Many reforms have been advocated with taxation as the machinery through which they were to be accomplished. In these programs of reform taxes have been considered as having a social or ethical function as well as a fiscal function. Some attempts have been made to separate taxes into periods, in one of which they were used only from the fiscal standpoint; in the other, from social considerations as well as fiscal. It would be difficult to find a time, however, when taxes were not used to some extent as a social measure.

Different persons suggest different social functions for taxes, according to the institutions they would have corrected. Some of the more extreme would have the state use the taxing power as a means of equalizing wealth. This use of taxes is sometimes advocated on the ground that wealth inequalities have arisen because of the past action of the state, and hence the state is perfectly justified in taxing large wealth. This principle is sometimes called the compensatory theory of taxation. Others, who think the present system of wealth distribution woefully unsound, would use taxes, not only to break down large fortunes now in existence, but to remove political and economic conditions which make such unequal accumulations of wealth possible. To accept such a field as a proper function for taxes, one must be willing to concede the present scheme of distribution to be unjust and to be based upon unsound principles - a concession which would not generally be made.

Regulation of Undesirable Institutions. - Taxation has seldom been used to the extent suggested in the preceding paragraph, yet everyone is familiar with its use for eliminating or regulating social evils. The circulation of state bank notes was considered such an evil to sound currency that their continued use was made unprofitable by the heavy tax that was placed upon them. Enterprises whose products are considered harmful to the moral or physical well-being of society are frequently subject to taxes. Conspicuous among these are the taxes which have been placed upon the liquor industry. The ethical question arises, however, as to the justice of compromising with evil by allowing it to remain by paying a tax. To eliminate an evil at once, however, may not always be desirable, or an institution may be an evil only if it is unregulated. Taxation may be used in these cases as a valuable social weapon.

Since taxes have so often been used with a social significance, some would have this aspect a prime consideration in the levy of every tax. The purpose of the state is to promote the general welfare, and this is accomplished most effectively when the state so functions as to bring the greatest good to the greatest number. In levying taxes, then, the state should not only be concerned about the sacrifice upon the individual who must pay, but with the good or evil effects upon society as a whole. If the base be considered an evil, then a repressive tax is desirable, and the resulting good to society would more than counteract the loss to the industry, even though it be destroyed.

With this idea in mind, officials should carefully consider the bases upon which taxes will be levied. Taxes tend to have a repressive effect, and if levied upon a desirable and useful industry to such an extent that its production is noticeably curtailed, the sacrifice of the taxpayer may be small in comparison to the general burden on society. Authorities, in levying taxes, then, should be concerned not only with the fiscal aspects, but with the possible repressive effects as well. There can be little doubt that, with the development of the police power, the social aspect of taxes will continue to receive much consideration.