The fiscal systems of the states are separate and distinct from that of the Federal government. The Federal government is one of delegated powers, while the powers of the states are residual. Much diversity, therefore, might be expected in the fiscal systems of the states, while the Federal system can only be changed by constitutional amendment or a change in court interpretations.

Constitutional Limitations. - The constitutional provisions noted above have an appreciable effect upon the revenue systems which can be used by the states. No state, of course, can levy duties upon exports or imports. The significance of this restriction has increased in importance as commerce has become more extensive, and has opened up greater and greater possibilities of securing revenue. The constitutional provisions which guarantee the citizens of one state all the privileges and immunities of the citizens of another state, and which give the control over interstate commerce to the Federal government, place further limitations upon the state's taxing power. No state can, therefore, lay a tax upon a citizen of another state which does not apply likewise to its own citizens. The courts have excepted corporations from this interpretation of citizenship. A corporation which does business in a state other than the one in which it was chartered may be taxed differently from corporations formed within the state. Should a state attempt to levy a tax upon goods, either leaving its borders or coming in, this action would immediately be declared void by Federal authorities because of the interference with interstate commerce. Consequently, what might be made a very fruitful source of revenue cannot be used, and resort must be had to forms of taxation which will stand under the constitutional provisions.

State Taxes. - Some form of property tax was early found in all the states, and has so developed as to include practically every form of property, both personal and real. In spite of the difficulties which have arisen, it still remains the tax of primary importance in every state, if not for state purposes, for the minor political divisions. Problems of equal assessment arose at the beginning of its use, but have increased many fold with the development of immense wealth in the form of intangibles, which so easily escape assessment. Many innovations and modifications have been tried to remedy the defects, but with far from satisfactory results. The long use of the property tax has so firmly embedded it in state and local tax systems that attempts to dislodge it, or even materially modify it, have generally proved futile.

The property tax still retains much of its earlier importance, yet other taxes are used in most states to supplement it, and in some cases almost to supplant it for securing funds for state purposes. Where this is true, the property tax is given over more exclusively to the local political units. One of the first taxes to be used, and one which possesses great possibilities which have not been developed, is the inheritance tax. It is only recently that its adoption has become important, and as yet the rates are comparatively low. A few states have developed the use of the income tax, and its further extension as a source of state revenue may be hastened by the adoption of the

Federal income tax. The policy of most states of imposing taxes of various sorts upon corporations is one of increasing importance. Early corporations were looked upon in a measure as public benefactors, and consequently were treated with leniency. As this attitude changed, and as it began to appear that corporations were well able to contribute to the support of the state in a way which they were not doing under the property tax, states began to impose special taxes upon them. License and business taxes, in recent years, are finding a more important place in the fiscal systems of states.

Local tax systems are largely governed by the states, and invariably hinge around property taxes. License and business taxes, as well as special assessments, are also used. The principal taxes used by the Federal, state, and local governments will be treated in detail in some of the succeeding chapters.