The revenue received from the payment of fees does not always occupy the same place in fiscal systems. It may be set aside for some specific purpose, or simply be placed in the common fund to help meet general expenditures. The dog tax, for example, is commonly set aside to pay damages to sheep owners for the destruction wrought to their flocks by dogs. Some states use all funds secured from licensing automobiles for building or improving highways. A common earlier use of the fee was to remunerate the incumbent of the office through which the fee was secured. This system proved to be very unjust, because there was frequently no relation between the amount of labor of the various officials and the remuneration which came to them. As population increased, moreover, the amount of services to be paid for in this way expanded to such an extent that the resulting remuneration became unreasonably large. The recent tendency has been to put the returns from fees into the general treasury and pay the official a fixed salary. In this way an adequate compensation for services rendered is much more nearly accomplished.
No general statement can be made as to the relation between the amount of the fee and the cost of rendering the service. Some have contended that any payment which exceeds the cost of rendering the service automatically loses the nature of a fee and becomes a tax. This would perhaps be true of services of a more or less commercial nature. When, for example, such charges are made for the use of a postal system that no net revenue, or perhaps a deficit accrues to the government, the charge is evidently a fee. The primary purpose in view is social progress - education, enlightenment, ease of communication, and similar considerations. These are the justifications for undertaking the service. If, however, the rates have been so fixed as to lessen the amount of service in order to obtain a large net return - that is, the idea in undertaking the service has been to get revenue - then the charge loses the nature of a fee and partakes more of that of a tax or public price.
The United States postal services, as well as the conduct of many municipal water plants, furnish examples of commercial enterprises which have adhered to the fee basis of charge. The French tobacco monopoly is an example of such an enterprise in which the purpose of securing revenue predominates. On the other hand, many fees exceed the cost of providing the service, or there is no attempt made to compare the cost with the exaction which is made. Most of the court fees are examples of this kind. Such services often require simply the filling out of blank forms, for which a nominal fee is charged. The chartering of a corporation, and the granting of various kinds of permits, are other examples of this type. The service is undertaken primarily for the common good, the idea of revenue is secondary, and the arbitrary fee which is exacted is paid because the individual receives a direct benefit.
Fees and the Police Power. - An increase in the use of fees has accompanied the extended use of the police power. This power is that sovereign right of the commonwealth to protect the economic, physical, and moral welfare of its citizens. As former individual liberties become more and more restricted for the good of the group, the system of granting licenses becomes more prevalent. The size of the fee is often governed by the amount of repression which is desired. If the regulation have in view simply to test efficiency, or have on record the members of a particular trade, the fee will likely be comparatively low. The granting of licenses to teachers, engineers, teamsters, and the like would likely be of this nature. When the institution upon which the fee is levied is harmful, and intended to be repressed, the fee may be large. The fees that have been paid by liquor establishments, dance halls, and poolrooms indicate this tendency.