are more equitable, more economical, more certain, and more elastic sources of revenue.

State Taxation.We have already pointed out the manifold inequities of the general property tax. There is no longer any question that it would be well for our commonwealths to abandon as rapidly as possible this source of revenue, and to leave to the local governments the taxation of real property. The state can easily develop corporation, inheritance, and license taxation until they will prove sufficient for state needs. Already two commonwealths have made the change, and many others seem prepared to follow them. Under these forms of taxation, personal property will be taxed more certainly and more equitably than it has anywhere been taxed under the general property tax.

Local Taxation. The system thus far outlined would leave to the local governments the most convenient and most appropriate sources for their revenues. First of all, public franchises or municipal management of public-service monopolies should be made in the United States as in Europe to pay a considerable part of the local expenses of government. Licenses also form a proper source of revenue even for smaller communities. Finally, any remaining revenues could easily be supplied from a little-burdensome tax on real estate, with perhaps a special and distinct tax upon such personal property as household furniture, live stock, farm implements, merchants' stocks, etc.

Such a harmonious system as has been here suggested would insure a greater degree of equity, elasticity, economy, certainty, and harmony than now obtain in our unsystematic hit-and-miss forms of taxation.


1.The revenues of the Federal government are derived in great part from customs duties and excise taxes; other sources are taxes on transactions, postal receipts, etc.

2.Customs duties are regressive, inelastic, and uncertain, and disturb business; but their productiveness gives them a strong place in the financial system.

3.Excise taxes on liquor and tobacco are also regressive, but they are less objectionable in other respects, and they are conveniently collected.

4.States have relied in the past mainly on the general property tax, which is unwieldy, unscientific, and inequitable, and leads to many sorts of corruption.

5.Poll-taxes no longer play any considerable r6le in taxation.

6. Taxes on corporations, license taxes, and inheritance taxes are in many states taking the place of other forms of taxation.

7.The income tax, which has been proved to be practicable, and which is theoretically a very just form of taxation, cannot at present be successfully laid in the United States.

8.Local governments now rely mainly on the general property tax and license taxation.

9.A balanced revenue system would have the Federal government supported chiefly by taxation of incomes and interstate commerce and by customs and excise taxes; the state governments, by corporation and inheritance and license taxes; the local government, by franchise and license taxation, supplemented if necessary by small separate taxes on real property and some classes of tangible personal property.


1. What part of the Federal revenues comes from customs duties? From excise taxes ?

2.What are specific duties? Ad valorem duties?

3.State and explain the objections to customs duties; to excise taxes. Compare the two.

4.Describe the method of collecting excise taxes.

5.What is the objection against taxing transactions?

6.Describe the evils of the general property tax. How is the gen-

-eral property tax levied ?

7.What has caused the recent great development of corporation taxation ?

8.What are the advantages of inheritance taxation?

9.Discuss the advantages of income taxation; the disadvantages.

10. Frame a balanced system of taxation for town, state, and nation, and explain why each tax is placed where it is.


Adams, H. C.: The Science of Finance, Part II, Bk. II, Ch. VI, especially § 73.

Daniels, W. M.: The Elements of Public Finance, pp. 167-170 and pp. 186-191.

Plehn, C. C.: Introduction to Public Finance, Part II, Ch. VIII, § 1. See also other references at close of preceding chapter.