The complexities and evils of modern tax systems have led many to desire and to seek for better things. One cause for the difficulties has been the attempt of different political divisions to secure funds by levying taxes upon the same bases. This has led to evasion of payments - particularly those in which the individual has not been visibly and closely interested. One reason for the reluctance of individuals to turn in their property to the assessor has been that a part of the tax collected would be expended in a distant part of the state where no benefits would accrue to the payer. Another difficulty has grown up through the attempt of local officials to assess properties, the nature of which caused them to extend far beyond the limits of any one jurisdiction. A remedy for some of these difficulties that has been much discussed in recent years is that state and local revenues should be derived from separate sources.

Advantages of Separation. - On the face of the proposition some outstanding advantages present themselves. It is evident that certain fields of resources are much more suited to the cultivation of the state than of local units. The first example which presents itself is the large class of corporations which are much more nearly organizations of the state than of any locality. The complexities and nature of their business is such as to require assessors of a much higher degree of skill than local districts can afford to provide. It has been advocated that the assessment of the property of corporations should be taken from the locality and turned over to the state. The inheritance tax is another source of revenue which is adapted to the use of states rather than to the use of localities. In the first place, localities do not possess the machinery to administer the tax satisfactorily, and in the second place, in a small area, no reliance can be placed upon enough transfers of property occurring within a given time to insure a stable revenue. Within a larger district this stability can be counted upon with a reasonable degree of certainty. A large number of license taxes, also, can be more efficiently handled through state machinery than through that of localities. It seems reasonable, then, that these sources of revenue could be profitably turned over to the state.

If the state be given the revenues from corporations, inheritances, and certain licenses, it would be possible to relieve the localities from contributing to the support of the state from revenues which are collected by local officials. There would be no state tax to be collected, consequently there would be no particular advantage for the inhabitants of one district to secure a lower percentage valuation than in adjoining ones, for it could not reduce the tax burden, but merely affect the rate. It would give the localities, moreover, a much greater autonomy in determining fiscal policies.

Dangers of Separation. - There is no doubt that the revenue systems of state and localities have been too closely interrelated, and that some degree of separation would prove beneficial. An entire divorce of the two, however, with absolute local autonomy in determining fiscal policies which the most ardent advocates desire, is fraught with dangers, and would not, perhaps, accomplish all that is hoped.

It is desirable to have some uniformity in the raising of local revenues, even if no part of the revenue is to go outside of the district. Local fiscal officials, moreover, would not always be competent to decide what plans would be feasible to adopt. The use of an income tax as the base of revenue in one township, for example, while the adjoining township used property, would either impose double taxes or exempt entirely an individual who owned property in one township and lived in the other. Other reasons exist, moreover, for unequal assessments than because a part of the revenue collected locally goes to state purposes. The local assessor, under the plan of separation, would still be an elected official, and the same reasons for showing favoritism would continue to exist. While a separation of revenues may be desirable to some extent, the local units should still be kept under central supervision to the extent that some uniformity remain in local fiscal methods. They should also be restrained from experimenting with systems which are not adapted to their need.

The absolute separation of sources of revenue possesses the added danger of leading to parsimony or extravagance. Take, for example, the states which rely almost entirely upon revenues from corporations. If these enterprises be powerful in the state, and have a controlling influence with the legislature, expenditures will be reduced to the minimum, and many desirable public activities may be thwarted in order to make the tax burden as light as possible. As was previously pointed out, moreover, it is politically undesirable to have one class voting the expenditure of funds which another class contributes, for this will lead to extravagance. If, then, corporations be the source of tax, and unpopular with the legislature because it represents another class of people, no amount of expenditure will appear to be too great. For the sake of economy an absolute divorce may not be desirable, and better results may be expected if the people who vote the expenditure of funds also have to help bear the burden.

As between Federal and state revenues the tendency seems to be in the opposite direction from a separation of sources. A few years ago it was argued that, since the Federal government had the field of customs and excises, the states should have that of incomes, corporations, and inheritances, and leave the returns from property to the localities. More recently, in spite of much objection from state officials, the Federal government has widened its scope of sources. Its use of incomes, corporations, and inheritances as sources of revenue has already been discussed.