In the preceding chapters an attempt has been made to give an outline of the growth of public expenditures, of the development of revenue systems to meet this growth, and of some of the problems which have been encountered because of this rapid growth in the amount of expenditures and revenues. The public has become accustomed to large expenditures - our first billion-dollar Congress a few years ago caused considerable comment, yet no one expects that a single Congress will again spend so little. The expenditures of the Federal government, at that time, were little noticed because of the reliance upon indirect taxes - customs duties and internal revenues - for practi-cally the entire amount of its income. While these taxes are no less burdensome than direct taxes, yet the burdens are not known, and consequently cause less objection from those who pay them. Indirect taxes, therefore, are of advantage to the state, in that large sums may be raised with practically no complaint from its citizenship. They are objectionable, however, in that their incidence cannot be accurately determined; hence it is difficult to use them extensively in a system of taxes which is expected to conform to the principles of justice.
Change in Public Activity. - As civilization and states develop, two tendencies appear - states take on a greater number and variety of functions, and direct taxes occupy a place of greater fiscal importance in the revenue system. These have been amply illustrated in the United States.
The functions of government have been gradually extended, previous privately conducted industries have been taken over by the various political units, and the services often given free or at a small fraction of the actual cost.
The most extensive illustration of this changed condition is found in education and in highways. The patrons of the districts no longer build schoolhouses and hire teachers, nor are the users of the highways longer inconvenienced by tollgates. Such services are now freely given, but entail, necessarily, a situation which calls for additional revenue. Another situation which has developed in the United States is the disappearance of the differentiation between the functions of various states and those of the Federal government. The Federal government can now aid in the construction of highways, in the advancement of education, in the eradication of disease and destructive insects, without the fear of being criticized for interfering with the rights of the states.
The states more and more take the attitude that they will accept the residual functions - that is, let the Federal government do what it will and they will do what is left. This gradual extension of the activities of the Federal government to services of such a tangible nature that the citizens can appreciate and measure some of the benefits, has made it possible to enlarge the use of direct taxes. The constitutional provisions placed extensive limitations upon the use of this form of revenue, but amendments and court interpretations have practically destroyed the former prohibitory restrictions. The removal of the restrictions was sanctioned because of the services of a tangible nature that the Federal government was rendering.
Present Public Burdens. - The present burdens inflicted by the Federal government are so familiar as to need little comment. In 1900 the per capita expenditure was about five dollars; in 1915 about eight dollars; while in 1920 it was about thirty-five dollars. This, of course, is abnormal, but it cannot be expected that the burdens will ever return to the pre-war basis. The war has added burdens which will continue to be felt for decades to come. The interest and sinking fund charges are now larger than the total expenditures before the war, and will continue to be felt. These, with the constant expansion of functions, will continue to keep the exactions of the Federal government from its citizens at a high figure.
Increased expenditures are found also in the states and local political units. Each of these conditions is an illustration that a government is an institution of increasing cost. Even though no more functions be undertaken, the per capita cost increases as the population grows. But states and cities also, due to the demands of their inhabitants, are increasing the services which they render. Figures were given to show this increase, and there is no indication but that it will continue.
There is, however, a difference between an increased tax and an increased burden - a situation which has been especially applicable in the last few years. When commodity prices rise for individuals, they rise, pari passu, for the state. This means that the state may supply exactly the same services, but at a greater cost, which will be reflected in the higher taxes. From the standpoint of the taxpayer it will mean that he is paying in a currency of less purchasing power, and hence the burden will be no greater than when the taxes were less. While taxes have increased in all states and cities, in most cases the increase has not been in proportion to the general rise in prices.