The development of criteria of justice in taxation, with the general acceptance of faculty or ability to pay as the most satisfactory, has been discussed. In the light of this development various kinds of direct and indirect taxes have been considered with reference to their justice, and it has been seen that the incidence of such indirect taxes as customs duties and excise taxes cannot be traced with sufficient accuracy to determine the real burden. Taxes upon consumption, moreover, are regressive, in that they fall more heavily upon the poorer classes, and for this reason they are no longer advocated as the essential part of a tax system.
The development of direct taxes to conform to the ability to pay has followed the changes and growth in economic institutions. The place of the individual as the base of the first direct taxes has already been pointed out. Poll taxes, however, conformed to the requirements of justice in only the primitive stages of society. Here property held a sphere of minor importance, there were no such distinctions as rich and poor, and here also the character of the work of individuals, as well as its reward, was very much the same. The injustice of the exclusive use of poll taxes became apparent as property began to occupy a more important place among economic institutions. The development of the use of property as a base for taxes has also been discussed, as well as the outstanding defects of this system as economic institutions developed into their more diverse and complex forms.
As long as society was primarily agricultural, and property consisted almost entirely of land and its appurtenances, a tax based upon property could be made to conform fairly well to the principles of justice. We have seen, however, that as property began to take on diverse forms, and began to assume varying degrees of productivity, a general property tax did not meet the requirements of justice. The difference in ability in the various forms of property to bear tax burdens, the development of the ability to bear these burdens without the ownership of property, the inequality of assessments, and the failure to assess many classes of property, have emphasized the failure of this tax to meet the requirements of justice.
Most countries outside of the United States, it was indicated, have long since given up property taxes in their search for some method which would more nearly conform to faculty under the modern complex industrial organizations. Some form of an income tax has been widely adopted where the property tax has been given up. In recent years, also, income taxes have begun to play a much more important role in the fiscal systems of our Federal and state governments. In the future, no doubt, income taxes will occupy a place of much greater prominence in the fiscal systems of the states, at least, than they have held heretofore.