61. Many Ideas of Taxation Are Inaccurate

To the layman a tax is any compulsory payment made to a political division, or, very often, to other institutions. Students of fiscal problems, however, cannot accept this broad characterization, but must make a differentiation between the compulsory payments to the state and other compulsory payments.

Definition of Taxes. - A number of attempts have been made to define taxes, many of which leave something to be desired. The idea of compulsion is general. Various ideas as to method and purpose of the levy have been given. Such ideas as the following may be found in analyzing the definitions of various writers: Taxes are legally collected contributions for meeting necessary and general expenses; taxes are proportional contributions levied on property; taxes are for the purpose of meeting public needs; taxes are for the purpose of meeting the expenses of government; taxes are one-sided transfers with the intention that a common burden will be maintained.

A little inquiry into the nature of the levy of taxes, and the purposes for which they are used, will show the insufficiency of these statements. Many examples could be given of where the funds collected from taxes have been used for other than the necessary and general expenses of the government. In the ancient autocratic state the funds collected were often used to subserve the private ends of the ruler. The same is equally true in such modern states as Turkey. In any state, however, it is not difficult to find expenditures from the common fund which have been so extravagant as to be worse than useless. Many of the familiar "pork barrel" appropriations of our Congress are of this nature.

Taxes, moreover, are frequently used for other than public purposes. Numerous examples may be found where funds from the common treasury have been used to aid individuals or groups of individuals in distress. In times of fire, flood, famine, and pestilence, the purse of political units has often been called upon to furnish relief. Wealth, moreover, is not the only criterion which may be taken as the basis for the tax levy. The wide use of poll taxes, especially in earlier revenue systems, is evidence of this. While a tax is not to, be expended for the direct individual benefit of the one by whom it has been paid, it does not necessarily convey the idea that the transfer is one-sided. The prevalence of such an idea would no doubt have the effect of making taxes very much more unpopular than they now are.

A proper definition of a tax, then, must be broad enough to include many of the suggestions in the above paragraph, and yet narrow enough to exclude voluntary payments, and those through which the one who makes payment expects to get a direct benefit from the expenditure of the fund. The following definition is suggested as one which meets these requirements. A tax is a compulsory contribu-tiorin, exacted by public authority according to some general rule, without reference to any special benefit conferred by the expenditure of the funds so exacted. This definition allows that a state may collect funds from any source, so that some general rule is followed, and that the expenditure may be for any purpose that the spending authorities may desire.